Criminal approach of entities not obliged to report

Publication date 05-08-2020

Tackling money laundering is a governmental priority. Covering up the criminal origin of the proceeds of crime enables the perpetrators to remain out of the reach of investigative agencies and to enjoy the assets they have amassed with impunity. This is undesirable and could undermine the integrity of the financial system and society's confidence in that system.

Like all EU countries, the Netherlands has legislation to prevent money laundering: The Money Laundering and Terrorist Financing (Prevention) Act (Wwft). Market players legally defined as designated institutions play a gatekeeper role in the fight against criminal money flows and money laundering and in the prevention, detection and reporting of unusual transactions.

Compliance with this legislation is of great importance to preventing money laundering, but also to bringing suspicious transactions to the attention of investigation and prosecution services. All suspicious transactions are made available in databases so that they actually contribute to the intelligence position of investigative services.

In the Netherlands, the role of these gatekeepers has been considered for years:

• by regulators responsible for compliance with the obligations contained in this Act,

by investigative services and the Public Prosecution Service with criminal investigations in the event of serious non-compliance with obligations (criminal approach of entities not obliged to report);

• in public-private partnerships between public authorities and market players aimed at increasing resilience and improving the detection capacity of designated institutions.

To promote compliance (KYC and reporting behaviour), in addition to supervision the Netherlands is taking a criminal law approach to designated institutions that fail to meet their obligations. The Anti Money Laundering Centre, the Public Prosecution Service, the investigative services and FIU-the Netherlands, together with regulators, are stepping up their efforts to deal with entities not obliged to report.

Dozens of criminal investigations have been completed and in many cases have led to the designated institution being convicted for failing to conduct customer due diligence or report unusual transactions (or do so on time). An example of a criminal investigation into non-reporting resulting from this approach is the case against the largest bank in the Netherlands, which ended in a settlement of EUR 775 million.

The criminal approach to gatekeepers combined with conscious media attention has also led to more and better reports being filed by other designated institutions. In addition, in 10% of the non-reporting cases a larger money laundering investigation is opened into the culpable involvement of the institution concerned in the laundering of the criminal funds of customers or their customers. This also provides an insight into more serious forms of predicate offences. The criminal-law focus on compliance with transaction reporting is thus an important instrument in the fight against money laundering. Attention to entities not obliged to report is also prescribed by the FATF in recommendation 40: “There must be sanctions for non-compliance…, which should be effective, proportionate and dissuasive.”