The FATF sets a series of standards aimed at preventing money laundering and terrorism financing, and it assesses whether the Member States have the right laws and regulations in place and if they are implemented in an effective manner. This is done based on the 40 recommendations established by the FATF and on its immediate outcomes based on effectiveness..

What does the Mutual Evaluation Report of the Netherlands look like?

The scoring of the Netherlands shows that out of the 40 recommendations, it is compliant with 10, largely compliant with 28, and partially compliant with 2. This is a good score that shows how the country takes serious efforts to tackle money laundering and terrorism financing risks. However, more attention is needed for items such as the lack of a VASPs regime in the BES Islands and a higher threshold for applying CDD measures than the one established in the FATF standards.

In spite of these shortcomings, the Netherlands serves as an example for other countries concerning the functioning of its Financial Intelligence Unit (FIU). It has a very well-developed system to request information from all obliged entities and to access information from a variety of databases and datahubs essential to investigate Unusual Transaction Reports (UTRs). It is yet to be seen how the FIU will provide information on the entirety of the predicate offenses in its Annual Reports.

A comparison between the Netherlands and Germany, in regards to supervision, allows us to contrast these different approaches and strengthen one another. BaFin, the supervisory authority in Germany, applies a graduated risk-based approach whereby staff is distributed according to the risk with more staff allocated to the highest-risk areas. For the Netherlands, the DNB and the AFM both apply a risk-based approach whereby staff is distributed across financial crime supervision teams to cover all sectors evenly.

Moreover, BaFin takes a stronger approach to sanctions by publishing instances of non-compliance which has indeed a deterrent effect due to the fear of reputational damage. The Netherlands, on the contrary, does not make public failures by obliged entities when informal measures are being imposed, except in exceptional cases. It is important to analyze whether obliged entities are strongly dissuaded through the remaining set of sanctions in the DNB and AFM’s toolkit in the upcoming years.

What should the Netherlands focus on in the future?

The regulatory landscape is constantly changing and the proposed AML package under negotiation will likely impact the Netherlands and EU Member States in general. The establishment of the AML authority is a step in the right direction to make supervision more efficient. It will be necessary to adapt the national response to fast-paced developments such as VASPs and crypto asset providers in order to ensure that criminals do not use them for the wrong purposes. Moreover, it is yet to be seen how the exchange of information between law enforcement authorities and intelligence agencies will be enhanced bearing in mind the importance of safeguarding privacy in these procedures.

If you have questions about the measures in place or how future legislative changes will impact your financial institution feel free to contact us at Simon Consulting, where one of our consultants will gladly give you personalized advice.