Recently there has been a growing dissatisfaction with the conduct of the supervisors. The fierce battle between supervisor DNB and Dutch neobank Bunq emulating AML/CFT regulations. This is an extraordinary case, as it does not happen very often that a bank goes to court in case of a disagreement with a powerful supervising authority. The neobank, which is supervised by DNB, is opposing the anti-money laundering approach of DNB. According to Ali Niknam, the CEO of neobank Bunq, DNB is abusing their powers.

Criticism of the anti-money laundering approach of DNB is widely shared in the financial sector.

But who is supervising the supervisory authorities if they exceed (or are on the verge of abusing) their powers?

The AFM and DNB are autonomous administrative authorities. An autonomous administrative authority (ZBO) is a governing body of the central government equipped with public authority. They are responsible for the execution of tasks or services of public interest and therefore have certain instruments at their disposal. 

Autonomous administrative authorities fall under the political responsibility of the Minister of Finance, but they are not hierarchically subordinate to the Minister. They operate autonomously based on the powers given to them. The Minister of Finance is responsible for their functioning to a certain extent. However, the Minister doesn’t have the power to interfere in the execution of their supervisory tasks.

An evaluation of the efficiency and effectiveness of these autonomous administrative authorities occurs every five years. At the request of the Ministry of Finance, the DNB and AFM have been evaluated for the period from 2016 until 2020, in December 2021.

Although the report is predominantly positive, there is still reason to critically reflect on the growing role and tasks of the supervisory authorities. They can act independently from politics due to their extraordinary position. The role of the parliament is currently limited in light of controlling the operations of the supervisory authorities. Meanwhile, the autonomous supervisors are becoming more present in the domain of the lawmaker. The supervisory authorities are increasingly using informal enforcement measures, policy-making and (pseudo)regulatory powers.

In regards to laws with open norms, such as the Financial Supervision Act (Wet op het financieel toezicht- Wft), there are already numerous legal provisions that have been defined more clearly as a result of the own interpretation of the supervisory authorities.

The powers of the supervisor are based on the Financial Supervision Act and the Act on the Prevention of Money Laundering and Financing of Terrorism (Wet ter voorkoming van witwassen en financiering van terrorisme- Wwft). Under these legislations, the supervisors have far-reaching powers, such as enforcing formal measures (e.g. the ability to impose a fine or the order for incremental penalty payments) and informal enforcement measures (e.g. oral and written compliance briefings and written warnings). Informal enforcement measures have no legal basis.

AFM’s annual report shows that they enforced 1188 informal measures in 2021, whereas in 2019 there were about 616 informal enforcement measures. In 2021, only 44 formal measures were imposed, whereas in 2019 there were only 44.

This is a concerning legal disadvantage regarding legal protection. Informal measures do not qualify as a decision which can be submitted to the courts for review. As a result, an informal measure cannot be legally challenged. This is concerning, because even the judges, as the last institution, cannot correct the supervisory authorities.

The Minister of Finance is still trying to guarantee the primacy of politics through the five-yearly evaluation. The independent supervisory authorities are at risk of being in line with national state accountability structures. Therefore, more direct and more frequent contact between the Parliament with  DNB and AFM can be important. By doing this, signals can be picked up more quickly by the legislator, in order to protect the national state accountability structures.

At the moment, there seems to be a gap in independent external control of public exercise by supervisory authorities. The Trade and Industry Appeals Tribunal (College van Beroep voor het Bedrijfsleven- CBB), which can serve as a last resort to correct decisions of the supervisory authorities, can easily be bypassed by using informal measures. The enforcement of non-legal measures by the supervisory authorities is concerning.

Now that it appears that these informal enforcement measures are preferred and more frequently applied by the supervisory authorities, should these informal enforcement measures not need a legal basis?