The enforcement of the Anti-Money Laundering and Anti-Terrorist Financing Act (abbreviated as Wwft in Dutch) by the regulators — the Dutch Authority for the Financial Markets (AFM) and the Dutch Central Bank (DNB) — continues to cause confusion. For example, the online bank Bunq has been at odds with the DNB for some time about how it implements its gatekeeping role — more specifically, about how Bunq conducts customer due diligence and then monitors its clients’ transactions.
In addition, the AFM imposed an administrative fine on Robeco Institutional Asset Management (RIAM) on 31 March 2022. RIAM had allegedly failed to sufficiently ensure that the investment institutions it manages screen their clients for money laundering and was therefore fined €2 million. A substantial amount that pales in comparison to the record fines previously imposed by the Public Prosecution Service on ING (€675 million) and ABN AMRO (€300 million).
The Wwft contains open standards and assumes a risk-based approach that gives institutions a lot of room to make their own estimates of risks relevant to them and to propose sufficient mitigating measures. Through guidelines, the regulators provide further direction for how institutions can implement the open standards. The specific guidelines (of the AFM and the DNB) elaborate on the general guideline published by the Ministry of Finance and the Ministry of Justice and Security in July 2020.
The Wwftregulators then assess whether this risk-based approach is conducted in a sufficiently adequate manner. In some cases, it becomes apparent that the regulator’s interpretation does not agree with that of the institution. The regulator then enforces the Wwft, as in the above cases.
In its guideline, the AFM mentions a number of sector-specific focus points, including those for managers of investment institutions. The regulator states that ‘if an alternative investment fund or UCITS has a separate manager, the manager of the investment fund is responsible for compliance with the Anti-Money Laundering and Anti-Terrorist Financing Act.’
The AFM subsequently asserts that the chosen distribution model is relevant to how compliance with the Wwft must be implemented.
‘The way in which units are offered to investors affects the extent to which the manager has obtained or is able to obtain knowledge with regard to the client or investor’, according to the AFM. Furthermore, ‘The manner in which an investor can acquire units in an alternative investment fund determines the definition of “client”. This must be considered when determining the relevant money-laundering risks and the method of conducting customer due diligence.’
In the Wwft, the concept of client is (broadly) defined as a ‘natural person or legal entity with whom a business relationship is initiated or on whose behalf a transaction is conducted’.
The AFM specifies that the way in which an investor can acquire units in an alternative investment fund is determinative for the definition of client. In other words, in such a B2B distribution model, who is the Wwft client of whom? That is the question that was recently at the core of a real-life example. Based on this practical case, we can answer this question as follows.
When:
then the client must be designated as the Wwftclient of the B, P or L, which in turn must be designated as the Wwft client of the MI.
To put it another way: in such a B2B context, the once-removed (retail) client of your business Wwft client is not also your own Wwft client. This situation involves the same activity — the distribution of units in investment funds — whereby multiple parties (Wwft institutions) are involved. Another explanation would amount to an accumulation of obligations that the Wwft itself does not require. A “repetition of moves” that unnecessarily burdens current or potential clients or business relations and does not offer the financial sector and society as a whole better protection against money laundering and the financing of terrorism. In that case, there would be “double surveillance” or “two gatekeepers” whereas, according to the legislation, one gatekeeper is sufficient.
Although the Anti-Money Laundering and Anti-Terrorist Financing Act creates considerable room for institutions to provide their own interpretation, it is initially up to the regulators to determine whether an institution’s approach follows that statute. Their guidelines provide a starting point. On the one hand, the AFM emphasised in its guideline that this document must be seen ‘as an explanatory note to the Anti-Money Laundering and Anti-Terrorist Financing Act and the Sanctions Act’. And: ‘An institution is free to implement the requirements in the Anti-Money Laundering and Anti-Terrorist Financing Act and the Sanctions Act differently to the extent that the intended result is achieved.’
On the other hand, the AFM expects companies to study this guideline and apply it in their daily practices. In any event, it is ultimately up to the competent court to determine whether the institution, with its approach, has achieved the legislator’s intended result. So, in the case of Bunq, we look forward to hearing the opinion of the Trade and Industry Appeals Tribunal.
