Customer Due Diligence and Know your Customer requirements in The Netherlands

When it comes to knowing your customer, two laws play an important role: The Financial Supervision Act (Wet financieel toezicht), hereinafter Wft and Wet ter voorkoming van witwassen en financieren van terrorisme the Wwft

The supervision of the entire financial system by the Dutch authorities is regulated by the Wft. The Wwft was introduced to prevent and reduce illegal financial activities, including money laundering, fraud and terrorist financing. 

Certain institutions and industries are legally obliged to process your data for Know Your Customer purposes. Therefore, this is allowed under the Privacy Act, the General Data Protection Regulation (AVG). We ask you to inform us of any changes in your personal and financial situation.

The purpose is to identify the representatives of the organization. Are there any individuals within the organization with a direct or indirect holding of 25% or more in the organization? They are then registered as ultimately interested parties (UBO). As from March 2022 it is mandatory for most companies to register the UBO’s in the UBO register at the Chamber of Commerce. This amplifies transparency and contributes to the fight against fraud, money laundering and terrorist financing. Check with the Chamber of Commerce whether this is necessary for your company to complete the UBO register. The main source of revenue has to be determined. Having a clear picture of the organization’s structure and business activities aids this process.

Section 1(a) of the Wwft outlines who the legislation applies to: i. Banks; ii. other financial institutions, and iii. designated natural persons, legal persons or companies acting in the exercise of their professional activities. Pursuant to Section 3(2d) of the Wwft, the service provider should be able to monitor the business relationships and the transactions effected during their existence based on its Customer Due Diligence “CDD”. This allows for an investigation into the origin of the funds used in those business relations or transactions.

The Nederlandsche Bank (DNB) id the supervisor of compliance with the Wwft. Among other things, it checks whether the policies and procedures for KYC and CDD of the financial institution comply with the Wwft. DNB also checks whether the institution complies with its own policies and procedures. The Wwft is based on the European Anti-Money Laundering Directive (AMLD). The amended AMDL-4 directive allows the use of electronic ID’s for identity verifications.

The Wwft enforces The Sanctions Act. This Act defines sanctions against certain states, territories or persons, such as the freezing of assets. You can read more on the National Government’s website (Dutch) and in the attachment Law and Regulations Wft, Wwft, and CDD process ING (Dutch).

Sources:

https://www.betaalvereniging.nl/en/know-your-customer-in-brief/

https://www.dnb.nl/en/sector-information/supervision-sectors/crypto-service-providers/integrity-supervision-of-crypto-service-providers/wwft-crypto/customer-due-diligence/investigating-the-origin-of-a-customer-s-funds/

https://www.dnb.nl/media/i1xjqk52/dnb-guidance-anti-money-laundering-and-anti-terrorist-financing-act-and-the-sanctions-act-december-2019.pdf

https://www.icpac.org.cy/zePortal/WebFiles/SELK/WebDocuments/Members/General%20Circulars/2018/4%202018/AML%20Guidance%20on%20establishing%20Source%20of%20Funds%20and%20Source%20of%20Wealth.pdf

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