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The Act to Prevent Money Laundering and Financing of Terrorism [Wet ter voorkoming van witwassen en financieren van terrorisme, WWFT] came into force on 1 August 2008.
It replaces the Identification (Provision of Services) Act [Wet identificatie bij dienstverlening, WID] and the Disclosure of Unusual Transactions (Financial Services) Act
[Wet melding ongebruikelijke transacties, Wet MOT].
The new act means that institutions that are affected by the anti-money laundering legislation will find it easier to see what obligations they need to comply with.
This is not just a case of two existing acts being combined; there are also new provisions.
For the latter, a leniency arrangement will apply until 1 January 2009.
The changes are intended to implement EU Directive 2005/60/EC on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing
(the “Third Money Laundering Directive”) and EC Commission Directive 2006/70/EC laying down implementing measures for Directive 2005/60/EC.
The Third Money Laundering Directive introduces a “risk-based approach”, meaning that institutions will have more freedom as regards customer due diligence.
The extent of the required due diligence is partly dependent on the risk that a certain type of client, business contact, product, or transaction poses as regards money laundering or the financing of terrorism.
The legislative history refers to services provided for foreign legal entities and clients of trust offices as examples of services that involve greater risks.
In actual practice, providing such services will require that greater attention be paid to customer due diligence.
A number of obligations have been eased. In certain cases, for example, there will be no obligation to complete the identification process prior to actually starting to provide the services.
Institutions will also be permitted to identify legal entities on the basis of online information provided by the Chamber of Commerce, and they will no longer be required to identify the representative.
No compulsory identification will apply to services involving only a very low level of risk, such as tax returns and consumer credit arrangements.
A number of additional obligations have also been introduced, for example the requirement in high-risk cases to determine who the ultimate beneficiary is, and the obligation in certain cases to monitor the activities of the client in the course of the business relationship and to determine the origin of money.
Another new provision is that a financial institution can now make use of identification details already collected by another financial services provider, meaning that it does not need to carry out its own investigation of a client.
An institution that introduces a client to another institution is required by the legislation to provide that institution with the identification and verification details regarding the client or the ultimate beneficiary.
The tax obligation for financial institutions to keep a copy of the identification document has been dropped.
Under the Act to Prevent Money Laundering and Financing of Terrorism, the only obligation is to record the information in the document; copying the passport is no longer necessary.
The Netherlands Authority for the Financial Markets (AFM) and the Dutch central bank (DNB) have announced that, until 1 January 2009, they will be lenient as regards enforcing the new provisions of the WWFT.
In return, however, the relevant institutions must do everything they can to comply with the amended rules as quickly as possible after 1 August 2008, but by no later than 1 January 2009.
It should be noted that the leniency arrangement will specifically not apply to the obligations under the WID and the Wet MOT insofar as those obligations have been incorporated without change into the WWFT.
For more information, please contact Arno Voerman,
Financial Institutions Market Group.
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