Lisanne is lawyer for corporate litigation, contracts and charities
lisanne.meijerhof@russell.nl +31 20 301 55 55Reinier advises national and international companies
reinier.russell@russell.nl +31 20 301 55 55On 25 July 2018, the revised Law for preventing money-laundering and financing of terrorism (Wwft) entered into force. The most important changes are (1) More organisations and transactions fall under the Wwft. (2) It is required to draft a risk assessment. (3) A client assessment is compulsory. This may include an investigation into who is the ultimate benifciary owner (UBO).
The Wwft dating from 2008 aims at preventing the financial system from being used for money-laundering and financing of terrorism. One of the most important measures to this end are client screenings. On 25 July 2018 a new version of the Law for preventing money-laundering and financing of terrorism (Wet ter voorkoming van witwassen en financieren van terrorisme; Wwft) entered into force. The Wwft has been tightened on some important points.
The scope of the revised Wwft is broadened. As a result, a number of new organisations fall under the Wwft.
The first new group consists of “major value dealers”. Major value dealers are persons trading in goods and receiving cash payments. The limit used to be EUR 15,000 but in the revised Wwft it is reduced to EUR 10,000. Also, not just the sellers of goods are subject to the Wwft but the buyers as well. Especially for the art trade this will mean an increase of the obligation of investigation.
The other new group consists of gambling providers. In addition to casinos other gambling providers are now also subject to the Wwft, such as lotteries and slot machine arcades. However, if the nature and scope of the transactions of a gambling provider entail a low risk for money laundering or financing of terrorism, they can be wholly or partially exempt from the requirements of the Wwft by this ministerial decree.
The revised Wwft requires organisations to prepare, report, and keep up to date an assessment of their risks for money laundering and financing of terrorism. This includes listing and weighing risks in relation to certain clients, products, and countries.
On the basis of the risk assessment, the organisation can evaluate whether additional measures have to be taken to limit these risks. If an unacceptable risk arises, the organisation must terminate the existing relationship with the client. An unacceptable risk may be, for instance, a client who wants to remain anonymous or provides false identity data.
The accuracy of a risk assessment must be in relation to the size of the organisation. If it is a rather small organisation that operates at national level only, the risk assessment doesn’t need to be too complicated and sophisticated. In any case organisations must take into account the risks that have been identified by the EU, the Dutch government and the Financial Action Task Force (FATF) when preparing their risk assessment. The various reports and guidelines of the organisations can be used to this end.
The Wwft stipulates that an organisation must perform client screening before concluding a business relationship or executing a transaction. Client screening mainly consists of identifying the client and checking whether the identity specified corresponds to the actual identity. In addition, it must be checked whether a person with which a business relationship is concluded is authorized to enter into this relationship.
In addition, the ultimate beneficial owner (UBO) of the business partner must be identified. This identification requirement is important if a business relationship is entered into with a legal entity. The institution must know which natural person owns/controls this legal entity.
The revised Wwft provides a definition of a UBO: a person who ultimately owns or controls a client. The Wwft also refers to cases where persons must in any event be considered as UBO, such as natural persons who have a financial entitlement exceeding 25% to a B.V. or N.V. If no UBO can be identified, a “pseudo UBO” may be listed. A pseudo UBO is a member of the senior management (for instance a director).
The revised Wwft does no longer specify cases where simplified client screening is sufficient. On the basis of the risk assessment, you will have to decide whether there is a proven low risk, in which case simplified client screening would be sufficient. Not performing client screening at all is no longer allowed.
Stricter client screenings have to be performed if a business relationship or transaction has a higher risk. Thus, transactions with cryptocurrency always require stricter client screenings as these involve a higher risk for money-laundering or financing of terrorism. Stricter client screenings must also be performed if the client – or UBO of the client – is domiciled in a country which has been identified as a high-risk country by the European Commission, such as Syria.
In addition, stricter client screenings must be performed if the client – or the UBO of the client – is a so-called “Politically-Exposed Person” (PEP). This includes not just professional politicians but, for instance, also board members of political parties or members of the Court of Auditors of a central bank. Such stricter client screenings now also apply to domestic PEPs.
It is no longer required to perform stricter client screenings for the only reason that a client isn’t physically present for verification of his or her identity. This identification can now be performed from a remote location by innovative techniques.
Would you like to learn more about the Wwft and what it means for your company? Would you like to know whether you are complying with the law? Or would you like us to draw up a risk assessment for your company? Please contact:
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