Act for Prevention of Money Laundering and Terrorist Financing (Dutch: Wwft)

The Act for Prevention of Money Laundering and Terrorist Financing (in Dutch: Wet ter voorkoming van witwassen en financieren van terrorisme =Wwft) is a well-known (not so popular) law for many business owners and individuals. Accountants, tax advisors, banks, but also many traders and brokers are designated as so-called ‘gatekeepers’. Under the Wwft they are required to conduct client investigations. This research involves more than simply asking for a copy of a passport. Once someone is a client, then client transactions must also be assessed for money laundering risks and, if necessary, reported to the Financiële Inlichtingen Eenheid (FIE) (Financial Intelligence Unit).

These obligations raise many questions. Entrepreneurs, gatekeepers, ask themselves for example: when do I do it right, when is there a risk of money laundering, should I request additional information about a transaction? And sometimes a regulator requests data or wants to visit for an audit. Then it helps to be well-prepared, so you know what to expect.

However, as a customer of a bank, advice on the Wwft may be necessary. Nowadays banks are asking their clients a lot of questions, since they are being held accountable by regulators and the OM (the Public Prosecutor’s Office) for their Wwft obligations. As a client, you sometimes wonder how best to answer these questions transparently but also concisely.

Who are the gatekeepers?

The Wwft was introduced in 2008 as a successor to the MOT and the WID, both of which dated from 1994. The origins of all these laws are European anti-money laundering regulations. Initially, the MOT and the WID applied to financial institutions such as banks, insurers and trust offices. From 2003, accountants, tax consultants, lawyers and notaries (for certain services) and brokers were also designated as gatekeepers. When the Wwft came into force on July 1, 2008, even more professions were designated as gatekeepers. Anno 2024, many traders have been assigned the same task, whether they trade in art, ships, cars or other goods. Sometimes it matters whether this trade is in cash. Furthermore, since 2020 a relatively ‘new’ group of gatekeepers has been crypto service providers.

For business owners it is not always clear whether they are a gatekeeper or not and, if so, for which services. This lack of clarity was particularly prevalent among traders, as shown in cases in which a textile trader and an onion trader were prosecuted for violating the Wwft. For cash transactions above a certain ‘reporting limit’ they had to conduct client investigations and also report those transactions. But even among lawyers this lack of clarity sometimes exists. As all these cases show, this lack of clarity can have major consequences: fines, criminal prosecution or disciplinary action.

What are your obligations as a gatekeeper?

If you are a gatekeeper, it is good to regularly check whether you have a clear picture of all the obligations imposed on you by the Wwft, and whether you are complying with them. Regulators monitor this and can impose measures and fines if the obligations are not met. Therefore, we are happy to help with a periodic review to see if everything is in order.

What are these obligations? They have been increasing over time, especially after the EU Fourth Money Laundering Directive came into force in 2018. The law states that gatekeepers must take appropriate measures to identify and assess their risks of money laundering and terrorist financing. Besides this policies, procedures and measures must be in place to effectively manage these risks. Depending on the nature and size of the institution, this may include having an independent compliance function and, in specific circumstances, its own internal audit function. One policymaker in the organization must be made responsible for compliance with the Wwft. This means that that person has an extra responsibility, and runs a risk if things are not arranged properly.

These obligations sound like a lot of paperwork, and they can be. We often get questions about it from clients. Fortunately, for many groups of gatekeepers, regulators have created practical manuals that can be found online.[1]  Professional organizations such as the NOB (tax consultants), the NBA (accountants) and the Orde van Advocaten (Bar Association) have also created such manuals. In practice, it pays to go through them periodically and keep them handy. 

Regulators can also control the retention obligations for gatekeepers. Furthermore, employees and policymakers should be periodically educated through training. Employees must also be screened –  for example through a check on their résumé and diplomas or by checking references, but in real estate transactions a Verklaring Omtrent Gedrag (VOG) (certificate of good conduct) is sometimes also required.

Client Screening

Many questions from our clients have to do with the obligation to conduct client due diligence. What information should (and may) you request? How do you assess that information? What else should you ask a client?

Again, a lot of practical information can be found in the regulators’ manuals. With long-term relationships, such as accountants, tax advisors and lawyers have with their clients, surely some more information should be requested. Especially when clients are active in sectors or countries identified as high-risk, it is expected to ask about the origin of their assets, among other things.

It is also important to properly store the information once it has been gathered. Periodically the information must be reassessed: is it still up to date, are there new risks or have risks actually diminished? Here, too, we assist clients and can ensure that you are well prepared for questions from regulators.

From another perspective, we also help clients who have to answer questions from gatekeepers. This often comes into play when applying for a bank account. Just the question of who is the Ultimate Beneficial Owner (UBO) can already cause a headache. But also, certain transactions on a bank account can lead to questions from a bank. This often involves crypto transactions: the bank wants to know how the crypto assets were accumulated. Press publications can also lead to questions from a bank. We help to answer these questions in the best possible way so the bank gets the information it needs.

What is an unusual transaction?

Sometimes it is difficult for gatekeepers to assess whether a transaction is unusual or not. Such an assessment requires a perspective different from how a client is normally handled in the firm’s day-to-day business. For example, in the past cash transactions were good practice among all kinds of merchants and middlemen. Nowadays these are looked at much more critically, especially by banks where entrepreneurs want to deposit their cash.

For many clients ‘business’ and ‘private’ are somewhat intertwined, and it is not unusual for them to make large expenditures initially from ‘the company’. However, a regulator may take a totally different view and regard this as (very) unusual, as was experienced for example by an employee of a jewelry store. That employee was even prosecuted for money laundering (and fortunately acquitted by the court), in part because the prosecution found it unusual for jewelry to be paid for from a company.

Tax consultants also often run into assessment questions. Since they see things from a fiscal point of view, the Wwft assessment is often limited to whether tax fraud is involved. This is not enough, however. The risk remains that other potentially criminal sources of money stay out of the picture, which can lead to the accusation that an unusual transaction was wrongly not reported. These days much attention is paid to corruption: deductible expenses can attract attention, for example, or consider the situation in which – high – consultancy or mediation fees have been paid without adequate substantiation. A report to the FIU may then be appropriate and failure to report may then constitute a criminal offense, as a large accounting firm experienced.

Monitoring compliance with the Wwft

Regulators monitor compliance with all these obligations. They can impose directions but also (hefty) fines.

There are different regulators for various professional groups: DNB and AFM (for financial institutions), Bureau Financieel Toezicht (bureau for financial supervision) (for accountants, tax consultants and notaries), the Dean of the Orde van Advocaten (Bar Association) (for lawyers) and the Bureau Toezicht Wwft (Wwft supervision bureau) (for brokers and traders, among others). Sometimes only a letter with questions is sent as part of the supervision, but every now and then offices are also visited and the regulator wants to see files and speak with the responsible policymaker or compliance officer. Frequently there is a specific signal upon which the regulator takes action. Such signals are often received by regulators from other government agencies with which they can exchange information.

Especially when a regulator announces a visit, it is important to prepare well. After such a visit, an inspection report is drawn up that can still be responded to. Based on this inspection report, a regulator can proceed to ‘enforcement’. If the regulator takes such a step, this is often published. If you do not agree with a measure or fine, or its publication, you can object or appeal against it. Here we can provide assistance as well.

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[1] See for instance: https://www.bureauft.nl/wwft/#wet-en-regelgeving, https://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/belastingdienst/zakelijk/aangifte_betalen_en_toezicht/wwft-voorkomen-van-witwassen-en-terrorismefinanciering/publicaties/, https://www.rijksoverheid.nl/documenten/richtlijnen/2020/07/21/algemene-leidraad-wet-ter-voorkoming-van-witwassen-en-financieren-van-terrorisme-wwft