Strict money laundering regulations hinder companies and charities

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Strict money laundering regulations hinder companies and charities

Reading time: 4 min

Short

In de strijd tegen frauduleuze witwaspraktijken vallen steeds vaker onnodige slachtoffers. Goede doelen, coffeeshops en zelfs betaald voetbalclubs hebben last van de aangescherpte reglementen rondom witwassen. Sinds de monsterboete die de ING in 2018 heeft gekregen zijn banken voorzichter dan ooit en dreigen eerlijke bedrijven en goede doelen slachtoffer te worden van het nieuwe, aangescherpte interne beleid van de banken.


Several companies from high-risk branches and NGOs that do business with high-risk countries have difficulties in obtaining financing or opening a bank account due to the strict anti-money laundering policies of banks


Hinder when applying for a bank account, financing or registering with a payment platform

For NGOs active in high-risk or sanctioned countries, it is very difficult to find a bank or to join a payment platform such as Mollie. They are asked to provide the necessary documents themselves, but for many smaller NGOs this often costs too much time and also a lot of money. The Dutch Banking Association recognizes this problem and says it is in discussion with the sector (source). What often arises at banks are the activities that - mainly smaller - NGOs finance and with whom they collaborate.

Not only NGOs are complaining about the anti-money laundering policy. Complaints are being made from various sectors about the obstacles, for example when opening a bank account or applying for financing. If it is stated that companies are hindered by the anti-money laundering rules, then it is probably more likely to think of classic fraud-sensitive companies such as legal weed shops in the Netherlands and trust offices. In addition to these examples, professional football clubs and companies that conduct international trade also report problems. Banks hardly dare to take any risk when taking on new clients who trade with, for example, risk countries or are active in a risk sector and they direct them to the door in advance. The due diligence investigation then takes too much effort and is not worth the risks.

Banks also apply different criteria. The anti-money laundering policy has thus become a complicated hassle of rules for both affected companies and the bank itself. Government policy is clear; strict guidelines against money laundering. But does this policy, when implemented in this way, not unlawfully hinder honest companies and charities? It should not be the case that bona fide companies and organizations operating in a risk area or industry do not receive a bank account or financing due to the strict anti-money laundering policy.


The relationship between banks and regulators has been sharpened since ING's monster fine. As a result, banks no longer dare to take risks at all.


The anti-money laundering policy under the AMLD

The anti-money laundering scheme is part of the AMLD, the Money Laundering and Terrorist Financing Prevention Act. The AMLD has gradually been tightened, but has never before caused as much nuisance as in the current reality. Due to a reign of terror by the Public Prosecution Service that resulted in at least one historically high fine for ING and an ongoing investigation at ABN AMRO, the relationships have been sharpened. Banks dare to take even less risk than before.

As a result of the AMLD, banks, like other institutions subject to the AMLD, have been given a so-called gatekeeper function by the government for the protection of our legal order. They are the first line in the fight against money laundering. By means of extensive customer due diligence investigations, also known as the AMLD customer investigations, they must be the first party to detect fraudulent practices and suspicious actions. A thorough AMLD customer due diligence takes a lot of time, given the large number of (sanction) lists that they have to go through to check a person or company.


The CDD On Demand solution enables you to perform a cheap AMLD customer due diligence within seconds

 

Time and cost savings by using CDD On Demand for your customer due diligence

CDD On Demand was created on the basis of this issue. Automation in the field of financial regulations regarding the Wwft was offered sparingly and was often incomplete. The CDD On Demand solution was developed based on the idea that it could all be better, cheaper and easier. The compliance check included in the solution, checks a company or person on eleven different (sanction) lists, both mandatory lists and non-mandatory lists. At the end of the compliance check, you will receive a certified report for your records, which in turn serves as proof that you have performed the compliance check in good faith. One compliance check only takes a few seconds and costs a maximum of € 1.50. The CDD On Demand API has also been developed for larger companies, which means that costs are even lower.

The monitor function

After the extensive compliance check, it is also the intention that you keep your data up-to-date. By the monitoring function of the CDD On Demand solution your system is always up-to-date without having to make any effort yourself. You only need to take action if something has changed in the situation of one or more clients, for example if your client is elected as a member of the States General in the upcoming election and he / she has now become a politically exposed person. The CDD On Demand solution then issues a notification that one or more of your clients has been found on one of the checked (sanction) lists. The monitor function runs the lists daily for all persons on the monitor list.

In this way, checking clients to comply with the Wwft becomes less time and money consuming. In addition, the risk of a fine from competent authorities is significantly reduced by demonstrating that you have complied with the Wwft as far as possible. The CDD On Demand solution is available for SMEs with a Wwft obligation, but also for large accounts with a Wwft obligation. You can at any time contact us about the possibilities for your company or request a free demo account..

The UBO register as an “instrument” against money laundering, counterterrorism and corruption; using sledgehammers to crack nuts!

The UBO register as an “instrument” against money laundering, counterterrorism and corruption; using sledgehammers to crack nuts!

Readig time: 3 min.

Disclaimer: There is no intention to downplay the money laundering or terrorist financing problem, but this article is about the relationship between money laundering and a massive privacy violation of the major shareholders and entrepreneurs; the UBO register.    

What information is available?

When doing research on money laundering, you mainly come across numbers. The total amount that would have been laundered in 2019 amounts to 13 billion euros, of which 5 billion euros comes from abroad (Source: FIOD annual report). Only a limited part of the nature of money laundering can be attributed to natural persons, research shows that money laundering in the Netherlands mainly occurs among drug criminals.

Counterterrorism is an emotionally charged topic and is often discussed in the news. What is not mentioned is that (fortunately) since 2014 the number of terrorist attacks has decreased by 50% and the number of civilian casualties by 54% View the overview of terrorism in 2019 here.

UBO register in the fight against money laundering and terrorist financing

The UBO register tries to combat money laundering and the fight against terrorism, but if such a large part of money laundering can be attributed to drug criminals, the UBO register is therefore especially useful if those drug criminals are registered in the register. The follow-up question is therefore whether drug criminals are listed in a UBO register; most of the people I've talked to about this don't think so. Thousands of honest entrepreneurs who have been working on their company for years, are listed.

Why then a UBO register full of privacy violations, if it is probably pointless concerning combating money laundering and preventing terrorist financing. It is the proverbial using a sledgehammer to crack nuts or a hidden agenda of the state and Europe.

Money laundering

In 2018, an investigation into money laundering was conducted by Utrecht University. Conclusion: The Netherlands has a money laundering problem. In 2014, the amount of money laundering is estimated by the research at 16 billion euros. View the full report here .

More than half of this amount, namely 9.1 billion, dan de helft van dit bedrag namelijk 9,1 miljard comes from abroad. No UBO register is required for this, but suspicious transactions abroad must be monitored for this. This is only possible in the case of cashless money. Cash is getting a bit trickier, but COVID-19 has curtailed cash transactions.   

So the size of the domestic money laundering problem in euros in 2014 was 6.9 billion. More than 90% of this amount comes from drug sales and fraud, according to the aforementioned report. 

For a long time I have searched for the size of the money laundering problem, measured in natural persons. The study by European Money Mule Action 5 (EMMA5) of December 1 provides an indication. In EMMA5, 650 banks, 17 bank associations and the financial investigation services of 31 countries worked together. All this for 3 months. EMMA5 has only resulted in 228 arrests of people who recruited Money Mules. There are not many. 

Actions by our own customers also point to a limited scope of the problem. At one customer 5000 compliance checks resulted in 37 files (0.7% of the file) that needed to be examined more closely. Incidentally, largely false alarm. Another argument to support the ‘using a sledgehammer to crack nuts’-suspicion.

Much is known about money laundering, according to the study. Known Facts:

  1. Using ‘legal’ businesses to launder money. Frequently used money laundering branches are: car dealers, prostitution, massage parlors, taxis and, since COVID-19, also web shops.  Alles zonder inkoop is aantrekkelijk
  2. Reselling (cash paid/ foreign) real estate is attractive for money laundering.
  3. Criminal money is also invested in (existing) companies, often using legal intermediaries.
  4. Geography is also important in money laundering, such as “maintaining relationships with countries of origin of large groups of migrants”. There are also criminal hotspots such as Marbella, Dubai and Marrakesh. The presence of a person on a hotspot possibly indicates a direction.

There are therefore reasons to believe that in the context of money laundering, the Financial Authorities are looking for a group of persons with a criminal background, who are probably not listed in a UBO register. These people cause 90% of the money laundering problem. There are enough leads in the research for more targeted searches.

The UBO register plays no significant role in combating money laundering and given the major violation of the privacy of those involved, the aim does not outweigh the means.   

New! In addition to the Quote 500, now also the Dutch Top 500.000 of the richest shareholders. Facilitated by the State! Does the end justify the means?

New! In addition to the Quote 500, now also the Dutch Top 500.000 of the richest shareholders. Facilitated by the State! Does the end justify the means?

Reading time: 6 min

Since September 27 you’re able to request Dutch UBOs at the Chamber of Commerce. You will receive a name, month and year of birth, nationality and country of residence of the UBO, including an insight (range) into the size of the share. This new service has been facilitated by Europe and the affiliated countries with which all UBO information is exchanged.

The State does nothing about data protection. Everything is public; you only need to request a code from the Chamber of Commerce and pay.

Determining the value of a natural person is easy (shares * company balance sheet value). An address is easy to find because most holdings, for example, are on a private address and otherwise Google will help!

Risky for those involved? That the State thinks so is evident from the following. The State offers the possibility to make UBO’s, that are mentioned on a specific protection list, invisible. As a layman, this seems to me to be contrary to the principle in the constitution that all Dutch citizens should be treated equally in an equal situation. A lawyer is allowed break their teeth on this.

All in all, a gross violation of the privacy of approximately 500.000 UBOs under the motto “preventing money laundering and combating terrorism”. This substantiation and justification has virtually no value because money laundering in the Netherlands is mainly done by drug criminals, according to research by the University of Utrecht. It would surprise the undersigned if drug criminals can be found in a UBO register.

Then the statement about a hidden agenda of the State remains. Certainly not fancy but has happened before (see SyRI story below). Below an elaboration.

The introduction  

“More than 1.5 million organizations will have to deal with the UBO register by 2020. From 27 September, many organizations have to register UBOs in this new register. UBOs (Ultimate Beneficial Owners) are persons who have more than 25% of the economic interest in an organization ”. The above quote comes from the website of the Chamber of Commerce (KvK). Immediately a new source of income for the Chamber of Commerce. Companies have to pay for a UBO request. The State does not pay for the use of the Chamber of Commerce database! Also bizarre.

The UBO register provides insight into shareholders who have an economic interest of more than 25% or who have a say in companies, foundations and associations, among other things.

The consequences

The UBO register has consequences:

  1. The UBO register is in violation of the (European) GDPR, which must guarantee the privacy of natural persons. The State will argue that it is a more important interest, but the State is not always right and cannot properly assess such matters. In the case of System Risk Inventory (SyRI), the State has had to back down for the time being.
  2. It concerns many people. There are approximately 800,000 BVs in the Netherlands. Most BVs have several UBOs and a number of UBOs have several BVs, such as an operating company and a holding. The number of UBOs in the Netherlands remains a guess, but according to good marketing practice, we estimate that there are 500,000 +/- 100,000 UBOs in the Netherlands.
  3. The UBO register has (possibly) far-reaching consequences for the personal safety of shareholders and their families. The State also endorses this position, as appears from the exceptional rule that has been drawn up that will protect the privacy of certain UBOs (?). de privacy van bepaalde UBO’s (?) gaat beschermen.

The UBO Register will make the following information publicly available for approximately 500,000 shareholders and directors:

  1. First and last name
  2. Month and year of birth
  3. Nationality
  4. Country of residence
  5. The nature and size of the equity interest in a range
 

Violation of the privacy

Het bovenstaande is een flagrante schending van de AVG/GDPR. Punt 5 bijvoorbeeld, de aard en de omvang van het aandelenbelang is ook in een bandbreedte een zeer gevoelig financieel gegeven in de GDPR. The above is a blatant violation of the GDPR. Point 5, for example, the nature and size of the equity interest, even if it’s only a range, is a very sensitive financial data in the GDPR.

"Financial data are sensitive personal data that can say a lot about someone. It is therefore important that organizations such as banks and the tax authorities handle this carefully." This can be read on the website of the Dutch Data Protection Authority. Seems like the above does not apply to the State?

Risks for those involved?

The fact that there are risks associated with the dissemination of this information is known to the State. This is evident from the following in the supplementary regulations. “The UBO may submit a request to the Chamber of Commerce to block certain data”. This will be honored if one of the following situations is demonstrably involved:

  1. Exposure to a
  2. Disproportionate risk,
  3. A risk of fraud,
  4. Kidnapping,
  5. Blackmailing etcetera.

This is also possible if the UBO is a minor, is under guardianship or administration or has police security.

State protection is a sham

“The additional UBO data - the day of birth, the place of birth, the country of birth, the residential address, BSN and / or TIN and the underlying documentation showing the identity of the UBO and the exact nature and scope of the economic interest held by the UBO - are only accessible to competent authorities and FIU-the Netherlands ”. This text comes from a briefing of the Senate by the Ministry of Finance. Naturally, the State and about twenty government services, including the Tax and Customs Administration, have unlimited free access to the information.

This claim that “the additional UBO data” is protected by the State is an outlandish and pointless.

The opposite is true: anyone with access to the internet and common sense can make a reasonable estimate of the value of the shares on the basis of the company's balance sheet value (annual report available from the Chamber of Commerce).

The value of the shareholder and his family is equal to the share range * value of the company (s) found in the UBO register. The protected residential addresses are also not very difficult to find on the internet with a first and a last name in combination with a country of residence and a nationality.

Entrepreneurs are often known on the internet and the information is easy to find. The State could just as well have placed a target on the head of enterprising Netherlands with an additional amount.

The conclusion; the medicine is worse than the disease

Any sane person will ask himself whether the importance of “preventing money laundering and financing terrorism”, which is done by a very limited group of Dutch people, who probably cannot be found in a UBO register, outweighs the means and that is a massive privacy violation of the shareholders (often entrepreneurs). The alternative is a hidden agenda at the State. This behavior is unworthy of the State.

A parallel can be drawn with SyRI; this is a system of the State in which the privacy rights of the citizens were massively violated under the motto “anti-fraud”.

For more information click here

Lawsuit in the making
Source: Privacy Web

Privacy First will start a lawsuit against the UBO register with its lawyer Otto Volgant (Boekx Advocaten) for violation of European privacy law. Dutch law and the overlying European directive are in conflict with the European Charter for Fundamental Rights and the GDPR. Privacy First often conducts its strategic procedures on privacy with a coalition of stakeholders. Privacy First is currently identifying which parties can contribute to the case against the UBO register.

 

Yes-co partners with SCOPE FinTech Solutions

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Yes-co partners with SCOPE FinTech Solutions

Reading time: 2 min.

As of September 1st, 2020, Yes-co and SCOPE FinTech Solutions teamed up to integrate the CDD On Demand platform in Yes-co's software for brokers. With this, Yes-co becomes the first supplier to offer brokers an integrated solution for compliance with AMLD and Sanctions Act.

 

Easily comply with the AMLD and Sanctions Act

Like the other so-called gatekeepers, estate agents also have obligations to follow the guidelines the AMLD and Sanctions Act. By entering into the partnership and realizing an integrated solution, Yes-co can expand its software with a new module that helps customers comply with the obligations of the AMLD and Sanctions Act. This offers customers the advantage that they can use their trusted Yes-co software in a very user-friendly way:

  • Being able to enter and / or update relationship data based on current Chamber of Commerce data
  • Being able to screen and check clients in the context of the AMLD and Sanctions Act and archive the result in the form of a certified PDF document in the client administration
  • Be able to conduct UBO research for business clients including underlying Chamber of Commerce extracts, resulting in a certified UBO research report in which the results are presented.

Based on its focus and specialism, SCOPE Fintech Solutions ensures continuous improvement of the delivered product, the development of new product components and features, the monitoring of laws and regulations and the implementation of necessary adjustments, so that Yes-co can focus on the core of its own software for brokers.

Broad collaboration

In addition to integrating software components, Yes-co and SCOPE Fintech Solutions will also work closely together to inform and support customers in the implementation and use of the software. Various offices in the market have indicated that they are very interested in the new module, but a lot of awareness and explanation will still have to be done within the entire market segment regarding compliance with the Wwft and Sanctions Act and what this entails. Yes-co and SCOPE will start a campaign for this after the technical integration of the software is ready and the module is available for customers via the Yes-co Appstore.

Are you a broker and are you interested in this new solution or would you like to use it, stay informed by placing yourself on the Wwft watchlist, then Yes-co will contact you when the product is available.