Updated guidelines regarding the Wwft and Sanctions Act

On October 15 2020 the Netherlands Authority for the Financial Markets (AFM) published an updated version of the guidelines on the Anti Money Laundering and Terrorist Financing Act (Wwft) and Sanctions Act. The guideline has been amended due to new regulations, such as the introduction of the UBO register. In addition, the AFM entered into discussions with various companies who said that they would like to have more clarity about the implementation of de guidelines.

The AFM tries to provide "more complete" answers to the questions addressed by the companies.

What requirements must a Wwft-bound risk assessment and company policy meet?

The AFM makes it even more clear that in order to comply with the Wwft, organizations must have a solid customer Due Diligence(CDD) policy. This policy must clearly specify the procedure for drawing up a risk profile of clients. This must include information on how different risk factors influence the client's risk assessment. The risk assessment must include an indication of the risks concerning the customer, the product, the service, the transaction or delivery channel-specific, and the geographical risk.

The guideline states that the tasks and responsibilities concerning the Wwftand Sanctions Act must be included in the policy. It goes without saying that you as an organization are responsible for keeping your policy up-to-date.

The UBO register and the exception for stockbroking firms

The UBO register has been introduced on the 27th of September. The UBO register is an online register, managed by the Chamber of Commerce, where you can request the details of an UBO. The UBO register has been introduced to make it more difficult for persons who commit financial and economic crime to hide behind legal entities. It offers transparency and insight into the persons who have ultimate control within an organization. Ultimate Beneficial Owners are clients with a legal entity who have more than 25% of the ownership and / or control of a legal entity, institute, foundation, association or general partnership, through shares, voting rights, ownership interests or other means.

Stockbroking firms are exempt from this 25% rule. For more information about this exception, go to point 5.2 of the new guideline: UBOs at stockbroking firms.

What does the AFM understand by risk-based continuous monitoring of clients and transactions?

The AFM also provides more clarification on how to 'monitor' transactions, clients and - if necessary - the source of the funds.

It is expected that a transaction pattern can also be determined based on the risk profile and the risk assessment of the client. After the client has been accepted, it is therefore important that you monitor your client's transactions and, if necessary, report abnormal transactions to FIU-Nederland.

The AFM also expects that your client's risk profile and risk assessment are up-to-date. This means that the risk assessment of a client must be repeated periodically, and that the risk profile must be updated if the results of the assessment change. Your policy must include how often you need to assess clients based on the different risk categories. For example, high-risk clients should be re-checked at least once a year, medium-risk clients should be re-checked at least every two years, and low-risk clients should be re-checked at least every five years.

In addition, you also have an "event driven review". This occurs when there are is a certain "trigger" that forces you to recheck your client. Events which are to be considered as triggers must be covered in your policy.

Finally, the Wwft and Sanctions Act guidelines prescribe that - if necessary - you as an organization must have knowledge of the source of financial resources, in other words: the origin of the client's money. Based on the client's risk profile, it can be determined how often this should be checked. In general, the higher the clients's risk profile, the more often the source of funds must be assessed.

What are the requirements of a 'Wwft' training as referred to in the guidelines?

As an organization, according to the guidelines, you are obliged to inform employees and policymakers within the organization of the provisions of the Wwft by means of training. The aim of the training is that an employee is able to recognize unusual transactions and to perform a proper and complete risk assessment. Organizations are free to determine how they offer and shape this training. Examples are: certified training courses, (in-house) training courses, e-learning modules, and awareness sessions. It is important that the organization can demonstrate, for example by means of documentation, how (frequently) the training is given and what the content of this training is. This is necessary to assess whether the program meets the requirements of the Wwft.

Which Sanction Lists should companies include in their screening and how often do they need to screen?

According to the AFM, organizations should (at least) screen their clients against the National Terrorism Sanctions List, the EU Sanctions List and the UN Sanctions List. See the section above on monitoring your clients. If a potential client is registered on one of these Sanctions Lists, you must report this to the AFM via the registration form.

Most important change: Introduction of the UBO register

The AFM mainly clarifies how to interpet the Wwftguidelines. The most important consequence for you as an entrepreneur is that you must register yourself in the UBO register.

For organizations that have registered or will register with the Chamber of Commerce after September 27, 2020, the registration of UBO data will be arranged immediately upon registration.

A little more initiative is expected from organizations that were active before 27 September. These organizations have up to the 27th of March 2022 to register without any additional costs.  These organizations will also receive a timely letter from the Chamber of Commerce containing a manual for registering UBOs.

You don't have to wait for the invitation. If you are authorized to sign within your organization, you can already register UBOs here . As long as you have completed the registration at the Chamber of Commerce before March 27, 2022, you're good. Failure to register, to register completely, or failure to keep the registration up-to-date can be punished with an administrative fine and qualifies as an economic offense.

Organizations with legal forms such as sole proprietorships, listed private and public limited companies, 100% subsidiaries of listed companies, associations of owners, legal entities in formation, associations with limited legal capacity that do not conduct a business, legal entities under public law, and other legal entities governed by private law do not need to register.

Every other legal form such as a general partnership, CV, BV, NV, trusts, etc. does have a duty to register.

In conclusion

In October 2020, the AFM amended its Guidelines of the Wwftand Sanctions Act. Questions such as:

• What requirements must a Wwft-bound risk assessment and company policy meet?
• To what extent should companies investigate the UBO of stockbroking firms?
• What does the AFM understand by a risk-based audit of executed transactions?
• What are the requirements of a 'Wwft' training as referred to in the guidelines?
• Which Sanction Lists should companies include in their screening and how often do they need to screen?

As a person who is subjected to the AML, it is good to be aware of the latest changes and the AFM therefore provides guidelines. It is therefore important that you take note of this. Better be safe than sorry! 

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