In the field of anti-money laundering (AML) in the Netherlands, there is a notable shift in tone as the focus turns from identifying past failures to a forward-looking approach for a more efficient and effective AML policy. A recent KPMG report titled "Joined forces: towards a more effective and efficient fulfillment of the gatekeeper role in the Netherlands" offers solutions for enhancing AML practices. This shift is not only relevant within the Netherlands but also has implications for the wider European Union and beyond.
Over recent years, the Netherlands has witnessed revelations of deficiencies in AML efforts by gatekeepers, leading to stern responses from regulators, law enforcement, and the Dutch Public Prosecution Service. Gatekeepers, particularly banks, have faced increased scrutiny, resulting in a compliance-centric approach that has created challenges for customers in terms of reduced access to the financial system, extended processing times, and higher costs, particularly affecting politically exposed persons (PEPs) and non-governmental organizations.
Recognizing the significance of their gatekeeper role, a coalition of Dutch industry and professional associations representing both gatekeepers and their clients joined forces in early 2023. They engaged KPMG Advisory to conduct a study aimed at identifying opportunities and possibilities for improving AML, counter-terrorist financing (CTF), and sanctions efforts.
The study revealed various impediments affecting gatekeepers, including a lack of clear government guidance, conflicting laws and regulations, limited powers to fulfill their expanding Know Your Customer (KYC) and Customer Due Diligence (CDD) obligations, and a lack of an effective feedback loop from law enforcement and the Financial Intelligence Unit (FIU).
A significant challenge lies in the tension between protecting customer privacy and effectively preventing money laundering and terrorist financing. This tension is evident in recent rulings from the European Court of Justice and discussions on information-sharing among gatekeepers and with public partners.
To address these issues, the study examined various initiatives, both domestic and international, to identify success factors and lessons learned. It highlighted the potential for collaboration and the use of technology to address some of the identified impediments.
Private sector collaboration, particularly in the form of joint utilities for transaction monitoring, sanctions screening, and KYC/CDD, showed promise in shortening the CDD process and reducing costs. These initiatives involve reusing, updating, and enriching available data, reducing the need for repetitive customer inquiries.
Collaboration and early-warning systems, particularly to prevent "shopping" by customers, were also seen as effective ways for gatekeepers to share signals and prevent criminals from accessing the financial system.
Public-private partnerships (PPPs) were identified as critical to effective AML policy. The study praised existing PPP structures in the Netherlands and emphasized that intelligence from different sources can improve the identification, analysis, investigation, and prosecution of financial crimes.
The study recommended exploring the use of new technologies to enhance AML compliance, such as digital identity tools, authentication methods, and electronic identification systems.
Central government steering was also deemed essential to enhance effectiveness and efficiency in AML compliance. A national strategy based on a national risk assessment (NRA) and a risk appetite for the Netherlands was recommended. Central coordination and clear guidance from the government can help address some of the impediments faced by gatekeepers.
Finally, the study underscored the importance of balancing privacy concerns with the prevention of money laundering and terrorist financing, emphasizing that achieving greater efficiency and effectiveness requires collaboration between gatekeepers and the government.
While the study was conducted with a focus on the Dutch market, the lessons learned and solutions proposed can be relevant for AML efforts worldwide. Compliance with AML legislation and sanctions is a global priority, and international initiatives highlighted in the study demonstrate that many regions face similar challenges. In conclusion, the study underscores the importance of collaboration in advancing AML practices and achieving greater effectiveness and efficiency.
By fLEXI tEAM