FATF: Netherlands' banks need to address beneficial ownership of corporations

The most recent Mutual Evaluation Report (MER) for the Netherlands indicates that more needs to be done to avoid the employment of legitimate people for illegal activities.

The Financial Action Task Force (FATF) released the country's MER today (Wednesday), and it reveals that the Netherlands has to invest "more resources" in enhancing its risk-based supervision.

Overall, the FATF gave the Netherlands a clean bill of health, noting that the country's efforts to combat money laundering and terrorism funding are yielding "good results."

There are two areas that need improvement:

Beneficial Ownership: Ensuring that the banks and other gatekeepers in Holland are able to identify the true owners of businesses. They should decline to offer services if they are unable to do so due to the ownership structure's complexity or opacity.

Underground Banking: Unlicensed activity, requires more resources in order to increase risk-based oversight. The supervision of the non-financial sector has to develop its understanding of using a risk-based strategy as it is less established.

The FATF also recommends that Holland take more stringent action against illegal activities like underground banking because the country's non-financial sector supervision is regarded to be "less developed" and needs to gain a better grasp of using a risk-based approach.

The report also concludes that Hague officials should take additional steps to prevent the use of legitimate individuals for illegal activities, strengthen risk-based supervision, and make sure sanctions for offenses related to money laundering and terrorist financing are "proportionate and dissuasive."

The biggest money laundering concerns in the Netherlands are connected to fraud and drug-related offenses. However, extreme right-wing terrorism, other UN-designated groups, and religious extremism like ISIL pose concerns to the nation's ability to finance terrorism.

The nation has created "robust risk-based policies and strategies to address them" and has a "good understanding of the risks it faces", but FATF emphasized that it has to solve some outstanding "technical deficiencies," particularly the regulation of VASPs.

A "key feature" of the Dutch AML/CFT system, according to FATF, is domestic inter-agency coordination and public-private partnerships, with "strong cooperation" between the Dutch FIU and law enforcement authorities.

Although FATF has emphasized that the Netherlands could "increase resources" to improve risk-based supervision to address unlicensed activities and proportionate and deterrent consequences for non-compliance, the government is also "particularly effective in cooperating with international partners."

FATF has additionally cautioned the Netherlands that it must "do more" to guarantee that there is access to sufficient, accurate, and up-to-date information on beneficial ownership.

FATF advised the Dutch government to "focus  more on the reporting and supervision of the timely implementation of targeted financial sanctions for terrorist financing or proliferation financing."

By fLEXI tEAM