New guidance Netherlands Anti-Money Laundering and Counter-Terrorist Financing Act and Sanctions Act

Recently, the Dutch Central Bank (De Nederlandsche Bank, DNB) published new guidance in relation to the Anti-Money Laundering and Counter-Terrorist Financing Act and the Sanctions Act, directed to the following types of institutions: banks, life insurers, payment services providers and agents, electronic money institutions, foreign exchange offices, trust offices, lease companies, casinos, pension funds and other insurers.

DNB conducts integrity supervision of a wide range of financial and other institutions. This specific supervision is based on the Financial Supervision Act (Wet op het financieel toezicht), the Anti-Money Laundering and Counter-Terrorist Financing Act (Wet ter voorkoming van witwassen en financieren van terrorisme), the Trust Offices Supervision Act (Wet toezicht trustkantoren) and the Sanctions Act 1977 (Sanctiewet 1977). The purpose of integrity supervision is, among other things, to prevent the use of the financial system for money laundering and terrorist financing purposes.

The new guidance (in English) can be found here: DNB Guidance on the Anti-Money Laundering and Counter-Terrorist Financing Act and the Sanctions Act

Dealing with back-to-back loans BES

There seems to be unclarity at banks how to deal with back-to-back loans. Back-to-back loans are loans where the consumer (borrower) pledges the amount to be borrowed to the lender. When granting back-to-back loans to consumers, the following have to be taken into account. A back-to-back loan can also entail the risk of over-indebtedness. Specifically, the consumer has to pay interest charges on the loan, whereas the interest he/she receives on the underlying savings (amount pledged) is much less. The AFM considers that granting a back-to-back loan has to follow the same procedure that applies to the granting of a standard consumer loan or mortgage loan. Hence, when providing advice on a back-to-back loan, the AFM’s credit model has to be completed, including information about financial status, risk appetite, knowledge and experience, and purpose.

Notifying changes in executive boards, shareholders and supervisory boards BES

The AFM often does not receive notification from companies about changes in the composition of their executive boards, shareholders or supervisory boards. Appointment of policy-makers, changes in their reliability, resignation of an executive director or supervisory director and the sale of shares by majority shareholders must be notified to the AFM.

Prior to their appointment, policy-makers for advisers, brokers, authorised agents, credit providers, portfolio managers, and operators of securities markets must be screened by the AFM. Only after gaining the AFM’s approval the policy-maker is allowed to be appointed. Furthermore, licensees are under an obligation to inform the AFM if the reliability of their policy-makers has changed.

If an executive director or supervisory director is planning to resign, or if a majority shareholder wants to sell its shares, the licensee must inform the AFM of this. The AFM will then assess whether after the resignation of the executive director or supervisory director the remaining members of the respective boards possess sufficient knowledge and experience to manage or supervise the company. The AFM usually takes up to eight weeks after receiving notification to decide whether to approve the change. Accordingly, submit notification of such change at least two months before the intended resignation.

Prohibition on tie-in sales BES

As in the Netherlands, in the BES there is also a prohibition on tie-in sales (section 5:16 of the Financial Markets BES Islands Act). In brief, it states that when concluding a credit agreement the provider of credit is not allowed to force an agreement for an additional financial product or service on the client. There are some exceptions, two of them being:

  • If a client has the right to choose the company with which he/she concludes an agreement for the additional product or service;
  • If a client can be compelled to maintain a current account into which the payments required under the credit agreement have to be paid. However, the client may not incur unreasonable costs as a result. It is not permitted to demand that this current account regularly receives transferred amounts representing salary or pension (making the account a salary account).

If an agreement has been concluded that contravenes this prohibition, the agreement is capable of annulment.