Wwft

The Dutch Government policy is aimed at preventing the laundering of criminal money and the financing of terrorism. This also includes all forms of fraud (such as bankruptcy and tax fraud) and bribes (corruption). That is why almost all service providers, including us as lawyers, civil-law notaries, candidate civil-law notaries and assigned civil‑law notaries, are required by law, in respect of certain services, to conduct ‘client screening’, to ‘monitor’ clients, to investigate the origin of the funds used and to report ‘unusual transactions’ to a national reporting point. These obligations are set out in the Dutch Money Laundering and Terrorist Financing (Prevention) Act (Wet ter voorkoming van witwassen en financieren van terrorisme (Wwft)). This law is based on a European directive which means that the same rules apply throughout the European Union.

Not all our services fall under the Wwft. The Wwft states that this law applies if we:

“[…] advise or assist in:

  • the purchase or sale of properties subject to registration;
  • the management of funds, securities, coins, banknotes, precious metals, precious stones or other assets;
  • the incorporation or management of companies, legal entities or similar bodies […];
  • the buying or selling of shares in, or the buying or selling or the taking over of all or part of businesses, companies, legal entities or similar bodies[…];
  • activities in the field of taxation that are comparable with the activities of […] [tax advisors];
  • the establishment of a right of mortgage on a property subject to registration; or

[…] act on behalf of and for the account of a client in any financial or real estate transaction”

This legislative text must be interpreted on a case-by-case basis. In general, the Wwft applies to services in the field of real estate and corporate law. The Wwft may also apply to personal and family law, for example if tax advice is also provided.

Exemptions

However, there are also exemptions. Firstly, the Wwft does not apply to our services when determining the client’s legal position. This is also called the exploratory stage. No substantive services are rendered at this stage. However, as soon as these services are rendered, the Wwft applies immediately.

Secondly, there is the so-called ‘process exemption’. The Wwft does not apply if we render services to represent a client in a lawsuit, to give advice in the context of a lawsuit or to give advice on instituting or avoiding a lawsuit.

These exemptions also apply if our services relate to one of the aforementioned Wwft services.

If the services required from us fall under the Wwft, we are required by law to conduct a client screening. The extent of the investigation depends on the extent of the risk of money laundering or terrorist financing. This risk is determined in advance on the basis of various factors laid down in the law, by the government and by supervisory authorities. Examples are: the nature of the services, geographical risk factors, the industry in which the client operates and the way in which the transaction is financed. We are not permitted to render any substantive services until the client screening has been completed in full and in accordance with the Wwft. The Wwft prohibits us from accepting the assignment if the client screening cannot be completed in full and in accordance with the Wwft. In that case, an existing business relationship must also be terminated.

The client screening means that we must research at least:

If the client is a natural person

  • the client’s identity and any representative;
  • the purpose and intended nature of the business relationship;
  • the representative authority of the person acting on behalf of the client;
  • whether the client is acting for himself or herself or for someone else;
  • whether the client is a politically exposed person (a ‘PEP’);
  • the origin of the funds (e.g. money) used in the transaction.

In most cases, the investigation into the origin of the funds does not have to be completed before we are permitted to accept the assignment.

If the client is a legal entity

  • who the ‘ultimate beneficial owner’ (‘UBO’) or pseudo-UBO is;
  • the client’s identity, any representative and the UBO or the pseudo‑UBO;
  • the purpose and intended nature of the business relationship;
  • the ownership and control structure of the legal entity;
  • the representative authority of the person acting on behalf of the client;
  • whether the client is acting for himself or herself or for someone else;
  • whether the UBO or the pseudo-UBO is a politically exposed person (a ‘PEP’);
  • the origin of the funds (e.g. money) used in the transaction.

In most cases, the investigation into the origin of the funds does not have to be completed before we are permitted to accept the assignment.

Enhanced client screening

Sometimes we are obliged to take additional measures, in line with the higher risks that have emerged. Enhanced client screening, for example, is mandatory if:

  • the client (natural person) or representative (such as a director) is not physically present for identification purposes;
  • the client, the UBO or the pseudo-UBO is a politically exposed person (a ‘PEP’); and/or
  • there is involvement in a country with a ‘high risk’. This is apparent from the various lists that we have to check.

A combination of factors can also lead to a high risk, and therefore to a mandatory enhanced client screening. Such factors include, for example, the industry in which the client operates, the way in which a purchase price is determined, the way in which the financing takes place and a structure that seems complex given the business activities.

A UBO is an ultimate beneficial owner of a legal entity or company. Part of the Wwft client screening is that we are obliged to investigate who the UBOs are. According to the law, the UBO is any natural person who ultimately owns or controls a legal entity. A UBO is therefore always a natural person. A legal entity may have one or more UBOs (or pseudo-UBOs). Who a UBO is differs per type of legal entity or company (see below).

Sometimes, there is no UBO or there is doubt as to whether the identified person really is the UBO. In such cases, one or more pseudo-UBOs must be designated. These are natural persons who belong to the ‘senior management staff’. It differs per type of legal entity or company who should be understood as such (see below). Designating one or more pseudo-UBOs is an ultimate fallback option. In the case of companies, this does not happen very often. However, it does occur in the case of foundations and associations.

UBO of a BV or NV (non-listed companies)

Every natural person:

  • having a direct or indirect interest of more than 25% of the shares, voting rights or ownership interest; or
  • exercising effective control otherwise (being the ultimate policymaker).

‘Interest’ means an interest in the capital, such as a right to profit or the right to the surplus after liquidation. The term ‘effective control’ includes, for example, control by means of an issue of depositary receipts for shares, beneficial ownership, special types of shares with special control and/or profit rights, profit rights under the articles of association, contractual profit rights, voting proxies and, more specifically, being able to dismiss the majority of the directors, to amend the articles of association and to have a casting vote in other material decisions that enable dominant influence to be exercised.

Pseudo-UBO: any director under the articles of association. If a director under the articles of association is a legal entity, it concerns any natural person who is a direct or indirect director under the articles of association.

UBO of a foundation (stichting), association (vereniging), mutual insurance company (onderlinge waarborgmaatschappij) or cooperative (coöperatie)

Every natural person:

  • having a direct or indirect interest of more than 25% of the ownership interest (ownership interest means earnings from capital or from surplus after liquidation);
  • holding directly or indirectly more than 25% of the votes in the event of an amendment to the articles of association; or
  • exercising effective control otherwise (being the ultimate policymaker).

Pseudo-UBO: any director under the articles of association. If a director under the articles of association is a legal entity, it concerns any natural person who is a direct or indirect director under the articles of Association.

UBO of a general partnership (vennootschap onder firma), partnership (maatschap), limited partnership (commanditaire vennootschap) and shipping company (rederij)

Every natural person:

  • having a direct or indirect ownership interest of more than 25% (ownership interest means earnings from capital, including its profits or reserves, or from surplus after liquidation);
  • holding directly or indirectly more than 25% of the votes in the event of a change in the cooperation agreement;
  • holding directly or indirectly more than 25% of the votes cast in the performance of the cooperation agreement (other than by acts of management); or
  • exercising effective control otherwise (being the ultimate policymaker).

Pseudo-UBO: any partner, with the exception of limited partners (also known as silent partners) in a limited partnership. If a partner is a legal entity, it is any natural person who is directly or indirectly a director under the articles of association.

UBO of a religious denomination (kerkgenootschap)

Every natural person who, at the dissolution of the denomination, is appointed as legal successor in the statute of the denomination.

Pseudo-UBO: the natural persons mentioned as director in the statute, or if possible mentioned as director in the documents of the church organisation.

UBO register and our feedback obligation

From 27 September 2020, we must consult the UBO register at our Wwft client screening. From that date, almost all Dutch legal entities and companies are obliged to register their UBOs in the UBO register and the UBO register goes ‘live’. Existing legal entities and companies are given a year and a half to register, but new entities must do so immediately.

If the UBOs are registered in the UBO register, we see the following information about those UBOs: first and last name, month and year of birth, nationality, country of residence, the nature and extent of the economic interest.

If there is a difference between the information registered in the UBO register and the UBO information we ourselves have, we are obliged to report this to the Chamber of Commerce (in the Netherlands, the UBO register is part of the Commercial Register of the Chamber of Commerce). This is our ‘feedback obligation’ for Wwft services. This feedback obligation overrides our duty of confidentiality (just like when we have to report an ‘unusual transaction’). We must substantiate the feedback with documents. The Chamber of Commerce then informs the legal entity that a discrepancy has been reported and gives it the opportunity to check the information in the UBO register. The Chamber of Commerce does not request information from the UBOs. If the legal entity has not yet registered UBO information, our feedback obligation does not apply.

The obligation to register in the UBO register applies in any case to BVs (non-listed), non-listed NVs, foundations, associations, religious denominations, mutual insurance companies, cooperatives, shipping companies and partnerships (partnership, general partnership, limited partnership). Exceptions include listed companies, sole proprietorships and owners’ associations. Foreign legal entities do not have a registration obligation in the Netherlands either, but they may fall under the registration obligation for the UBO register of the country of origin. Like the Wwft, the UBO register is based on European directives, so all member states of the European Union are obliged to maintain such a register from 2020.

A PEP is a politically exposed person. Part of the Wwft client screening is that we are obliged to check whether the client, the UBO or the pseudo-UBO is a PEP. If that is the case, we will have to conduct an enhanced client screening.

A PEP is someone who is entrusted with one or more of the following prominent public functions, has been entrusted for the past year or is about to be entrusted with such a function. Some family members of a PEP are also PEPs. This is the case for a parent, the spouse (or equivalent) or a child or spouse of a child (or equivalent). In addition, a person is also a PEP if he or she is known to have a close business relationship with a PEP.

PEP-functions:

  • head of state, head of government, minister, junior minister or state secretary;
  • member of parliament or member of a similar legislative body (e.g. the senate or parliament);
  • member of the board of a political party;
  • member of a supreme court, constitutional court or other high court that delivers judgments against which, except in exceptional circumstances, there is no appeal, for example in the Netherlands: Council of State (Raad van State), Supreme Court (Hoge Raad), Trade and Industry Appeals Tribunal (College van Beroep voor het bedrijfsleven) (and/or the Central Board of Appeal (Centrale Raad van Beroep));
  • member of an audit office or of the board of a central bank;
  • ambassador, chargé d’affaires or senior officer of the armed forces;
  • member of the management, supervisory or governing body of a state-owned company;
  • director, deputy director, member of the board or holder of an equivalent function in an international organization (such as the International Court of Justice, the United Nations, the institutions of the European Union, the North Atlantic Treaty Organization and the World Trade Organization);
  • another function similar to the functions listed above.

Part of the client screening for Wwft services is that we are obliged to identify the client, any representative and any UBO or pseudo-UBO. We then have to investigate and verify the given identity. The verification can also be done by another professional in consultation with the lawyer or civil-law notary.

Natural person

The identity of a natural person is verified on the basis of a valid and original identity document, such as a national passport, a Dutch identity card or a Dutch driving licence. In consultation with the lawyer or civil‑law notary, it can be verified whether another proof of identity can also be used. However, if the natural person has another nationality in addition to the Dutch nationality, this person is obliged to always identify himself or herself with a Dutch identity document in the Netherlands.

Dutch legal entity, company or branch

The identity of a Dutch legal entity, company or branch is verified on the basis of:

  • an online extract from the Chamber of Commerce that we have retrieved ourselves;
  • a digitally certified extract from the Chamber of Commerce; or
  • a deed or statement drawn up or issued by a lawyer, civil-law notary, candidate civil-law notary or a comparable, independent legal practitioner established in the Netherlands or in another European member state.

Foreign legal person or company

The identity of a foreign legal entity or company is verified – depending on the country and the risk – on the basis of, for example:

  • an extract from the foreign public commercial register;
  • a statement by a foreign lawyer or civil-law notary (or equivalent thereof); or
  • a partnership deed.

It may happen that a client is introduced to us by another service provider who has already conducted a client screening. Pursuant to the Wwft, we may only take over the results of that client screening if that client screening has been conducted by a:

  • lawyer or notary in the EU;
  • accountant or tax adviser in the EU;
  • Dutch trust office;
  • regulated financial institution (excluding a money transaction office (exchange institution)) in the EU.

Such a referring service provider must confirm to us that the client screening has been conducted in accordance with the Wwft. In addition, that service provider must provide us with all identification and verification details and other details about the client’s identity, any representative and any UBO. Under the privacy legislation, the referring service provider requires your explicit consent in this respect.

Once we have received all the information, we will check whether the client screening has been conducted in accordance with the Wwft and our office policy. If this is not the case, we are obliged to take additional measures ourselves.

The Wwft prohibits us from entering into or continuing a business relationship or carrying out a transaction, if we are unable to complete the client screening fully and in accordance with the Wwft. This may happen, for example, if the client does not respond to a supplementary question or a request for supplementary information. If in such a case there are also indications of money laundering or terrorist financing, we are obliged to report this to the Financial Intelligence Unit – the Netherlands.

In respect of Wwft services, we are required by law to report ‘unusual transactions’ to the Financial Intelligence Unit – The Netherlands. In short, a transaction or proposed transaction is ‘unusual’ if it could be related to money laundering or terrorist financing. When we make a report, we are not allowed to inform the client about it (not even in the case of a request based on privacy legislation). This tipping off prohibition is laid down in the Wwft. The duty to report starts when we actually render substantive services for the client.

We may only render substantive services for the client once the client screening has been completed in full and in accordance with the Wwft. However, if the client screening cannot be completed and there are indications of money laundering or terrorist financing, we are also obliged to report the intended transaction.

Lawyers and civil-law notaries have a legal duty of confidentiality. For lawyers, this duty of confidentiality is laid down in the Dutch Counsel Act (Advocatenwet), and for civil-law notaries in the Dutch Civil-Law Notaries Act (Wet op het notarisambt). The Wwft states that lawyers and civil-law notaries are not bound by their duty of confidentiality when making a report of an unusual transaction under the Wwft, and in that context are obliged to provide (additional) information to the Financial Intelligence Unit – the Netherlands and the Financial Supervision Office (Bureau Financieel Toezicht (BFT)). Our duty of confidentiality is therefore crossed by the Wwft duty to report.

The duty to report does not apply during the exploratory talk. Clients may at all times speak freely with a lawyer or civil-law notary in order to determine the legal position, as long as no substantive services (advice) are rendered at that time.

After we have accepted a Wwft assignment, we are obliged to continue to check the client’s nature and background and to keep it up to date. This is called ‘monitoring’. In the event of new information or changed circumstances, we may have to reassess the risks, conduct a new client screening and/or conduct an enhanced client screening. Important changes in circumstances include changes in management, activities, organizational structure, transaction patterns, place of business, transparency and financial behaviour.

In the case of financial transactions that fall under the Wwft, we are obliged to investigate the origin of the money used for these transactions. This obligation to investigate applies not only to payment via our clients’ account, but also to payment between the parties.

In addition, this investigation obligation also applies if the transaction is financed by means other than money (settlement, acknowledgement of debt, shares or other assets). The starting point of the investigation is the client’s explanation, but we must verify such statement. Therefore, the origin of the funds must also be substantiated and proven by documents, such as bank statements or financial statements. The exact information required depends, among other things, on the origin of the funds. The intensity of the investigation depends on the degree of risk incurred by the client or the transaction.

When complying with our legal obligations under the Wwft, we process personal data. Our privacy statement states how these personal data are processed. The following applies to the personal data that we collect on the basis of the Wwft.

The personal data that we collect on the basis of the Wwft are only processed for the purposes of the Wwft. We must retain these personal data for five years after the end of the business relationship with the client or after the execution of the transaction for the client. If we have made a report under the Wwft, the retention period for the personal data relating to that report will be five years after the report was made.

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Last update 6 August 2020.

Disclaimer: the content of this website is primarily intended for information purposes. In order to keep the information understandable, we deliberately do not strive for completeness. No rights can be derived from the content of this website.

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