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 are subject to 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 […] or the organisation of the contribution necessary for the incorporation, operation or management thereof;
  • 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, for example a first meeting. 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 are subject to 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 depends on 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.

In an assignment subject to the Wwft, the Wwft prohibits us from rendering substantive services before the client screening has been completed for the most part. The investigation into the origin of the funds (financing), which is a part of the client screening (see below), may be completed during our services in most cases. 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.

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.

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, 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 in relation to 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 relied on. 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). Pseudo-UBOs are a fallback option: in the case of companies, this does not happen very often; however, it does occur more often in the case of foundations and associations.

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

Every natural person:

  • holding directly or indirectly more than 25% of the shares (irrespective of the profit and voting rights attached thereto); or
  • holding directly or indirectly more than 25% of the voting rights (irrespective of shareholding); or
  • holding directly or indirectly more than 25% of the ownership interest (irrespective of shareholding, therefore depositary receipt holders can be UBOs) (‘ownership interest’ means the right to distribution from the assets of the company, such as a right to profit, reserves or the surplus after liquidation); or
  • being the ultimate owner or having the ultimate control with other means than shares, voting rights or ownership interest (e.g. a natural person who, as shareholder, has the (veto) right to appoint/ dismiss the majority of the board members); or
  • exercising (dominant) effective control otherwise (being the ultimate policymaker).

Pseudo-UBO (fallback option, see above): 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:

  • holding directly or indirectly more than 25% of the ownership interest (ownership interest means earnings from capital, such as profits, reserves 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 (dominant) effective control otherwise (being the ultimate policymaker).

Pseudo-UBO (fallback option, see above): 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, such as 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 (dominant) effective control otherwise (being the ultimate policymaker).

Pseudo-UBO (fallback option, see above): 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 (fallback option, see above): the natural persons mentioned as director in the statute, or if possible mentioned as director in the documents of the church organisation.

 

In our Wwft client screening, we are obliged to consult the UBO register, to determine whether the client’s UBOs are recorded and, if so, to save an extract of the UBO registration.

If the UBOs are registered in the UBO register, we will see the following information about those UBOs: who are registered as UBOs and their full names, months and years of birth, nationalities, states of residence and the nature and scope of the interests.

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. This is our ‘feedback obligation’ in Wwft services. Our duty of confidentiality is breached by this feedback obligation. If UBO information has not yet been registered, our feedback obligation does not apply.

What is the UBO register?

The UBO register is a register in which virtually all Dutch legal entities and companies have to register their ‘ultimate beneficial owners’ (UBOs) (see below about when someone is ‘UBO’). The UBO register becomes part of the Commercial Register of the Chamber of Commerce. Some data in the UBO register become public.

What is the purpose of the UBO register?

The purpose of the UBO register is to combat financial and economic crime, such as money laundering, corruption, tax evasion, fraud and the financing of terrorism. The idea is that combating this becomes easier if it is clear who the ultimate beneficial owner or owners of a company is or are. In this way, individuals and organisations (such as lawyers and civil-law notaries) are better informed about those with whom they enter or wish to enter into a business relationship.

Who is UBO for the UBO register?

The definition of ‘UBO’ for the UBO register is the same as for our Wwft-UBO investigation (see ‘What is a UBO (or pseudo-UBO)?’).

Who is responsible for registration in the UBO register?

The legal entity or company subject to the registration obligation is itself responsible for the correct and timely listing of all UBOs. The UBOs do have a legal duty to cooperate.

Which organisations must register their UBOs?

Virtually all legal entities and companies in the Netherlands fall within the scope of the UBO register. The obligation to register in the UBO register applies to:

  • private limited companies (BVs) (unlisted);
  • public companies (NVs) (unlisted);
  • foundations (stichtingen) (including Trust Office Foundations (STAKs) and Public Benefit Organisations (PBOs);
  • associations (verenigingen) with or without full legal capacity but with an enterprise (owners’ associations (verenigingen van eigenaren) are excluded);
  • partnerships (personenvennootschappen) (partnerships (maatschappen), general partnerships (vennootschappen onder firma), limited partnerships (commanditaire vennootschappen));
  • mutual insurance associations (onderlinge waarborgmaatschappijen);
  • cooperatives (coöperaties);
  • European NVs, European CVs, European Economic Interest Groupings which, according to their articles of association, have their registered offices in the Netherlands;
  • shipping companies; and
  • religious denominations (kerkgennootschappen).

 Exempt from the obligation to register in the UBO register are:

  • listed companies and its 100% subsidiaries (the 100% interest can also be held indirectly);
  • sole proprietorships (eenmanszaken);
  • owners’ associations (verenigingen van eigenaren);
  • associations without full legal capacity and without an enterprise;
  • legal entities governed by public law; and
  • other legal entities governed by private law (courtyards (hofjes), guilds, foundations, farmers’ markets).

 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.

When must the UBOs be registered?

Legal entities and companies already registered with the Chamber of Commerce on 27 September 2020 have until 27 March 2022 to register their UBOs (eighteen months from the date of entry into force of the registration obligation).

Legal entities and companies that were not yet registered with the Chamber of Commerce on 27 September 2020 must register their UBOs immediately (as part of the registration in the Commercial Register of the Chamber of Commerce).

If the registered UBOs change, legal entities and companies will have to update this in the UBO register within a week.

What information is public?

Part of the information about UBOs becomes public. It concerns the following:

  • who are registered as UBOs, and then per UBO:
    • first name and surname;
    • month and year of birth;
    • nationality;
    • state of residence; and
    • nature and extent of the UBO’s economic importance (indicated in the following ranges: > 25% – 50%, >50% – 75%, >75% – 100%).

What information is not public?

The following information about UBOs is not public and can only be accessed by competent authorities and the Financial Intelligence Unit (FIU):

  • citizen service number (BSN)/foreign tax identification number (TIN);
  • day of birth;
  • country and place of birth;
  • residential address;
  • copy of valid identity document;
  • copies of documents showing the nature and extent of the economic interest.

How is privacy protected?

Not all data is public (see above) and there are data blocking possibilities, but these are limited (see below).

Another measure is that those consulting the UBO register must register and identify themselves before they are allowed to consult the UBO register. This data is stored so that the UBO has the opportunity to ask how often the data have been consulted.

Furthermore, searches can only be conducted in the legal entity’s name and not in the UBO’s name (but FIU‑the Netherlands and the competent authorities are able to do so).

Finally, a fee will be charged for consulting the UBO register (€ 2.50).

What data blocking possibilities are there?

The data blocking possibilities are limited. As with the Land Registry, blocking is only possible with:

  • minors;
  • guardianship or administration;
  • police protection.

What if the obligations for the UBO register are not complied with?

Non-compliance with the obligations for the UBO register can be punished under both administrative and criminal law. This applies to:

  • legal entities or companies subject to registration which are involved in non-registration, incorrect or incomplete registration;
  • UBOs that have failed to comply with the duty to cooperate; and
  • Wwft institutions that have not complied with the feedback obligation.

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

In any case, 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 such a person are also PEPs. This is the case for a parent, the spouse (or equivalent) or a child or spouse of a child (or equivalent). The same applies to persons who are known to have a close business relationship with a person with a PEP function.

Examples of 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.

Intermediate or junior officers are not covered by the above functions. The Tax and Customs Administration has drawn up a list (in Dutch) of Dutch prominent public functions that fall under the definition of a PEP.

 

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.

In an assignment subject to the Wwft, the Wwft prohibits us from rendering substantive services before the client screening has been completed for the most part. The investigation into the origin of the funds (financing), which is part of the client screening, may in most cases be completed during our services. Subsequently, we are legally obliged to end our services if:

  • the investigation into the origin of the funds cannot be completed; or
  • if, due to new information, the other parts of the client screening cannot be completed after all.

This may happen, for example, if the client does not respond to a supplementary question or a request for supplementary information. If the client screening cannot be completed and 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.

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 9 November 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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