Since the entry into force of the first Anti-Money Laundering Directive (hereafter AMLD) in 1991, combating money laundering has been a major issue in the European financial sector. This directive was soon succeeded by AMLD2 and then by AMLD3 in 2005. During this period, not only was the scope of application extended to different types of institutions, but more and more detailed rules for combating terrorist financing were also introduced.
AMLD4 was implemented on 25 July 2018 in the Prevention of Money Laundering and Terrorist Financing Act (Wwft) and in underlying regulations. An important aspect of the Wwft is that it is risk-based. This means that institutions covered by the Wwft are required to prepare a risk assessment of their ML and TF risks. Since 2018, the definition of PEP(politically prominent person) and of UBO (Ultimate Beneficial Owner) has been tightened. Specific requirements also apply to an institution’s Wwft governance.
Implementation of AMLD5
Since 21 May 2020, the fifth anti-money laundering directive, AMLD5, has been implemented in Dutch law. This has resulted in several changes to the Wwft. For instance, the scope has been further expanded: more industries are subject to Wwft obligations, including crypto service providers.
In addition, managers of real estate investment institutions now also face obligations with regard to tenants of real estate in the investment institutions they manage. Since the implementation of AMLD5, the Wwft also applies to natural persons, legal entities or companies that mediate professionally or commercially in the creation and conclusion of rental agreements as referred to in Section 7:201 of the Dutch Civil Code. This insofar as the monthly rent amounts to an amount of €10,000 or more. From this amount, the obligations of the Wwft start to apply, such as conducting client investigations, monitoring transactions and reporting unusual transactions to FIU-the Netherlands. Finally, the UBO register was introduced, which came into force on 27 September 2020.
AMLD5 and cypto-service providers
Based on AMLD5, the rules from the Wwft also apply to crypto service providers. They must now register with DNB to offer their services. This registration requirement only applies to parties that:
- offer custody wallets; or
- offer exchange functions for virtual currencies.
A custodial wallet is said to be offered when “a company offers services through which it secures cryptographic private keys on behalf of its clients to hold, store or transfer virtual currency”. This applies to firms that themselves hold their clients’ private keys. An exception is providers of non-custodian wallets, such as ‘software wallets’.
The provision of exchange functions for virtual currency occurs when “a company performs or enables transactions for customers through which virtual currency is exchanged for cash and vice versa”. Thus, the exchange of virtual currency can be done in various ways, such as:
- by bringing together the buying and selling intentions of third parties in relation to crypto currencies in such a way that a contract results from it according to the rules of the platform;
- by acting as a counterparty itself;
- by acting as a broker); or
- by using Automated Teller Machines (ATMs).
DNB Registration requirement
The registration obligation only applies to crypto service providers operating or planning to operate in or from the Netherlands. They must register with DNB. Without a registration, it is prohibited to operate in the Netherlands as a provider of crypto services. This also applies to Dutch parties that only have foreign customers.
What does the registration for crypto service providers entail?
The file to be submitted to DNB to obtain registration includes:
- general company information (incl. articles of association and extract from the Chamber of Commerce);
- a detailed business plan (incl. the strategy, an overview of activities and a SWOT analysis);
- an elaboration of the governance (incl. organisational structure and transparent control structure);
- an elaboration of the controlled conduct of business (incl. compliance and audit, reporting procedure, outsourcing and training & education);
- an elaboration of the integrity management (incl. a systematic integrity risk analysis, client due diligence policy, policy on countering conflicts of interest, statement of the policymaker specifically charged with responsibility for compliance with the Wwft and Sanctions Act 1977);
- a file for each (co-)policymaker to be assessed for suitability and reliability.
Compliance software Ruler
Ruler helps you stay up to date with changes to the Wwft and other relevant laws and regulations, as soon as they are announced. So you are always up-to-date, and prepared for what is about to change.
Want to know more?
Want to know if you qualify as a crypto service provider? Or do you need help applying for registration? Projective Group helps financial institutions apply for registrations or licences. Please feel free to reach out to us.