Kingdom of the Netherlands-Netherlands
Detailed Assessment Report on Anti-Money Laundering and Combating the Financing of Terrorism

The Netherlands has a long-standing legal framework concerning Anti-Money Laundering and Combating the Financing of Terrorism preventive measures, which dates back to 1993. The legal framework for Customer Due Diligence is generally adequate; however, a number of provisions are problematic. The Dutch system of preventive measures emphasizes the risk-based approach, complemented by a principles-based approach. The principles-based approach should be better supported with guidance for financial institutions. Although most elements of the Suspicious Transaction Report reporting requirements are in place, the reporting regime has one minor legal shortcoming and raises effectiveness concerns.

Abstract

The Netherlands has a long-standing legal framework concerning Anti-Money Laundering and Combating the Financing of Terrorism preventive measures, which dates back to 1993. The legal framework for Customer Due Diligence is generally adequate; however, a number of provisions are problematic. The Dutch system of preventive measures emphasizes the risk-based approach, complemented by a principles-based approach. The principles-based approach should be better supported with guidance for financial institutions. Although most elements of the Suspicious Transaction Report reporting requirements are in place, the reporting regime has one minor legal shortcoming and raises effectiveness concerns.

1 GENERAL

1.1 General Information on the Netherlands and Its Economy

Overview

32. The Netherlands is a parliamentary democratic constitutional monarchy. It borders the North Sea to the north and west, across which are Norway, Denmark, and the United Kingdom. It shares land borders with Belgium (450 km.) to the south, and Germany (577 km.) to the east. The capital is Amsterdam and the seat of government is in The Hague. The Netherlands is densely populated. The 2009 estimate is that 16,554,448 people live on 41,562 km. It is a geographically low-lying country, with about 27 percent of its area and 60 percent of its population located below sea level. Significant areas have been gained through land reclamation and preserved through an elaborate system of polders and dikes. The Netherlands was a founding member of the UN, NATO, the European Communities (now the European Union), the International Monetary Fund, the World Bank, and the Western European Union.

Dutch economy

33. The Dutch economy is a private free market system. The main impact of the government on the economy is through regulation and taxation. Currently, almost two thirds of the economy is based on foreign trade. In terms of exports, the country ranks seventh in the world. The country has been one of the main proponents of international free trade and the reduction of duties and tariffs on goods and services. As a member of the European Union (EU), the Netherlands uses the Euro since January 1, 2002, a common currency used by 16 EU countries.3 The Netherlands is also a party to the Schengen Agreement.4

34. The Netherlands is home to some of the world’s largest corporations, including Royal Dutch Shell and Unilever. Despite its small size, the Netherlands ranks number seven in the world in total value of its corporations. The 2009 GDP was €572 billion, after reaching €596 billion in 2008.5 This makes the Dutch economy the 16th largest worldwide.6 After the recent recession (4.0 percent real GDP decrease in 2009), the economy looks set to grow again on the back of a recovery in world trade, fiscal stimulus, and easier monetary conditions. The latest estimate of the CPB (Centraal Planbureau), the Netherlands Bureau for Economic Policy Analysis, is that real GDP will increase by 1¼ percent in 2010 and 1¾ percent in 2011.7 The IMF estimates that GDP will increase modestly by ¾ percent in 2010.8

System of government

35. The Netherlands has been a constitutional monarchy since 1848. The Constitution (Grondwet) states that the government, i.e., the ministers, is responsible for government policy, rather than the Monarch. The Queen enjoys immunity. The Netherlands is a parliamentary democracy. The State is ruled by the government under the supervision of parliament. The government consists of the Ministers under the leadership of the Prime Minister (minister-president). Parliament consists of an Upper House (Eerste Kamer) and a Lower House (Tweede Kamer).

36. The 150 members of the Lower House (Tweede Kamer) are elected directly by the citizens of the Netherlands. In principle, there are elections every four years. The main task of the Lower House is to supervise the government’s actions. The Lower House has several powers to achieve this objective. One of the most important is the right of amendment, i.e., the right to change bills proposed by the Cabinet, which is led by the Prime Minister and consists of the Ministers and State Secretaries. The Minister responsible for the proposed bill can adopt such an amendment, submit it to a vote in the Lower House, or can reject it outright. If this is the case, the Lower House may table a motion of ‘no confidence’ against the Minister or the Cabinet. This can ultimately lead to the resignation of the Minister or the entire Cabinet. The Lower House also has the right of initiative, i.e., the right to propose bills, the right of interpellation, the right to demand clarification from a Minister, the right of inquiry, and the right of budget.

37. The Netherlands has three administrative layers: the State, the provinces (provincies), and the municipalities (gemeenten). Elections are held every four years for the Provincial Councils (the second administrative layer) and the municipalities.

38. Delegates from the Provincial Councils elect the membership of the Upper House (Eerste Kamer). The Upper House is a co-legislator and monitors government policy. All bills which have been passed in the Lower House must also be approved by the Upper House. The Upper House can only adopt or reject a bill. It cannot propose or amend bills. Furthermore, the members of the Upper House have the same rights as the members of the Lower House.

39. At the time of the mission, the Netherlands had 13 Ministries. With a new government in place since October 14, 2010, there are now 11 Ministries.9 Each Ministry is headed by a Minister who bears political responsibility for the policy pursued by that Ministry. He or she is supported in this task by one or occasionally two State Secretaries (staatssecretaris(sen)). The civil servants in each Ministry assist the Minister and State Secretary or Secretaries in their work. They maintain an apolitical stance (loyalty principle). After elections, the civil servants continue to work at the same Ministry for the newly-appointed Ministers and State Secretaries.

Judicial system

40. The Netherlands is divided into 19 districts, each with its own court (rechtbank). Appeals against judgments passed by the district court in civil and criminal law cases can be lodged at the competent Court of Appeal (Gerechtshof). There are five Courts of Appeal in total. Appeals against administrative law judgments go to the competent specialized administrative law tribunal—the Administrative Jurisdiction Division of the Council of State (Raad van State, Afdeling Bestuursrechtspraak), the Central Appeals Tribunal (Centrale Raad van Beroep) or the Trade and Industry Appeals Tribunal (College van Beroep voor het Bedrijfsleven), also known as Administrative High Court for Trade and Industry, depending on the type of case. Appeals in civil, criminal, and tax law cases are lodged at the Supreme Court of the Netherlands (Hoge Raad der Nederlanden, HR).

41. The Council for the Judiciary (Raad voor de Rechtspraak) is part of the judiciary system, but does not administer justice itself. It has taken over responsibility over a number of tasks from the Minister of Justice. These tasks are operational in nature and include the allocation of budgets, supervision of financial management, personnel policy, ICT, and housing. The Council supports the courts in executing their tasks in these areas. Another central task of the Council is to promote quality within the judiciary system and provide advice on new legislation which has implications for the administration of justice. The Council also acts as a spokesperson for the judiciary on both national and international levels.

Constitutional reform of the Kingdom of the Netherlands

42. The Netherlands is part of the Kingdom of the Netherlands, a political union made up of three constituent countries: the Netherlands in Western Europe, and Aruba and the Netherlands Antilles (consisting of the islands of Curaçao, Sint Maarten, Bonaire, Sint Eustatius, and Saba) in the Caribbean. All three countries are distinct jurisdictions and participate on a basis of equality as partners in the Kingdom.

43. At the time of the mission, it was foreseen that the Netherlands would be enlarged with three islands that formed part of the Netherlands Antilles: Bonaire, Sint Eustatius, and Saba. These were to become ‘special municipalities’ of the Netherlands. The remaining islands of the Netherlands Antilles, Curaçao, and Sint Maarten would then each acquire the status of independent country within the Kingdom of the Netherlands. This constitutional reform took place in October 2010.

Anti-Money Laundering and Combating the Financing of Terrorism framework

44. The Dutch legislation on the prevention of money laundering and the financing of terrorism originates in the 40+9 Recommendations of the Financial Action Task Force (FATF). These Recommendations constitute the basis for the directives of the European Communities (Council Directive 91/308/EEC of June 10, 1991 on prevention of the use of the financial system for the purpose of money laundering (OJEC L 166/77), amended by Directive 2001/97/EC of the European Parliament and of the Council of December 4, 2001 amending Council Directive 91/308/EEC on prevention of the use of the financial system for money laundering (OJEC L 344) and Directive 2005/60/EC of the European Parliament and of the Council of October 26, 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing (OJEC L 309, hereinafter: the Third Money Laundering Directive).

45. EU Directives 91/308/EEC and 2001/97/EC were implemented in the Identification (Financial Services) Act 1993 (later amended to Identification (Provision of Services) Act) and the Disclosure of Unusual Transactions (Financial Services) Act. These Acts entered into force on February 1, 1994. The purpose of the Identification (Provision of Services) Act 1993 (Wet identificatie bij dienstverlening 1993, hereinafter: WID) and the Disclosure of Unusual Transactions (Financial Services) Act (Wet Melding ongebruikelijke transacties, hereafter: WMOT) was to combat the laundering of criminal proceeds and the financing of terrorism. To this end, the WID imposed the obligations of customer identification and customer due diligence, while the WMOT made it compulsory to disclose unusual transactions. Together, the two Acts aimed to prevent the financial system from being used for money laundering and terrorist financing. When the new provisions of the Third Money Laundering Directive needed to be implemented in Dutch legislation, it was decided to simultaneously integrate the WID and the WMOT. The two Acts were fused in the Money Laundering and Terrorist Financing Prevention Act (Wet ter voorkoming van witwassen en financieren van terrorisme, hereinafter: WWFT. This Act came into force on August 1, 2008.

46. Besides the WWFT, there are several other laws that make up the AML/CFT framework in the Netherlands:

  • Act on financial supervision (Wet op het financieel toezicht, Wft). The Wft came into force in January 2007. This law consolidated the law on the supervision of banks (Wet toezicht kredietwezen, Wtk), the law on the supervision of insurance companies (Wet toezicht verzekeringsbedrijf, Wtv), and some other supervisory laws for financial institutions. The Decree on Prudential Rules pursuant to the Act on Financial Supervision (Besluit prudentiële regels Wet op het financieel toezicht, BPR Wft) and the Decree on the Supervision of the Conduct of Financial Enterprises pursuant to the Act on Financial Supervision (Besluit Gedragstoezicht financiële ondernemingen Wet op het financieel toezicht, BGFO Wft) provide for further rules, including rules regarding measures to safeguard integrity. Such integrity measures have to be taken by financial institutions to mitigate, among other things, the risk of money laundering and the risk of the financing of terrorism.

  • Sanctions Act 1977 (Sanctiewet 1977). The Sanctions Act 1977 provides the basis for national freezing measures and other sanctions and for supervision of compliance with sanction regulations.

  • Money Transfer Offices Act (Wet inzake de Geldtransactiekantoren, Wgt). The Wgt entered into force on June 27, 2002. As of November 1, 2009, the EU Payment Services Directive (2007/64/EG, PSD) was implemented in Dutch legislation (in the Wft). Thus, every payment service provider which is not a credit institution needs a license to be able to operate as a payment institution. Money transaction offices that provide payment services as defined in the Wft (i.e., money remittance services) will be regulated under the Wft instead of, as hitherto, under the Wgt. The Act provides for summary transitory legislation in respect of existing payment institutions.

  • The Trust Offices Act (Wet toezicht trustkantoren, Wtt). The Wtt entered into force on March 1, 2004. Under the Wtt, it is prohibited to carry on the business of a trust office from a Netherlands-based establishment without a license. Trust offices are subject to requirements concerning operations and organization and the trustworthiness and expertise of the persons who operate it.

47. The Netherlands follows a threshold approach in defining predicate offenses for ML. Articles 420 bis and 420 quater of the Penal Code are applicable to objects that were obtained through the commission of “a criminal offense” but not to objects that stem from misdemeanors. Under the Dutch Penal Code (Wetboek van Strafrecht, hereinafter: WvSr), the public prosecutor needs to prove that the proceeds originate from criminal activity. The specific predicate offense itself and the exact origin of the laundered proceeds do not have to be proven. The general criminal origin as well as the knowledge of the perpetrator may be deduced from objective circumstances. The maximum sentence for “offenses” ranges between imprisonment for six months to imprisonment for life. “The maximum imprisonment sanction available for misdemeanours generally does not exceed six months.”

48. Dutch law does not provide for a separate terrorist financing offense but terrorist financing activities could be prosecuted based on either Article 46 WvSr (preparation of a criminal offense punishable with imprisonment for four years or more), or Article 140 (4) in conjunction with Article 140a WvSr (participation in a criminal/terrorist organization). At the time of the assessment, there have been no prosecutions or convictions for terrorist financing in the Netherlands.

1.2 General Situation of Money Laundering and Financing of Terrorism

1.2.1 Predicate Offenses

49. According to the WODC’s and CBS’s statistics, theft is the most prevalent criminal offense, in particular burglary, followed by traffic offenses, and assaults.

50. As shown by the table below, the country has fewer murders, drug offenses, police and prisoners than the average country, but slightly more assaults, many more burglaries, and a lower conviction rate.

Selected Crime Statistics (2003)

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Source: Ministry of Justice (WODC), Central Bureau of Statistics (CBS), United Nations

51. Over the years, the Dutch authorities have taken the initiative to study predicate offenses and proceeds of crimes and how they impact society. This includes novel and advanced research investigating the links between business and crime.

Corruption

52. Domestic corruption appears to be low. The Netherlands has consistently scored very well in transparency and anti-corruption rankings, including those published by Transparency International (TI), and the World Bank (see below).

Control of Corruption and Rule of Law Scores

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Source: “Governance Matters VII: Aggregate and Individual Governance Indicators, 1996–2007,” Kaufmann, Kraay & Mastruzzi (World Bank Policy Research Working Paper No. 4654, June 24, 2008).

53. In addition, in its most recent GRECO report,10 the conclusion is that “overall, the Dutch legal framework for the criminalization of corruption complies with the standards of the Criminal Law Convention on Corruption (ETS 173) and its Additional Protocol (ETS 191).” And that “[…] the legal provisions seem to be broadly interpreted by prosecutors and judges alike and the case-law built up underscores the broad scope of the provisions under evaluation.”

Drugs

54. The exact amount of drugs moving to and through the Netherlands is hard to estimate, but there are some indications. A November 2010 article in Justitiële verkenningen, a magazine published by the Ministry of Justice’s WODC, entitled “The Share of the Drug Sector in the National Income”11 estimates that the total contribution of production and trade in drugs to the national income rose from €1,300 million in 1995 to €1,800 million in 1998, and then dropped to €1,200 million in 2008.12

55. As far as cocaine is concerned, the primary countries used to move the product from source countries to the European market are the Netherlands and Spain, mostly by sea.13 UNODC estimates that a total of 212 metric tons of cocaine were sent to Europe to satisfy an annual consumption14 of 124 metric tons. The Dutch National Threat Assessment 200815 cites a 2004 study estimating that the annual use in the Netherlands is between 4 and 5.4 tons. According to the UNODC’s 2010 World Drug Report, 12 percent of those arrested in France for trafficking cocaine were Dutch nationals,16 illustrating the importance of the Netherlands as a transit country for illicit substances.

56. The Netherlands does appear to have taken action in response to this threat. Cocaine seizures have dropped markedly in recent years, presumably as a result of increased controls, especially in the Antilles and at Schiphol airport, and proactive enforcement.17

57. Heroin routes lead from the east to the United Kingdom and the Netherlands.18 According to the report, “[t]he Netherlands is a hub for heroin trafficking to France, the United Kingdom, Belgium, as well as Germany. In the Netherlands, the total number of arrests made by customs authorities is limited.”19

58. Indoor growth of cannabis has spread from the Netherlands and the drug is exported. Production estimates vary between 36 tons in 1995 to 766 tons in 2006. The NTA in 2008 estimated that between 10 percent and 74 percent of the cannabis produced in the Netherlands is destined for export.20 Which means that between 7 and 104 tons were smuggled out of the country in 2006. The authorities admit that they do not know the scale of the exports.

59. The number of nurseries, where cannabis plants are grown, has continued to rise since the early 1990s, as illustrated in the chart below. In 1991, only 54 nurseries were dismantled; by 2005, this number had increased to almost 6,000.21 If they produce between 61 and 142 tons per year, at a wholesale price of €3,000 per kilogram, the value of cannabis at the retail level is estimated to lie somewhere between €182 and €424 million per year.22 If we take the high end of the estimate, this is slightly more than one-third of the estimated total POC figure for drugs (see table with Average POC estimates per crime category below) and must be laundered. In addition, news reports indicate that there is often a link between real estate and cannabis growers, in that the owner of a particular building or piece of land sometimes allows, or even seeks, for his property to be used for the production of cannabis.

uA01fig01

Number of dismantled nurseries between 1991 and 2006

Citation: IMF Staff Country Reports 2011, 092; 10.5089/9781455230082.002.A001

Note: Graph taken from the National Threat Assessment–Organised Crime 2008 (KLPD – IPOL), p. 58.Source: Netherlands Police Agency, Department of International Police Information (IPOL).
Links between Businesses and Crime

60. In the early 2000s, the demise of a number of companies utilizing Dutch offshore services revealed the vulnerability of the Dutch financial system to large-scale international fraud schemes and was a strong signal of the relationship between business and crime. In 2006, the Dutch Central Bank issued new rules because of concerns, expressed in a report, that “[trust] offices could be used by people with an interest in remaining anonymous, for reasons that cannot bear the light of day. This would impair the integrity of the financial system.”23

61. In October 2008, a Working Group of the Dutch House of Representatives produced a report on the interconnectedness between the upper and the underworld.24 In its conclusions, the Working Group describes a grey zone between legal and illegal behavior, especially in the real estate sector. Its conclusions were three-pronged: First, more research is needed into the possibilities for, and restrictions on, information exchange between various authorities and databases. Second, it requested the Justice Commission to organize a hearing regarding the abuse of professional privilege and the duty of secrecy by notaries and lawyers. Finally, with regard to the real estate sector, the Working Group proposed to take the following measures in the short term: a better protection of the profession of appraiser, to extend the Public Administration (Probity Screening) Act (Wet bevordering integriteitsbeoordelingen door het openbaar bestuur, Wet BIBOB) to the real estate sector, to improve MOT-reporting, and to increase information exchange.

62. According to the NTA 2008, IPOL linked the database of names on the EU list of criminal organizations and Dutch Chambers of Commerce to check if and to what extent criminal suspects were linked to businesses. The NTA notes that: “Of every four suspects on the list for 2006, one is registered as a stakeholder in a company” and “the number of registered criminal organisations that can influence or that control companies through (core) members […] is 74.3 percent.” The table below lists the sectors in which these companies are involved.

63. A number of caveats should be considered in relation to this IPOL research, which is still at a preliminary stage: The definition of financial institutions is broader than the FATF definition; the names in the database are suspected criminals, not convicted criminals; there is a selection bias in the study, since it looks in particular at the persons that own a company; it is unclear if the companies are used for criminal activities, and; the nature and impact of alleged criminals’ presence in these companies is unclear. This said, this innovative and forward-thinking initiative is an interesting attempt to better understand the links between businesses and crime.

Companies with a link to suspected criminal groups, by sector

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Cited in: National Threat Assessment 2008, p. 204.Source: KLPD, IPOL, EU list of criminal organizations 2006; Chambers of Commerce.

Misuse of companies in 2000, 2002 and 2004

(absolute numbers)

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Cited in: National Threat Assessment 2008, p. 100.Source: CBS (Statistics Netherlands), Statline.

1.2.2 Money Laundering

A Major Financial Center

64. The country’s excellent communications network, convenient transportation infrastructure, highly-developed financial services industry, and the fact that Rotterdam is one of the world’s busiest ports, make it an interesting target for money launderers. The country has been described as a transit country for crime by academics.25

65. In August 2010, the IMF identified a list of 25 jurisdictions with the most systemically important financial sectors, in the context of the integration of the Financial Sector Assessment Program (FSAP) assessments into Article IV surveillance.26 The list considers the size and the interconnectedness of jurisdictions’ financial sectors.27 Out of 25 countries,28 the Netherlands ranks in seventh place overall, in ninth place in terms of size, and in sixth place as far as interconnectedness is concerned.

66. The figure below is based on Fund staff estimates.29 It shows the United Kingdom to be more or less in the center of the global banking system. The Netherlands is very close to the center of the system, much closer than, for example, the United States. Due to the level of development of the Dutch financial system, notably the variety of products offered by the sector and the interconnectedness to the international financial system, the country has characteristics attractive to money launderers.

uA01fig02

Position of the 25 jurisdictions with systemically important financial sectors in the global banking network.

Citation: IMF Staff Country Reports 2011, 092; 10.5089/9781455230082.002.A001

Note: Lines between jurisdictions reflect the connections between their respective banking systems. For simplicity, only the connections between each of the 25 jurisdictions and the rest of the global network are shown.
Proceeds of Crime

67. In 2006, the Utrecht School of Economics published a study funded by the Dutch Ministry of Finance, on “The Amounts and Effects of Money Laundering.” On a macro level, the academics calculated that about €18 billion are laundered in or through the Netherlands each year. Although the estimate received a lot of criticism, it nevertheless provides an indication. This study estimated the money generated in the Netherlands which is laundered in the Netherlands itself at €3.8 billion, and the flow to the Netherlands from abroad at €14 billion.30 According to this study, most of the money generated for laundering comes from drugs and fraud31. Real estate was seen as a very important method to launder money. Other forms of money laundering that the report mentions are bank transactions, back-to-back loans, money transfers, money exchange offices, trust offices, casinos, underground banking, cash smuggling, and special purpose entities.

In order to account for criticism and to integrate more recent information, we calculate estimates of proceeds of crime generated in the Netherlands (see table below).32 The main sources of criminal proceeds in the Netherlands appear to be fraud, including tax fraud and illicit narcotics.33 The total in billion US$ as brought to 2009 currency is approximately $14.6 billion, equivalent to 1.84 percent of the Dutch GDP. Approximately $11.2 billion was related to fraud (including tax fraud) and another $2 billion to drug offenses. NL Average POC estimates for offenses for which there was data available

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Note: According to the April 2010 IMF World Economic Outlook, NL GDP: $794,777,000,000, G8 GDP: $32,220,515,000,000, World GDP: $57,937,460,000,000.

This table does not list all of the FATF’s designated categories of offenses since reliable figures cannot always be found. The most notable omission is corruption, which is generally considered among the crimes generating the most proceeds. However, the country occupies the seventh place in Transparency International’s 2010 Corruption Perceptions Index, indicating a low level of corruption.

De illegale economie in Nederland, Verbruggen & Smekens (Centraal Bureau voor de Statistiek, Webmagazine, September 20, 2004).

National Threat Assessment 2008, p. 117.

See above.

Smekens, M. and Verbruggen, M. (2004). “De Illegale Economie in Nederland.” Centraal Bureau voor de Statistiek, 20 September, 2004; cited in Unger et al. (2006, p. 48).

Smekens, M. and Verbruggen, M.; Centraal Bureau voor de Statistiek, Webmagazine, (September 20, 2004); National Threat Assessment 2008.

Criminaliteit en rechtshandhaving 2001, WODC, 2003, p. 60; taken from NIPO 2002; cited in Unger et al. (2006, p. 47); National Threat Assessment 2008.

Smekens, M. and Verbruggen, M. (2004). “De Illegale Economie in Nederland.” Centraal Bureau voor de Statistiek, 20 September 2004; cited in Unger et al. (2006, p. 48); “Amsterdam Closing Red Light District,” February 13, 2008, Digital Journal.

68. The table only comprises proceeds of crimes committed in the Netherlands and laundered in the Netherlands. Not all proceeds of crimes generated in the country are laundered in the country, and some of the laundered proceeds originate in foreign countries. In this respect, we must note the role of Dutch TCSPs. In the above mentioned report from the University of Utrecht, interviewees indicated that they suspected that approximately 1 percent of the money transiting through Dutch TCSPs from abroad is related to money laundering. Research indicates the size of the Dutch trust industry in 2006 to be approximately €4,500 billion,34 equivalent of about 5.6 percent of the Dutch GDP.

Investigations, Prosecutions, and Seizures

69. The table below shows that the number of criminal investigations has steadily increased since 2004. As of 2008, the last year for which complete statistics are available, there were four times more pure or mixed ML investigations than four years earlier, showing a steady increase of the use of AML provisions in the law.

Number of Criminal Investigations in the Netherlands for pure or mixed ML investigations brought to the Public Prosecutor

(provided by the Ministry of Justice)

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70. According to prosecution data in the table below, the most prosecuted proceeds-generating crimes in the Netherlands are drug-related offenses, human trafficking, and criminal organizations. This is broadly in agreement with the proceeds of crime (POC) estimates table above. For each of the three offenses listed in the table below, there is an increased use of AML provisions over the latter part of the decade.

ML prosecutions combined with certain other offenses

(provided by the Ministry of Justice)

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71. The table below sets out the outcomes of prosecutions of pure and mixed money laundering offenses.35

Results from prosecutions for pure and mixed ML prosecutions

(provided by the Ministry of Justice)

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72. The number of seizures has also increased. In August 2009, the public prosecutor in Maastricht, province of Limburg, seized 134 buildings and lots belonging to a person suspected of laundering proceeds of crime, tax fraud, and growing marijuana.36 People operating a business involved in real estate, mortgages, and insurance were also suspected.37 A notary and two banks were also scrutinized by the authorities. This indicates ties between illegal enterprises and seemingly legitimate businesses.

1.2.3 Terrorism and terrorist financing

73. The National Consortium for the Study of Terrorism and Responses to Terror (START),38 based at the University of Maryland in the United States, Global terrorism database, contains data about terrorist incidents in the Netherlands since 1970 with the following profile:

74. The country has experienced 115 terrorist incidents since 1970, their number peaking in 1986 and 1992. According to the database, terrorist organizations that are currently active or have been active in the Netherlands are: Actiefront Nationalistisch Nederland, Al-Qaeda, Armenian Red Army, Community Revolutionaries in Europe, Free South Moluccan Youths, Pan-Turkish Organization, South Maluku Republic (RMS), South Moluccan Suicide Commando, Stop Huntington Animal Cruelty (SHAC), and Takfir wa Hijra.

75. This shows that the country has had experience dealing with a variety of terrorist organizations, ranging from discontented Moluccans, over Palestinians and extreme left-wing organizations, to, most recently, fundamentalist Islamic organizations. At present, the main threat to the Netherlands seems to come from international Islamic extremists.39

76. The Islamic extremist threat in the Netherlands is currently deemed to be limited.40 According to the NCTB,41 this would mean that the likelihood of the country experiencing a terrorist attack cannot be ruled out entirely, but the probability is deemed to be low. As the Twelfth Counterterrorism Progress Report42 was released, the press release indicated that “Dutch interests abroad are more vulnerable to the risk [of] terrorist attack” and that “the threat against the Netherlands itself still mainly comes from transnational networks that could mainly manifest themselves via Dutch or European jihadists returning from training camps or areas of conflict.” At the same time, the report stated that “[l]ocal networks in the Netherlands remain, for the time being, weak and leaderless.” And that “[t]o the extent that Dutch jihadists are indeed developing activities, it appears they mainly wish to focus on participation in the jihad in Afghanistan, Pakistan and Somalia.”

77. In April 2010, several members of the Liberation Tigers of Tamil Eelam (LTTE) were charged with terrorism. Seven people were arrested and €40,000 in cash was seized, among other things. The DNR investigated with the help of the Fiscal Intelligence and Investigation Service–Economic Investigation Service (Fiscale Inlichtingen- en Opsporingsdienst–Economische Controledienst; hereafter: FIOD-ECD) after a tip from the General Intelligence and Security Service (Algemene Inlichtingen- en Veiligheidsdienst; hereafter: AIVD). The suspects were presumably involved in gathering funds through collections, fundraisers, sale of DVDs and calendars, and the organization of illegal lotteries. These activities appear to have continued after the LTTE’s military defeat in 2009.

1.3 Overview of the Financial Sector

78. The Netherlands has a modern and developed financial sector which contributes 6–7 percent to the overall GDP. The largest sectors of the financial services industry are banking, insurance, and pension funds and are represented by some of the largest banks and insurers in the world. The private fund management sector is one of the most sophisticated in Europe, as is venture capital.

79. The Netherlands’s financial services regulatory system is structured according to the “Twin Peaks” model. The Dutch Central Bank (De Nederlandsche Bank; hereafter: DNB) focuses on the prudential objective of promoting the soundness of financial institutions, while the Netherlands Auhority for the Financial Markets (Autoriteit Financiële Markten; hereafter: AFM) focuses on the conduct of business objective of enhancing orderly and fair market practices. Integrity supervision including AML/CFT supervision is performed by both. The institutions under the purview of DNB for integrity supervision are banks, insurance companies, pension funds, bureaux de change, and money transfer offices. AFM supervises approximately 14,000 financial institutions; the majority of them are financial service providers, approxmiately 10,000, but also investment firms and investment institutions numbering 400.

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Banking

80. The banking sector is comprised of 103 banks, 58 of which are Dutch and banks that are part of a financial conglomerate. The remaining 45 are banks that have a foreign parent company (in or outside the EU) or are branches of EU banks or non-EU banks. The four largest banks (ABNAmro Bank, ING Bank, Rabobank, and SNSReaal) account for about 80 percent of the Dutch banking market. Up to October 2009, 28 money transaction offices (which included money transfer offices and bureaux de change) were registered with and supervised by DNB.

Insurance

81. In early 2010, the insurance sector was composed of a total of 312 insurers including 60 life insurers, 33 benefits-in-kind and funeral expenses insurers, and 213 nonlife insurers. Banking and insurance industries may be combined in a single financial institution; however, the financial crisis has had an impact on this practice and ING, for example, is divesting its insurance business almost entirely. DNB supervises 62 life insurers.

82. Insurance companies in the Netherlands perform a number of functions. Insurance companies make substantial loans for which there is an extensive system of brokers. Insurance companies also grant mortgages and purchase real estate.

Asset Management

83. The Netherlands has a large, well-developed and managed asset management sector comprised of pension funds, investment funds including equity funds, bond funds, real estate funds, hedge funds, and mixed funds. At the end of 2009, investment funds (excluding pension funds and insurers) had assets under management of €445 billion. The Netherlands has one of the world’s most highly-developed pension fund industries with private assets under management among the highest in Western Europe. The value of pension funds’ equity and debt portfolios stood at €649 billion at the end of 2009.

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Financial corporations: balance sheet1

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1.4 Overview of the DNFBP Sector

Casinos

84. Pursuant to the Games of Chance Act (Wet op de kansspelen), it is forbidden to compete for prizes or premiums if the winners are selected by any determination of chance on which the participants cannot exert an influence, unless a permit has been issued by the Minister of Justice according to the Games of Chance Act. At present, the Games of Chance Act does not provide for the granting of permits to organize games of chance via the Internet, and, therefore, it is forbidden. The only organization licensed to run a casino under the Games of Chance Act is Holland Casino.

85. Holland Casino is under government control; the members of the Supervisory Board are appointed by the Minister of Finance. Net operating profit from Holland Casino fell in 2008 with 83.3 percent to €14.3 million (2007: 85.6 million). The total amount payable to the state in 2008 came up to €189.6 million (2007: 268.2 million).

Real estate agents

86. There are approximately 8,500 real estate agents in the Netherlands. Most of them are members of a professional organization. The three biggest professional organizations for real estate agents are the Dutch Association of Real Estate Brokers and Real Estate Experts (Nederlandse Vereniging van Makelaars, NVM, 4,200 members), Intermediary Association for Real Estate, (Vereniging Bemiddeling Onroerend Goed, VBO, 1,000 members) and National Association for Real Estate Agents (Landelijke Makelaars Vereniging, LMV, 500 members). Almost 70 percent of Dutch houses are sold by NVM members. NVM members had a total turnover in 2008 of approximately €972 million.

Dealers in precious metals and stones

87. In the Netherlands, every seller of goods acting in the course of a business or profession, insofar as payment for these goods is made in cash for an amount of €15,000 or more (regardless of whether the transaction takes place in one operation or in several related operations) falls under the scope of the WWFT. About 4,800 companies in the Netherlands are involved in the sale of precious stones, metals, jewelry, and jewels. Two of the professional organizations in this branch are the Federation for Gold and Silver (Federatie Goud en Zilver) and the Association for the Trade in Diamonds (Vereniging voor de Diamanthandel).

Notaries

88. Around 4,500 (junior) notaries are providing their services in the Netherlands. The Dutch law requires a notarial instrument for a number of agreements and legal transactions. The most important are conveying real property in the Netherlands, creating or canceling mortgages, incorporating public or private limited liability companies or altering their articles of association, establishing foundations or associations (including cooperatives) or altering their constitution, drawing up, altering and executing wills, drawing up or altering marriage contracts (i.e., usually ante-nuptial settlements) and registered domestic partnership agreements, transferring registered shares, legalizing signatures, and providing for gifts and donations in a notarial instrument. Civil-law notaries are by law members of the Royal Dutch Notarial Society.

Lawyers

89. There are approximately 16,000 lawyers in the Netherlands (3,800 offices). According to the Netherlands Bar Association (Orde van Advocaten), about one-third of this number provides, at least occasionally, services that fall within the scope of the WWFT. Lawyers are by law members of this Association.

Accountants

90. Approximately 12,000 public chartered accountants (externe register accountants, RA-accountants) are carrying out their activities in the Netherlands. Public chartered accountants are, by law, members of the NIVRA (Koninklijk Nederlands Instituut van Registeraccountants): a body governed by public law, appointed by the government. There are about 6,500 public chartered accountant-business administration consultants (externe accountants-Administratieconsulenten, AA-accountants) in the Netherlands. An AA-Accountant is an internationally-recognized accountant who is authorized to perform audits, comparable with the English Chartered or Certified Accountant. An AA-Accountant meets the European Directives for statutory audits and specializes in small and medium-sized enterprises. The profession of AA-Accountant and the use of the AA title are laid down and protected by law. This law guarantees the independence, expertise, and reliability of AA-Accountants. Public accountant-business administration consultants are, by law, members of the NOVAA: a body governed by public law, appointed by the government. Certain tax advisors are privately organized (not by law). There are approximately 11,000 tax advisors in the Netherlands; 4,500 are members of the Dutch Association of Tax Advisors (Nederlandse Orde van Belastingadviseurs, NOB). Finally, there are about 10,000 other independent legal advisers and financial economic advisers performing activities in the Netherlands.

Trust and Company Service Providers

91. As of December 31, 2009, there are 167 licensed TCSPs. These TCSPs are supervised by DNB. The International Management Services Association (VIMS) and the Dutch Fiduciary Association (DFA) are the two professional organizations that are engaged in this type of business.

92. In 2006, the turnover realized by the TCSPs amounted to €247 million, coming from approximately 20,000 object companies and 16,000 clients.

1.5 Overview of commercial laws and mechanisms governing legal persons and arrangements

93. Book 2 of the Dutch Civil Code regulates the establishment, management, and dissolution of legal entities established under Dutch law. Pursuant to Article 3 of the Civil Code, legal entities in the Netherlands may take the form of an (1) association (2) cooperative (3) public limited company (“NV”) (4) private limited company (“BV”), or (5) foundation.

94. Legal entities in the Netherlands are set up by way of notarial deed. For BV’s and NV’s, a certificate of “no objection” issued by the Ministry of Justice has to be obtained as well. Legal entities set up under Dutch law are incorporated for an indefinite period of time.

95. All forms of legal entities are required to register with the Dutch Chamber of Commerce and to file annual tax returns with the Tax and Customs Administration. Foreign companies are registered with the Chamber of Commerce only if they have a branch or commercial undertaking in the Netherlands.

96. Dutch legal entities require at least one director, whereby both natural and legal, foreign and Dutch persons and residents may serve as company directors. The authorities stated that it would be very common for Dutch legal entities to have legal entity directors, including foreign legal entity directors. Company records have to be kept for at least seven years.

97. BVs may be set up by one or more natural or legal persons and are managed by one or more directors, which are elected by the shareholders. Any powers not conferred upon the directors remain vested in the general meeting of shareholders. BVs may issue only registered but no bearer shares. Any transfer of ownership of BV shares is subject to notarial authentication. Shares of a BV may not be offered for public trading or subscription.

98. NVs are subject to the same establishment requirements and closely follow the ownership and management structure of the BV. In contrast to BVs, however, NVs may issue both registered and bearer shares and the transfer of NV shares is not subject to any notarial oversight. Dutch NVs require a higher stock capital than BVs and its shares may be publicly traded.

99. Dutch Foundations, just like BVs and NVs, are set up by notarial deed and subsequent registration with the Chamber of Commerce. They have no members and may not issue any shares or possess any share capital. Foundations are incorporated to realize a certain stated objective. Any profits of the foundation’s activities may only be used to accomplish its stated purpose and may not be distributed. Dutch foundations are usually set up for idealistic or social objectives but may also be used as asset (in particular share) holding entities or to carry out commercial activities. Foundations require at least one founder and one chairman.

100. An association under Dutch law is a partnership between two or more members to achieve a certain goal. Associations are allowed to make profits; however, these may be used only to further the common goal and profits may not be distributed. Only associations with full legal personality are set up by notarial deed and are required to register with the Chamber of Commerce. Associations with limited liability may but are not required to register.

101. Cooperatives are legal entities in which a number of persons combine their resources to facilitate their individual but similar interests. Cooperatives may be established by two or more members through a notarial deed and subsequent registration with the Chamber of Commerce. After incorporation, the number of members may be reduced to one. A Cooperative has no minimum capital requirement and may not issue any shares or certificates. Cooperatives may carry out any type of activity, including acting as holding company or finance company.

102. In addition to the above-mentioned legal entities, European Companies (SE) and European Cooperative Societies may be established and registered in the Netherlands. Both are subject to the same registration requirements as BVs and NVs.

103. Statistics on legal persons are kept by the Central Bureau for statistics and the Chamber of Commerce. As of December 31, 2009, a total of about 1.1 million Dutch and 7,000 foreign and European companies were registered with the Chamber of Commerce. Representatives of the Chamber of Commerce stated that over the past years, the number of foundations incorporated increased significantly and explained that this may be due to the fact that foundations do not need a minimum capital, are easy to incorporate, and are not required to publish financial information.

Total Number of Companies Registered with the Chamber of Commerce as of December 31, 2009

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104. Dutch NPOs may operate in the form of “foundation,” “association” (either formal or informal), NV, or BV. As outlined above, all foundations and formal associations are required to register with the Chamber of Commerce. Informal associations may but are not required to register. As of the end of 2009, 182,000 foundations and 125,425 associations with a “charitable purpose” were incorporated in the Netherlands.

Total Numbers of NPOs as of 2009.

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Legal Arrangements:

105. Dutch law does not provide for the establishment of legal arrangements such as express trusts or Treuhand. However, trusts incorporated under the laws of another country may conduct business in the Netherlands and, if they operate an undertaking in the Netherlands, register with the Chamber of Commerce. At the time of the assessment mission, it was not clear exactly how many foreign trusts were registered with the Chamber of Commerce. Anecdotal evidence suggests that the number of foreign trusts administered in the Netherlands is rather low. The Netherlands has signed and ratified The Hague Convention on Law Applicable to Trust and their Recognition on September 28, 1995.

1.6 Overview of strategy to prevent money laundering and terrorist financing

1.6.1 AML/CFT Strategies and Priorities

General

106. Tackling money laundering is of major importance in effectively combating a wide range of other serious crimes. It harms the integrity of financial and economic transactions and leads to a situation whereby (organized) crime becomes interlinked with the legal economy. Through concealing the criminal origin of proceeds from crimes, criminals can remain beyond the reach of investigating agencies. Moreover, the accumulated wealth provides criminals with the opportunity to obtain positions in bona fide enterprises.

107. The Netherlands runs a significant risk of terrorist attacks because it participates in military operations abroad, maintains close ties with the United States, and has groups within its borders that are susceptible to radicalization. Central government has made counterterrorism in the Netherlands a priority. Large investments have been made to increase the capacity of the intelligence and security services and improve the exchange of information between them. The surveillance and protection system has been revamped and new legislation drafted to facilitate counterterrorism efforts and make it easier to prosecute perpetrators.

108. In all, the position of National Coordinator for Counterterrorism (Nationaal Coordinator Terrorismebestrijding, NCTb) was established to improve cooperation between agencies. More specifically, the NCTb is responsible for policy development, analysis of intelligence, and other information and coordination of antiterrorist security measures.

Combating fraud

109. The main principle of combating fraud is prevention. Where prevention alone is not enough, this is followed by a differentiated approach: rapid and minor correction in the case of incidental fraud, and criminal enforcement in the case of systematic or methodical fraud. The level of fines is high, and the Tax and Customs Administration has the power to impose additional claims.

Reinforcing confiscation

110. The WvSr knows various bases for confiscation. The WvSr not only provides for a basis for the confiscation of objects, generally referred to as “ordinary confiscation” but also provides for “special confiscation” proceedings. These proceedings may result in an obligation to pay a sum of money that represents illegally-obtained profits or advantages (confiscation order).

111. Confiscation is a general instruction of the Public Prosecution Service (Aanwijzing ontneming). This procedure urges all prosecutors to investigate and seize criminal proceeds in case of an intended required fine of at least €500 or criminal proceeds estimated at the moment of seizure to be €500.

Administrative approach

112. The authorities aim to reinforce the preventive and administrative approaches not only by fighting organized crime with traditional policing, but also with administrative measures under the leadership of, e.g., the local municipal authority.

113. Due to capacity constraints, it has been used almost exclusively in a few big municipalities, such as Amsterdam. The goal is to achieve a regional and national application of the administrative approach in order to prevent criminals from escaping simply by moving to a different municipality.

114. In order to solve this problem, 11 information and expertise centers (Regionale Informatie en Expertise Centra, RIEC’s) are financed by the national government in the form of pilot programs.

115. The Public Administration (Probity Screening) Act (Wet bevordering integriteitsbeoordelingen door het openbaar bestuur, Wet BIBOB) is an effective tool for municipalities to obtain information to prevent the unintended facilitation of criminality by the local authority. The goal is a broader, clearer, and more selective use of the BIBOB Act.

Combating the financing of terrorism

116. Since the attacks in the United States on September 11, 2001 terrorism has been in the spotlight. They were followed by attacks on March 11, 2004 in Madrid and on July 7, 2005 in London. The Netherlands too experienced a terrorist attack when Dutch filmmaker and writer Theo van Gogh was murdered on November 2, 2004. In the Netherlands, the NCTb is responsible for ensuring cooperation between the national and international levels.

117. The combat of TF is organized centrally and locally. The central authorities responsible for terrorism in a broad sense, including TF, are the National Prosecution Service (Landelijk Parket, LP). Within the LP there are two specialized public prosecutors responsible for all terrorism cases investigated by the National Crime Squad (Dienst Nationale Recherche, (DNR)). These prosecutors link intelligence services and operational agencies. Within the DNR there is a specialized unit for investigations on terrorism.

118. Besides the LP, which focuses on combating (international) organized crime, there is also the National Public Prosecutor’s Office for financial, economic, and environmental offenses (Functioneel Parket, FP) where the national public prosecutor on ML is stationed. This public prosecutor is directly linked to FIU-NL. Suspicious Transaction Reports (Verdachte transacties, STRs) concerning TF are, therefore, under supervision of the national public prosecutor on ML. The FIOD-ECD is the Specialized Investigation Division (Bijzondere Opsporingsdienst, BOD) linked to the FP. This means that every case on TF will be investigated by the FIOD-ECD. The DNR and the FIOD-ECD work closely together and, if necessary, the two agencies exchange personnel to efficiently use certain specialized knowledge. Besides the centralized organization of investigations concerning TF, every police region can initiate TF cases. If the case appears to be too complicated, it can be transferred to the DNR.

119. The Counter-Terrorism Infobox (CT-Infobox) is a new development in the fight against (the financing of) terrorism. It is a formalized partnership of the AIVD, the Immigration and Naturalization Service (IND), the National Police Services Agency (KLPD), the Military Intelligence and Security Service (MIVD), the Public Prosecution Service (OM), the FIOD-ECD and FIU-NL, with the AIVD as lead agency. Its objective is to combat terrorism by centrally compiling and comparing information. This concerns people and networks involved in some way with terrorism, particularly Islamic violence, and associated radicalization.

Tackling abuse and manipulation of real estate

120. On March 25, 2009, the National Steering Group for Combating Real Estate Fraud was established by the Decree establishing National Steering Group for Combating Real Estate Fraud. To carry out the action plan prepared by the National Steering Group, a Working Group for Combating Real Estate Fraud was established.

121. The Dutch government has identified the notary profession as a high-risk profession. Notaries are often involved in real estate transactions and are able to provide access to the international financial system and, knowingly or not, can also facilitate concealment of the true origin of funds. They may act as gatekeepers: their professional roles often involve them in a range of tasks that place them in an ideal position to detect signs of money laundering or terrorist financing.

122. Notaries are obligated to report unusual transactions to FIU-NL and to perform CDD. The Bureau of Financial Investigation (Bureau Financieel Toezicht, BFT) monitors the compliance of these obligations and has successfully implemented a policy that strongly involves the sector itself. The Royal Notarial Professional Organization (Koninklijke Notariële Beroepsorganistie, KNB) carries out its own investigations while requesting its members to provide a statement by which they declare in what way they have shaped their responsibilities. The authorities indicated that over the past five years, there has been a steady increase in the number of reports by notaries.

Cooperation within the Financial Expertise Center (Financieel Expertise Centrum, FEC)

123. The FEC is a cooperative effort between various supervisory, investigative, and enforcement agencies.43 The FEC comprises all the organizations that carry out duties related to the financial sector: supervisory authorities; control, intelligence, and investigative institutions; and prosecution authorities.

124. For implementing its tasks as information platform, knowledge center and project bureau, the FEC is organized in an FEC Council and an FEC unit. The way the cooperation is designed is laid down in a covenant.

Supervision of legal persons (Herziening Toezicht Rechtspersonen, HTR)

125. A legal person is established in the Netherlands by a notarial deed. Before the notarial deed can be executed, the founder of the legal person has to request a declaration of no objection. This declaration is provided by the Ministry of Justice (Justis Office). Criminal and financial records of company founders and the first managing and supervisory directors and their relatives are checked by the Department of Justice prior to granting the declaration of no objection.

126. On April 1, 2010 the penalty of company director disqualification was introduced in the Dutch Penal Code (Wetboek van Strafrecht, WvSr). The instruction of a civil company director’s disqualification is in preparation. These penalties are meant for company directors that are guilty of mismanagement or are guilty of the abuse of legal persons for the purpose of money laundering, fraud, or other criminal acts.

1.6.2 The institutional framework for combating money laundering and terrorist financing

127. Below is set out a brief description of the roles and responsibilities of the various governmental and nongovernmental authorities and organizations.

1.6.2.1 Ministries
Ministry of Finance (Ministerie van Financiën)

128. The Ministry of Finance is responsible for financial supervision legislation and tax legislation. Within the Financial Markets Directorate, a specific Integrity Unit is responsible for AML/CFT policymaking, legislation (WWFT), and FATF coordination.44 AML/CFT policy is a joint responsibility with the Ministry of Justice.

Ministry of Justice (Ministerie van Justitie)

129. The Ministry of Justice is responsible for legislation in the following areas: i) civil law and procedure, ii) criminal law and procedure, iii) administrative law and procedure, and iv) constitutional law.45 The Ministry liaises with other government departments and relevant parties when drafting legislation in these areas. Laws are drafted in consultation with the Dutch Upper and Lower Houses, after being reviewed by the Council of State. The Ministry also negotiates on numerous international regulations in the European Union and the United Nations. The national criminal investigation department is responsible for tackling serious and organized crime at the national level.

Ministry of the Interior and Kingdom Relations (Ministerie van Binnenlandse Zaken en Koninkrijksrelaties)

130. At the central government level, the Minister of the Interior and Kingdom Relations is responsible for overseeing the 25 regional police forces and is directly responsible for managing the National Police Services Agency (Korps Landelijke Politiediensten, KLPD).46 Organizationally, FIU-NL is part of the KLPD. Within the KLPD, FIU-NL is positioned in the National Criminal Intelligence Department (IPOL).

Ministry of Foreign Affairs (Ministerie van Buitenlandse Zaken)47

131. The Sanctions Act 1977 gives the Minister of Foreign Affairs the power to create regulations to meet international obligations regarding international sanctions. On this basis, a sanction regulation on terrorism was created by the Minister of Foreign Affairs in 2002.

National Coordinator for Counterterrorism (Nationaal Coördinator Terrorismebestrijding, NCTb)

132. The National Coordinator for Counterterrorism has been established to improve cooperation between all agencies in the Netherlands involved in combating terrorism.48 The office of the NCTb and its staff fall under the responsibility of two ministers: the Minister of Justice (the lead minister for counterterrorism) and the Minister of the Interior and Kingdom Relations. The NCTb is responsible for policy development, analysis of intelligence, and other information and coordination of anti-terrorism security measures.

1.6.2.2 Public Prosecution Service (Openbaar Ministerie, OM)
General

133. The Public Prosecution Service is one of the main parties involved in dealing with criminal cases.49It decides whether or not to prosecute, and how to deal with certain categories of crime without going to court. Within the Public Prosecution Service, there are several specialized sections:

National Office of the Public Prosecution Service (Landelijk Parket, LP)

134. The Public Prosecution Service had a specialized section that deals with organized crime, called the Landelijk Parket (LP). The LP gives direction on criminal investigations of the National Crime Squad (Dienst Nationale Recherche, DNR).

National Public Prosecutor’s Office for financial, economic and environmental offences (Functioneel Parket, FP)

135. The Public Prosecution Service has a specialized section that deals with crime concerning the environment, the economy, and fraud called the Functioneel Parket (FP) This section of the prosecution service is active in those cases that are initiated by special investigative divisions. For financial crimes, this entails that the FP is responsible for handling cases that are initiated by the FIOD-ECD.

Public Prosecution Service Proceeds of Crime Bureau (Bureau Ontnemingswetgeving Openbaar Ministerie, BOOM)

136. BOOM is the specialized confiscation agency of the Public Prosecution Service in the Netherlands. BOOM operates only in larger, more complex confiscation cases (exceeding one hundred thousand Euros). Other “regular” confiscation in criminal cases is handled by the Public Prosecution Service. BOOM’s task is to confiscate criminal gains. Confiscation can be initiated by prosecution authorities at the start of an investigation. Besides BOOM’s primary mission of confiscation of criminal gains, it also cooperates with relevant partners such as: police (domestically as well as foreign police services) and other sections of the prosecution authority. Internationally, BOOM cooperates with EUROPOL, EUROJUST, and CARIN. Finally, BOOM has been given the status of “contact point” for foreign LEAs.

1.6.2.3 Operational agencies
Operational agencies with focus on AML/CFT
Financial Intelligence Unit-The Netherlands (FIU-Nederland, FIU-NL)

137. FIU-NL is the national center for receiving, requesting, analyzing, and disseminating disclosures of STRs and other relevant information concerning suspected ML or TF activities. Since 2006, the FIU-NL exists as a hybrid organization, partly administrative and partly law enforcement. In 2006, the Office for the Disclosure of Unusual Transactions (MOT) was transferred, together with the law enforcement unit specialized in AML cases (BLOM) in the Ministry of Interior. As a hybrid organization, FIU-NL comes under the responsibility of the Ministry of Justice and the Ministry of Finance (for policy) and of the Ministry of the Interior (administration and management).

138. FIU-NL now has a staff of 56 individuals. They are divided into an administrative unit (the MOT), a law enforcement section (the BLOM), and a facilitation unit. FIU-NL acts as a buffer between the financial institutions/reporting entities and investigating authorities. It receives Unusual Transactions Reports (UTRs). The UTRs are analyzed/investigated and transformed into Suspicious Transaction Report (STRs). The head of FIU-NL is ultimately responsible for determining which UTRs should be transformed into STRs. The STRs are loaded (disseminated) into a special database (IVT), to which authorized law enforcement authorities have access to. FIU-NL is placed within the National Police Services Agency (KLPD). Its tasks are both in the field of AML and CFT.

Fiscal Intelligence and Investigation Service—Economic Investigation Service (Fiscale Inlichtingen-en Opsporingsdienst—Economische Controledienst, FIOD-ECD)

139. The FIOD-ECD is a subdivision of the Tax and Customs Administration. If the Tax and Customs Administration suspects fraud, the matter is referred to the FIOD-ECD. The FIOD-ECD then assesses whether fraud is indeed being committed. In consultation with the Public Prosecution Service, it may decide to start a criminal investigation. In the case of fiscal fraud, the public prosecutor may also opt for a penal settlement or an administrative settlement instead of going to court.

140. The FIOD-ECD also performs supervisory activities in the area of economic planning, financial integrity, and movement of goods. This involves matters such as bankruptcy fraud, anti-laundering legislation, and the Health Care Charges Act (Wet tarieven gezondheidszorg). In addition, the FIOD-ECD contributes to the fight against organized crime and terrorism by mapping out money flows of criminal and terrorist organizations.

National Police Services Agency (Korps Landelijke Politiediensten, KLPD)

141. The Netherlands has a single police organization divided into twenty-five regions and one National Police Services Agency (KLPD) with various supporting divisions. A regional police force is responsible for policing in a given area known as the police region.

National Crime Squad (Dienst Nationale Recherche, DNR):

142. The DNR, which is organizationally located within the KLPD, is responsible for the combating of (inter)national organized crime and serious crime. Investigation, the development of expertise, and (inter)national information exchange is part of the National Crime Squad’s work. All investigations that are carried out by the National Crime Squad are executed under authority of the national office of the public prosecutor.

National Criminal Intelligence Department (IPOL)

143. The National Criminal Intelligence Department (IPOL), which is organizationally located within the KLPD, receives, modifies, and analyzes information and shares this and makes this available to investigating police agencies. IPOL has a crucial strategic role in law enforcement and public order and safety.

Bureau of Financial Investigation (Bureau Financieel Economische Recherche, BFER)

144. Within the Police Region’s criminal intelligence divisions, there are financial investigation experts. There are also special divisions. Police regions may employ accountants and various kinds of experts. The focus of BFER is on real estate, internal bank fraud, confiscation, and facilitators. BFER is mainly composed of tactical investigators, next to experts like financial experts, accountants, and lawyers.

Other relevant operational agencies
Netherlands Tax and Customs Administration (Belastingdienst)

145. The more than 30,000 staff members of the Dutch Tax and Customs Administration are responsible for a wide range of activities and are part of the Ministry of Finance. Part of their work includes fraud detection and the supervision of the import, export, and transit of goods.

General Intelligence and Security Service (Algemene Inlichtingen-en Veiligheidsdienst, AIVD)

146. The AIVD safeguards the national security of the Netherlands by identifying threats, political developments, and risks which are not immediately apparent. To this end, it conducts investigations both inside and outside the country. Where necessary, the AIVD shares information so that partners and other interested parties can take appropriate measures. The AIVD operates under the responsibility of the Ministry of the Interior and Kingdom Relations.50

Royal Netherlands Military Constabulary (Koninklijke Marechaussee, KMAR)

147. The KMAR falls under the Ministry of Defense; however, it performs most of its policing tasks under the responsibility of other ministries, principally Justice and the Interior. The Military Constabulary is divided into six districts in the Netherlands. It also operates abroad, protecting embassies and other buildings and accompanying Dutch service personnel on peace missions. The Military Constabulary is a police force operating in both military and civilian spheres. It serves as a police force for the Navy, Army, and Air Force. It also performs police and security tasks at Dutch airports, where it combats drug smuggling together with the fiscal investigation services. In addition, it is sometimes deployed to help civilian police forces maintain public order (for instance, in riot squads) and to investigate offenses. The Military Constabulary is responsible for guarding members of the Royal House and the Prime Minister’s official residence. It also escorts armored transports for DNB.

Intelligence and Investigation Service of the Ministry of Social Affairs and Employment (Sociale Inlichtingen- en Opsporingsdienst, SIOD)

148. The SIOD was established in 2002 to uphold the rules and regulations of the Ministry of Social Affairs and Employment (SZW) through criminal investigations. The domain of the SIOD concerns in principle all legislation of the Ministry of Social Affairs and Employment. This mainly concerns subjects in the fields of employee insurance schemes, social assistance, (benefits and getting people back to work), and the labor market (employment of illegal aliens, temporary work agencies, and labor market subsidies). However, other types of SZW subjects, such as labor conditions, also fall under the remit of the SIOD.51

Intelligence and Tracking Service of the Inspectorate of the Ministry of Housing, Spatial Planning and the Environment (Inlichtingen-en Opsporingsdienst van de Inspectie van het Ministerie van Volkshuisvesting, Ruimtelijke Ordening en Milieubeheer, VROM-IOD)

149. A special unit within VROM-Inspectorate, called VROM-IOD, deal with criminal investigation. Often, it concerns organized crime in relation to international (financial) vehicles and trade. VROM-IOD investigation teams are formed by investigators and technicians supported by lawyers and accountants. Investigation teams are supervised by the public prosecutor, who is responsible for the investigation.

National Police Internal Investigation Department (Rijksrecherche)

150. In the context of repression of fraud and corruption affecting integrity of government or public administration, the Rijksrecherche serves as a separate criminal investigation service although it might cooperate with other criminal investigation services. Its focus is on the Dutch police, the national, regional, and local governing bodies and the public administration. The Rijksrecherche can be deployed to investigate those cases where crimes committed by public officials seriously threaten integrity of government or public administration. It investigates such cases if they should not or could not be dealt with by regular police. Rijksrecherche has its own criminal intelligence service which can also act on anonymous reports.

Justis Office (Justis)

151. Justis is a special service related to the Ministry of Justice responsible for screening on integrity. Government, for example local governments, can request for background information on companies and persons before giving out permits or financial support. This task is based on the Public Administration (Probity Screening) Act (Wet bevordering integriteitsbeoordelingen door het openbaar bestuur, Wet BIBOB), mentioned above. Justis advises the requesting (local) government and they decide whether or not to follow the advice. Justis is also involved in the preventive supervision on companies. Establishers of companies in the Netherlands need a declaration of no objection (Verklaring van geen bezwaar, VVGB) from the Ministry of Justice. The VVGB is requested through a notary by Justis. Justis screens the financial and criminal history and the intent of the company. On this basis, the requested VVGB will be issued or denied.

1.6.2.4 Supervisory authorities
Dutch Central Bank (De Nederlandsche Bank, DNB)

152. DNB is the central bank and the prudential and integrity supervisor for banks and other (financial) institutions in accordance with the Wft, WWFT, Wgt, Wtt, the Pension Act, and the Sanctions Act.52 DNB supervises compliance with AML/CFT legislation and regulation of a range of institutions: banks, life insurance companies, bureaux de change, payment institutions (e.g., money transfer offices, creditcard companies), trust and company services providers, and casinos.

The Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten, AFM)

153. The AFM is responsible for supervising the operation of the financial markets. This means that AFM supervises the conduct of the entire financial market sector: savings, investment, insurance, and loans.53

Bureau Financial Supervision (Bureau Financieel Toezicht, BFT)

154. The BFT is responsible for the supervision in connection with legislation on the prevention of ML and TF of lawyers, (junior) civil-law notaries, independent legal advisers, public chartered accountants, public accountant-business administration consultants, tax advisors and other independent finance economic advisers.54 The BFT is also responsible for financial supervision of civil-law notaries and court bailiffs.

Netherlands Tax and Customs Administration, Holland-Midden, Unit MOT (Belastingdienst Holland-Midden, Unit MOT, BHM)

155. BHM is responsible for the supervision in connection with legislation on the prevention of money laundering and financing of terrorism regarding the sale (or the provision of intermediary services) of vehicles, ships, works of art, antiques, precious stones, precious metals, and jewelry. In addition, BHM is the authority responsible for the AML/CFT supervision regarding real estate brokers.

1.6.2.5 Cooperation between agencies
Financial Expertise Center (Financieel Expertise Centrum, FEC)

156. The FEC was established in 1998 to enhance the integrity of the financial sector. The Financial Markets Director of the Ministry of Finance and the Law Enforcement Director of the Ministry of Justice attend FEC Council meetings as observers.

National Steering Group for Combating Real Estate Fraud (Regiegroep Aanpak Misbruik Vastgoed)

157. On March 25, 2009 the National Steering Group for Combating Real Estate Fraud was established. This Steering Group is one of the measures from the government’s strategy to pursue a coherent strategy to fundamentally tackle abuse of and manipulation with real estate (see supra: under subtitle “Tackling abuse and manipulation of real estate”). The Steering Group will be jointly chaired by the Ministries of Justice and Finance. A Working Group for Combating Real Estate Fraud is established by the National Steering Group.

Committee on ML and TF (Commissie Witwassen en Terrorismefinanciering, BC MOT)

158. It was established when WMOT came into being. Under the WWFT, which entered into force on August 1, 2008, the committee is given a slightly modified mandate, which is more in line with its composition and its role in practice. The principal task of the new Committee will no longer be to monitor FIU-NL, but to act as a discussion partner for the responsible Ministries as regards the functioning of the duty to disclose in practice and the determination of the indicators.

Task forces

159. In 2007, the Dutch government launched a new program of action to intensify the combat of (international) organized crime. Two main priorities in this program are ‘human trafficking’ and ‘organized crime-related to large scale cannabis cultivation.’

1.6.3 Approach concerning risk

1.6.3.1 National Threat Assessments

160. Every four years, Dutch law enforcement agencies prepare a National Threat Assessment on serious and organized crime (Nationaal Dreigingsbeeld zware en georganiseerde misdaad) to identify and gauge the scale of the threats posed to the Netherlands by serious and organized crime, including money laundering.

161. The National Coordinator for Counterterrorism (Nationaal Coördinator Terrorismebestrijding, NCTb) prepares four times a year a Terrorist Threat Assessment (Dreigingsbeeld Terrorisme Nederland, DTN). This assessment is a broad analysis of the threat posed by national and international terrorism, including terrorist financing, to the Netherlands and Dutch interests abroad. It is intended for use by senior civil servants, members of government, and policymakers.

162. In 2009, the Ministry of Finance organized three workshops as a first step in conducting a national threat assessment on money laundering. Based on the output of these, the Financial Expertise Centre (Financieel Expertise Centrum, FEC) was tasked to work on a National Threat Assessment Money Laundering (National Threat Assessment (NTA) Witwassen). The FEC is a cooperative effort between various supervisory, investigative, and enforcement agencies working together on a policy as well as operational level. The FEC comprises all the organizations that carry out duties related to the financial sector: supervisory authorities; control, intelligence, and investigative agencies; and prosecution authorities. The national threat assessment is expected to be finalized in early 2011.

1.6.3.2 Implementing EU-legislation and the risk-based approach

163. The Act implementing the Third Money Laundering Directive (the WWFT) takes a “principle-based” approach. This means that the Act prescribes the result to be produced by the customer due-diligence review, not the manner in which the review must be carried out.

164. By implementing the Third Money Laundering Directive in national legislation (WWFT), the risk-based approach was introduced. Institutions can tailor their CDD measures to the specificities of their organization as long as the outcome is as required by the WWFT. The approach means that institutions make their own assessment of the risks entailed by particular customers, transactions or products, and it also enables the institutions to bring the efforts and resources required for the customer due diligence in line with these risks. As a result, more attention can be devoted to monitoring accounts and transactions that represent an increased risk of money laundering or terrorist financing. With regard to customers, transactions or products that entail a lower risk, less intensive monitoring will suffice.

1.6.3.3. Supervision

165. The supervisor can assess for each individual institution whether an institution has adequately identified the level of risk of customers, transactions, and products and has developed adequate procedures and measures concerning customer due diligence to curtail these risks.

166. The supervisory authorities also apply a risk-based approach in the exercise of their supervisory function.

1.6.4 Progress since the last mutual evaluation or assessment

167. In September 2004, the IMF produced a Report on the Observance of Standards and Codes (ROSC). Recommendations were made. The authorities’ view on the follow up given to these recommendations is set out below.

a) Ensuring there is effective sharing of information by MOT (FIU) with supervisory authorities.

168. On a regular basis, supervisors and FIU-NL meet with each other to discuss issues regarding the reporting requirements.

b) Make confiscation of criminal proceeds for ML/TF mandatory.

169. A general instruction of the Public Prosecution Service (Aanwijzing ontneming) urges all prosecutors to investigate and seize criminal proceeds in case of an intended required fine of at least €500 or criminal proceeds estimated at the moment of seizure to amount to €500. However, confiscation measures under Dutch law remain in the discretion of the judge.

c) Address a requirement that there be renewal of identity documents if in the course of a business relationship doubts occur regarding the identity of a client.

170. Article 3 (3) (d) WWFT requires financial institutions to perform customer due diligence when they doubt the reliability of information obtained earlier from the customer. Additionally, Article 3 (2) (d) WWFT requires an institution to carry out, where possible, constant monitoring of the business relationship and the transactions conducted during the existence of the relationship.

d) Incorporate specific record-keeping requirements for account relationship materials (post account opening) and transaction records as authorities adopt revisions to ISA/DUTA.

171. In the Netherlands, it is mandatory to maintain all business records for at least seven years. This general obligation is set out in Article 2:10 (3) of the BW and Article 52 of the General Tax Code (Algemene wet inzake Rijksbelastingen, AWR). With regard to the data that is provided to FIU-NL in the context of an unusual transaction report (Article 16 (2) WWFT), Article 34 WWFT requires that financial institutions retain this data in an accessible manner for five years following the moment when the report was filed. The data collected by financial institutions for CDD purposes should be maintained in an accessible manner for five years (Article 33 (2) WWFT). In addition, the Wft requires that financial institutions store their CDD documentation for five years (Articles 14 (5) BPR Wft, Article 19 BPR Wft, Article 21 (5) BGFO Wft and Article 26 (4) BGFO Wft).

e) DNB should provide more specific guidance to licensees on measures that should be adopted to minimize the risk inherent in dealing with bearer shares.

172. The Netherlands has started a process in which bearer shares will be ultimately dematerialized. The first phase was mobilization and the second phase centralization; a central depository was set up for bearer securities. The third phase is the dematerialization phase, which will be completed by January 1, 2013. As of the time of the assessment mission, however, Dutch law still allowed for the issuance of new and the unregulated transfer of existing bearer shares.

173. The last few years, frequent use has already been made of the global note; this is a share issue with the decision of the shareholders meeting and closing figures for the issued share capital on one A4. The global note and the central share issue account at the depository institution Necigef (central securities depository) is conclusive. Banks are the first line of defense and they use the RIS List. The Dutch RIS List is the summary list of all the reports drawn up by the police with regard to stolen or missing bearer securities previously known as the “summary list of the investigation list issued by the police related to stolen or lost securities.” The objective of this RIS list is to administrate centrally the registration of stolen or lost physical bearer securities.

174. Figures published by DNB show that the number of banks with a deposit desk, which is needed to exchange physical certificates, has decreased drastically. The last large institution that still uses physical certificates will phase it out by January 1, 2013, as required by new legislation. This date runs in parallel with the closure of the transition phase in neighboring Belgium so that any shortcut, should it exist, will be made impossible.

f) Introduce an explicit requirement for internal procedures regarding ongoing training, and amend laws/regulations to create an internal audit function for any sector for which it is not explicit.

175. Articles 3:10, 3:17, 4:11 and 4:14 Wft require financial institutions to maintain internal procedures, policies, and controls to mitigate integrity risks (including the risk of money laundering and terrorist financing). Further detailed requirements based on these Articles are compulsory under the BPR Wft and the BGFO Wft. Article 35 WWFT requires financial institutions to train their staff regarding these internal controls, procedures, and policies. Regarding bureaux de change, the Wgt and the Wgt regulations on the conduct of business by and the administrative organization apply.

g) Amend laws/regulations to require management level compliance officers.

176. Article 21 BPR Wft and Article 31c BGFO Wft require financial institutions to have an independent compliance function.

h) Expand scope of tipping-off prohibition to cover those who come into contact with information regarding the reporting or consideration of a decision to report.

177. Financial institutions, their directors, officers, and employees are prohibited by law to disclose (“tipping off”) the fact that a UTR or related information is being reported or provided to FIU-NL, as stated in Article 23 (1) WWFT. Breach of this secrecy is an economic offense and will be punished according the WED.

i) Ensure in all sectors that institutions are required to maintain records of transactions considered for reporting but not reported and that these records are available for supervisory review.

178. See answer under Recommendation 4. Both Articles 33 (2) WWFT and Article 34 WWFT require that the data is kept in an accessible manner. According to Article 5:17 General Administrative law Act (Algemene wet bestuursrecht, Awb), supervisors have unrestricted access to all records maintained by entities under their supervision.

j) Extend integrity testing by supervisors in practice to a wider range of senior management outside of the Executive Board.

179. See next point.

k) Rectify the deficiency identified in the role played by the central organization of the cooperative bank in undertaking fit and proper examinations.

180. Articles 3:8 Wft, 3:9 Wft, 4:9 Wft, 4:10 Wft, 13 BPR Wft, 20 BGFO Wft, and 25 BGFO Wft deal with the standards of hiring employees by financial institutions. DNB and AFM are responsible for this fit and proper testing. In this respect, DNB and AFM gather information from the Public Prosecution Service, the Tax and Customs Administration, foreign (supervisory) authorities, professional organizations, and their own databases. Also public sources are consulted like Graydon, the Chamber of commerce, LexisNexis, and the Internet.

l) Within the two-year period referred to by FATF, amend relevant laws to require that accurate and meaningful originator information (name, address, and account number) on fund transfers remains with the transfer throughout the payment chain.

181. The Netherlands is bound by “Regulation (EC) No. 1781/2006 of the European Parliament and of the Council of November 15, 2006 on information on the payer accompanying transfers,” in force since January 1, 2007. This instrument is directly applicable in the Netherlands.

m) Impose an obligation, consistent with SR VII, on FSPs to give enhanced scrutiny to wire transfers that do not contain complete originator information and provide guidance that encourages compliance on an immediate basis.

182. This was covered by Articles 8, 9, and 10 of the EU Regulation.

n) The direction given to financial institutions in respect of their dealings with nonprofit organizations should be expanded.

26. Guidance to financial institutions is given in a broader sense. See, for example, the Q & As with respect to the WWFT.55 Due to the risk-based approach, financial institutions have to perform their own risk assessment of the customer, transaction, or product.

o) The working group on nonprofits in the Netherlands should come up with reasonable measures to improve the transparency and monitoring of foundations and associations in general as well as with measures to improve the registration, regulation, and monitoring of charities.

183. All nonprofit organizations with legal personality, such as foundations and associations, have to register at the Chamber of Commerce. The BW entrusts the Public Prosecution Service with the supervision of foundations.

184. In 2008, the Tax and Customs Administration introduced a form of preventive fiscal supervision of charities. When an organization wants to make use of certain advantageous fiscal arrangements set up for charities and other nonprofit organizations (jointly referred to as Algemeen Nut Beogende Instellingen, ANBIs), it has to request a judicial order from the Tax and Customs Administration. This order will only be provided if the ANBI meets a number of criteria, including a policy plan that sets out scheduled activities, ways of fundraising, and planned expenditures. The ANBI is also obligated to provide a full overview of its financial administration, including all revenues on a yearly basis.

185. In addition to these legal measures, the CBF, which is a privately-run organization, provides a seal of approval to fundraising institutions which have issued a request on a voluntary basis. Supervision by the CBF is based mainly on annual reports and accounting declarations provided by the institutions themselves, along with investigations carried out by the CBF itself.

2 LEGAL SYSTEM AND RELATED INSTITUTIONAL MEASURES

Laws and Regulations

2.1 Criminalization of Money Laundering (R.1 & 2)

2.1.1 Description and Analysis
Legal Framework:

186. The Netherlands have criminalized ML through Articles 420 bis, 420 ter, and 420 quater Wetboek van Strafrecht (Penal Code). The provisions in their current form were first adopted in 2001. Prior to 2001, ML was investigated and prosecuted on the basis of the “receiving of stolen goods” (Heling) offense.

187. The statutory provisions as indicated above are further supported by a significant number of court decisions, including Supreme Court rulings, which provide guidance on how to interpret and correctly apply the ML provisions.

188. The Netherlands have ratified the Palermo Convention on May 26, 2004 and the Vienna Convention on September 9, 1993.

Criminalization of Money Laundering (c. 1.1—Physical and Material Elements of the Offense):

189. Articles 420 bis and 420 quater of the Penal Code criminalize (1) the concealing or disguising of the true nature, source, location, disposition or movement of an object, or of the person who has title to or possession of the object and (2) the acquisition, possession, transfer, conversion or use of an object if the offender either knows or may reasonably suspect that objects stem directly or indirectly from a criminal offense. In addition, Article 420 ter of the Penal Code sets out that the habitual commission of money laundering offenses under Articles 420 bis and 420 quater constitutes aggravating circumstances.

190. The ML offenses under Dutch law address all material elements of the offenses as defined in the Palermo and Vienna Conventions. The “conversion or transfer,” the “concealment or disguise of the nature, source, location, disposition, movement or rights and ownership” and the “acquisition, possession, and use” are all explicitly covered. Dutch law also does not require proof of a specific purpose in committing any of the above-mentioned acts.

191. With respect to the offense of “possession,” the Supreme Court in a judgment of October 2, 2007 (NJ 2008, 16) held that merely being in possession of money that has been obtained by the suspect through the commission of a predicate offense constitutes money laundering pursuant to Article 420 bis (2) of the Penal Code. In some countries, the principle of double jeopardy bars the authorities from prosecuting for both the predicate offense and the money laundering offense, in a scenario where the perpetrator engages merely in possession of his criminal proceeds. There is no such barrier in the Netherlands and in such scenarios the Dutch authorities can prosecute the same individual for both the predicate offense and for money laundering.

The Laundered Property (c. 1.2):

192. The ML offenses under Articles 420 bis and 420 quater both refer to “objects” that directly or indirectly stem from a criminal offense, whereby both provisions stipulate that the term would include “any good and property right.” “Property right” is defined in Article 6 of Book 3 of the Civil Code to cover all “rights that are, either individual or as part of another right, transferable or provide the one who is eligible [to them] with material benefits or are received in exchange for supplied or promised material remuneration.” The term “goods” is defined in Article 2 of Book 3 to extend to all “material objects susceptible for human control.”

193. In discussions with the authorities, it was stated that the term “objects” would include everything of value, including but not limited to money, real estate, and any other property. To support this view, the authorities provided a ruling of the Amsterdam Appeals Court (Hof Amsterdam July 3, 2009, LJN: BJ1646, zaak Holleeder), in which the court considered cash, bank accounts, apartment rights, real estate, and company premises to constitute “objects that directly or indirectly stem from a criminal offense.”

194. Based on the broad language of Articles 2 and 6 of Book 3 of the Civil Code and the cited case law, the assessors conclude that the Dutch ML provisions are applicable to assets of any kind, whether corporeal or incorporeal, moveable or immovable, tangible or intangible, and legal documents or instruments evidencing title to, or interest in such assets, and are, thus, in compliance with the FATF standard on this point.

Proving Property is the Proceeds of Crime (c. 1.2.1):

195. Articles 420 bis and Article 420 quater of the Penal Code do not require that a person be convicted of a predicate offense for the prosecution to establish the illicit origin of proceeds. The authorities confirmed that ML is an autonomous offense under Dutch law and may be prosecuted independently from the predicate offense.

196. This view has also been taken by the Supreme Court in a ruling of September 28, 2004 (NJ 2007, 278) where the court clarified that it is not necessary to prove that funds or property is proceeds of a specific criminal offense, but that it would be sufficient to establish that objects “must have been derived from criminal activity.”

197. In the specific case referenced above, the Supreme Court upheld the ML conviction based on the conclusion that “the existence and origin of the money were to remain concealed” and, thus, “the possibility that the money might have been obtained legally [is] so improbable that it [can be] assume[d] that the money was derived from a criminal activity.”

198. In another ruling of September 27, 2005 (NJ 2006, 473), the court stated that “the circumstances of the actual case in question will have to convince the court that a transaction with the outward appearance of a money laundering construction [is in fact a transaction carried out for ML purposes]” whereby it is not necessary to “identify the precise offense from which the property originated” or to show that the entire funds or assets stem from a criminal activity. Funds or assets that only partially represent proceeds of crime and partially stem from licit sources are, thus, still considered proceeds of crime in their entirety.

199. In sum, Dutch law merely requires the prosecution to establish that objects are likely to be direct or indirect proceeds of crime, without the need to specify the predicate offense.

The Scope of the Predicate Offenses (c. 1.3):

200. Articles 420 bis and 420 quater of the Penal Code apply to proceeds from any criminal offense.

201. The Dutch Penal Code differentiates between “offenses” and “misdemeanours.” “Offenses” are listed in Book II (Articles 92 to 420 quinquies) and “misdemeanours” are set out in Book III (Articles 424 to 476) of the Penal Code. As a general rule, the maximum available sanction for misdemeanours is imprisonment for up to six months, whereas the maximum sanction available for offenses ranges between imprisonment for six months to imprisonment for life.

202. The table below establishes how each FATF-designated category of predicate offenses is criminalized under Dutch law. All listed provisions constitute offenses as they are either set out in Book II of the Penal Code or in a separate statute but are punishable with imprisonment for six months or more.

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203. Tax offenses under Articles 68, 69, and 72 of the General Law Concerning National Taxes, including tax evasion, are punishable in the Netherlands with a maximum sentence of imprisonment for four to six years and, thus, constitute predicate offenses for ML. This was also confirmed by the Supreme Court in a ruling of October 7, 2008 (NJ 2009, 92).

Threshold Approach for Predicate Offenses (c. 1.4):

204. The Netherlands follows a threshold approach in defining predicate offenses for ML. Articles 420 bis and 420 quater of the Penal Code are applicable to objects that were obtained through the commission of “a criminal offense” but not to objects that stem from misdemeanours. As indicated above, the maximum sentence for “offenses” ranges between imprisonment for six months to imprisonment for life. “The maximum imprisonment sanction available for misdemeanours generally does not exceed six months.”

205. Dutch law is, thus, in compliance with the FATF standard on this point.

Extraterritorially Committed Predicate Offenses (c. 1.5):

206. Articles 420 bis and 420 quater of the Penal Code do not expressly refer to predicate offenses committed abroad. However, the authorities stated that the reference to “objects that directly or indirectly stem from an offense” would be interpreted to also include objects that have been obtained through criminal conduct committed outside of the Netherlands. This view was also confirmed by the Supreme Court in a ruling of December 1, 1998 (NJ 1999, 470), where the court held that the Dutch ML provisions are, at a minimum, applicable to predicate offenses that have been committed abroad if the relevant conduct has been criminalized both under Dutch law and the law of the country in which it took place.

207. Dutch law is, thus, in compliance with the FATF standard on this point.

Laundering One’s Own Illicit Funds (c. 1.6):

208. The language of the Dutch ML provisions seem to include both cases in which a person launders the proceeds of his/her own criminal conduct and cases in which a person launders the proceeds of another person’s criminal conduct. This interpretation was confirmed by the Supreme Court in a judgment of October 2, 2007 (NJ 2008, 16), where the court confirmed the lower court’s decision to convict the appellant for laundering the proceeds of his own criminal conduct.

Ancillary Offenses (c. 1.7):

209. Ancillary offenses are set out in the general provisions of the Penal Code and are applicable to all specific offenses set out in Book II of the Penal Code, including the ML provisions. Article 45 of the Penal Code criminalizes the attempt to commit a criminal offense and provides that the offender may be sanctioned with the maximum penalty available for the attempted offense reduced by one third, or with a term of imprisonment for up to twenty years in cases where the attempted offense is punishable with life imprisonment.

210. Articles 47 and 48 of the Penal Code further criminalize the procuring, assisting, solicitation, or aiding and abetting of an offense and stipulate that such conduct may be subject to the same sanction as the main offense.

211. Article 140 Penal Code stipulates that it is a criminal offense for any person to participate in an organization whose aim it is to commit a crime and sanctions such conduct with imprisonment of up to six years or a fine of up to €76,000. The term “organization” has been interpreted by the courts to mean “a structured and lasting form of collaboration between two or more persons that is directed at the commission of an offense.” A person could, thus, be held criminally liable for “association to commit” an ML offense under Article 140 of the Penal Code.

212. The outlined provisions set out appropriate ancillary offenses to ML, including attempt, aiding and abetting, facilitating, and counseling the commission thereof. In addition, association to commit ML can be prosecuted as “participation in a criminal organization.”

Additional Element—If an act overseas which does not constitute an offense overseas, but would be a predicate offense if occurred domestically, lead to an offense of ML (c. 1.8):

213. As indicated under criterion 1.5 above, Articles 420 bis and 420 quater of the Penal Code do not expressly refer to predicate offenses committed abroad. However, the authorities stated that the reference to “any offense” would be interpreted to include conduct within and outside the Netherlands. In line with this argument, the Supreme Court in a ruling of December 1, 1998 (NJ 1999, 470) suggested that for the ML provisions to apply, it would “probably not be necessary” to establish that conduct committed abroad was criminalized under the law of the foreign jurisdiction so long as the conduct is an offense under Dutch law. However, as under Dutch law it is not necessary to establish exactly which predicate offense has been committed or where a predicate offense has taken place for the ML provisions to apply, the court has not yet had an opportunity to issue a binding ruling on this matter.

Liability of Natural Persons (c. 2.1):

214. As outlined above, Articles 420 bis and 420 quater of the Penal Code require that the perpetrator either knew or may have reasonably suspected (which effectively applies an objective “could have known” test) that objects are the proceeds of crime. Dutch law is, thus, not only in line but goes beyond the Vienna and Palermo Conventions on this point.

The Mental Element of the ML Offense (c. 2.2):

215. Dutch law does not provide for a statutory provision that would regulate the inference of the mental element from objective factual circumstances. However, with respect to Article 420 bis of the Penal Code, the Supreme Court has confirmed application of this principle in a number of cases (Hoge Raad September 27, 2005, NJ 2006, 473; Hoge Raad September 28, 2004, NJ 2007, 278). In particular, the Supreme Court held that the intentional elements of the act of ML (the procuring, concealing, transferring…) can be deduced from the conduct itself and that the criminal origin and knowledge thereof by the main perpetrator can be deduced from the factual circumstances of the case.

Liability of Legal Persons (c. 2.3):

216. Articles 420 bis and 420 quater of the Penal Code apply to “any person” who commits an act of ML. While the provisions do not specify how the term “person” is to be interpreted, Article 51 of the Penal Code establishes that any criminal offense under Dutch law may be committed by a natural or legal person.

217. Legal persons may, thus, be subject to criminal liability for ML and be sanctioned with penalties and nonpunitive orders as appropriate. In cases where an ML offense is committed by a legal person, a fine of up to €760,000 may be applied based on Article 23 (7) Penal Code. In addition, a confiscation order may be issued.

218. The authorities stated that while in the past, a number of legal entities have been held criminally liable under Article 420 bis, no bank or other FI has ever been convicted for ML.

Liability of Legal Persons should not preclude possible parallel criminal, civil or administrative proceedings (c. 2.4):

219. Article 51 of the Dutch Penal Code expressly stipulates that holding a legal person criminally liable for a criminal offense does not preclude the possibility of parallel criminal proceedings against the persons who ordered the commission of or controlled the prohibited act.

220. In addition, the authorities stated that it would be possible to initiate criminal proceedings against a legal person concurrently with civil or administrative proceedings. In practice, however, the criminal proceedings would be carried out first and civil and administrative proceedings would be proceeded with only at a later stage.

Sanctions for ML (c. 2.5):

221. Intentional ML pursuant to Article 420 bis is sanctioned with imprisonment for a term of up to four years and/or a fine of up to €76,000. If the prosecution is based upon the failure to reasonably suspect that property is the proceeds of crime, Article 420 quater provides for imprisonment for a term of up to one year and/or a fine of up to €76,000.

222. Article 420 quater of the Penal Code further stipulates that anybody who commits ML habitually is liable to imprisonment for a term of up to six years or a fine of up to €76,000. In addition, for each ML case, a confiscation order or special confiscation order as outlined under Recommendation 3 below may be issued.

223. The general provisions of the Penal Code allow for prison sentences and fines to be accumulated in cases involving a number of isolated criminal offenses, whereby accumulation of prison sentences is limited to 1 1/3 of the highest maximum sanction applicable to any of the offenses involved.

224. In addition to criminal sanctions and to avoid prosecution of a specific case, for conduct liable to a maximum sentence of not more than six years of imprisonment, the public prosecutor’s office has the power under Article 74 of the Penal Code to offer payment of a certain amount of money, surrender of property that is liable to confiscation, the payment of the estimated value of these objects and/or the payment of compensation for damages caused by the offense. As indicated in the tables with the total number of prosecutions for ML or ML and another offense below, persons have made use of this possibility in a number of cases, whereby it is unclear what measures or amounts were involved in each case.

225. The sanctions in place for ML seem to be in line with the sanctions applicable to other serious criminal offenses under Dutch law. For example, illicit trafficking in stolen and other goods, basic corruption, and basic fraud offenses are sanctioned with imprisonment of up to four years and a fine of up to €76,000. Forgery is punishable with imprisonment of up to six years and a fine of up to €76,000.

226. The sanctions for basic ML offenses are low when compared to some FATF countries (i.e., Argentina=2–10 years imprisonment, Brazil=3–10 years imprisonment, Mexico=5–15 years imprisonment, Italy=4–12 years imprisonment, United States=fine and/or imprisonment up to 20 years or both, United Kingdom=fine, imprisonment up to 14 years or both), but are in line with the sanctions applicable in other FATF countries (i.e., Finland=fine or imprisonment up to 2 years, Japan=fine and/or imprisonment up to 5 years).

227. In terms of actual application of the statutory sanctions, between 2004 and 2009, sanctions were imposed in 525 pure ML cases, whereby about 259 or 46 percent of these cases led to a prison sentence. Of these 259 cases, only about 60 or 11 percent resulted in a prison sentence for more than one year. The authorities indicated that this was due to the fact that some of them were smaller cases involving cash couriers. Of the 525 convictions, six related to legal as opposed to natural persons, whereby the fine imposed in each case was in excess of €5,000.

228. Due to privacy reasons, the statistics provided by the authorities do not indicate the exact duration of prison sentences imposed. Also, it is not clear whether any sanctions have been imposed for habitual ML and the extent of those sanctions, if any. Fines were imposed in about 60 cases but the statistics provided by the authorities do not state the exact amounts. The authorities indicated that due to privacy reasons, statistics on sanctions cannot be quantified in greater detail if the number of cases is less than ten.

Sentences for pure ML Offenses

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229. A slightly different trend can be observed in cases where a conviction was obtained for both ML and another offense. While the total percentage of cases that led to a prison sentence seems to be the same as for pure ML cases (about 70 percent), the sentences imposed seem to be slightly more severe. Between 2004 and 2009, 1,757 cases for ML combined with another offense resulted in the application of sanctions. About 1,234 or 70 percent of these cases resulted in a prison sentence. Of the 1,234 cases, 917 or 52 percent led to imprisonment of up to two years, and 317 or 18 percent to imprisonment for more than two years. The statistics provided by the authorities do not, however, indicate the exact duration of the sentences and whether sanctions for habitual ML have ever been imposed. Additionally, fines were imposed in about 102 cases but the exact amounts were not provided due to the already mentioned privacy rules.

Sentences for ML combined with other Offenses

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230. In the period 2004 to 2009, the majority of convictions for pure or mixed ML have resulted in a prison sentence, whereby it appears that a good number of them resulted in imprisonment for a year or more. In the absence of more detailed information regarding the length of the prison sentences and the amounts of fines imposed, the assessors are not able to determine in full the degree of the effective application of the statutory sanctions regime. Equally, in the absence of information on the types and number of sanctions applied to legal persons, the effective application of the ML provisions to legal persons cannot be fully evaluated.

231. In sum, while a conclusion that the statutory sanctions are fully effective is not possible without more specific information, it is clear that the sanctions regime has been effective to a certain degree in that it has resulted in significant number of prison sentences.

Statistics (R.32):

232. The authorities indicated that the most relevant predicate offenses for money laundering are illicit trafficking of humans, weapons, and drug offenses. General crime statistics that would allow the assessors to draw a conclusion regarding the scale of these offenses or other significant types of proceeds-generating predicate offenses committed in the Netherlands were not available. Furthermore, the authorities stated that available information on the predicate offenses involved in ML cases would be limited due to the fact that Dutch law does not require identification of a specific predicate offense for the ML provisions to apply.

233. Furthermore, complete and accurate statistics on the number of criminal investigations carried out for ML were not made available to the assessors. Dutch law requires that all cases investigated be presented to the public prosecutor. It, thus, seems that the table with the Number of Criminal Investigations in the Netherlands for pure or mixed ML investigations brought to the Public Prosecutor and the table with the Total Number of Cases for ML or ML and another offense brought to the Public Prosecutor by initiating law enforcement authority in 2006–2009 below would to some extent be reflective of the number of investigations carried out. However, criminal investigations that were terminated at an early stage and preliminary investigations would not be covered by these tables. In addition, it remains unclear how ML investigations in the Netherlands are triggered, in particular how many of them have been initiated by STRs, and how many investigations were terminated and based on what grounds. It also could not be established in relation to which underlying criminal conduct ML investigations were carried out. While assessors acknowledge that it may be difficult for the Dutch authorities to maintain statistics on the underlying predicate offenses given that the prosecution is not required to establish exactly which offense generated the property that is laundered, the assessors still consider it important that the authorities collect comprehensive statistics on the general crime categories involved in ML cases.

234. Statistics on the number of prosecutions for ML are maintained by the Ministry of Justice and suggest that a significant number of prosecutions have been obtained for ML since 2004.

235. The table below regarding the Excerpts Crime and Criminal Justice Statistics in the European Union, Crimes recorded by the Dutch Police represents an excerpt from the European Crime and Criminal Justice Statistics. The numbers only pertain to certain types of crimes and do not give a full picture of the types and trends of predicate offenses committed in the Netherlands. The statistics are also slightly outdated as they only cover the years 2004–2006. Statistics were not available for the years 2007-2010 or for any other crimes than those listed in the table below.

Excerpts Crime and Criminal Justice Statistics in the European Union, Crimes recorded by the Dutch Police

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236. The table below with the Number of Criminal Investigations in the Netherlands for pure or mixed ML investigations brought to the Public Prosecutor and the one further below with the Total Number of Cases for ML or ML and another offense brought to the Public Prosecutor by initiating law enforcement authority in 2006–2009 indicate the total number of ML cases (including cases in which both ML and the predicate offense were investigated) brought to the public prosecutor by year and initiating law enforcement authority. As indicated above, the numbers are indicative of but do not comprehensively set out the total number of investigations conducted for ML.

237. The table with the Total Number of Cases for ML or ML and another offense brought to the Public Prosecutor by initiating law enforcement authority in 2006–2009 indicates that more than 70 percent of all ML cases brought forward to the public prosecutor stemmed from criminal investigations conducted by the regional police. The FIOD-ECD is also handling a large number of ML investigations. This table does not, however, indicate how many cases brought to the public prosecutor were initiated based upon information provided by the FIU. The authorities stated that this information was difficult to obtain as the police would have direct access to the STR database and it is, thus, not clear how many prosecutions were triggered by STRs rather than other information obtained by law enforcement authorities.

Number of Criminal Investigations in the Netherlands for pure or mixed ML investigations brought to the Public Prosecutor

(provided by the Ministry of Justice)

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Total Number of Cases for ML or ML and another offense brought to the Public Prosecutor by initiating law enforcement authority 2006–2009

(provided by the Ministry of Justice)

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238. The table with the Total number of prosecutions for ML or ML and another offense and the one with ML prosecutions combined with certain other offenses (see both below) show the total number of prosecutions initiated for ML (including cases in which the ML and the underlying predicate offense were jointly prosecuted) broken down by year. The table with the Total number of prosecutions for ML or ML and another offense indicates that the number of prosecutions almost doubled in the year 2006 and again increased by 30 percent in 2007 mainly due to a Supreme Court ruling issued in 2005, which clarified that it is not necessary to prove the underlying criminal offense when prosecuting ML. Furthermore, it was stated that awareness by law enforcement authorities of the relevance and usefulness of the ML provisions has increased significantly over the last years and has resulted in an increase in cases. In particular, a general instruction issued by the public prosecutor’s office, which requires the initiation of an ML investigation whenever a crime generated proceeds of €500 or more, may have contributed to this trend.

239. The table with the ML prosecutions combined with certain other offenses provides statistics on the number of cases in which both ML and drug trafficking, human trafficking, or criminal organization were prosecuted. The authorities indicated that these three predicate offenses can be considered the most significant proceeds-generating crimes committed in the Netherlands.

Total number of prosecutions for ML or ML and another offense

(provided by the Ministry of Justice)

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ML prosecutions combined with certain other offenses

(provided by the Ministry of Justice)

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240. The table with the results from prosecutions for pure and mixed ML prosecutions sets out the number of convictions and acquittals obtained for pure ML offenses and for ML in connection with a predicate offense. The references to “merge” relate to cases where one court proceeding was later merged with another court proceeding against the same person. The reference to “other” means any other decision than a conviction, merger, or acquittal, such as, for example, invalidity of the subpoena, incompetency of the court, stay of prosecution, etc. The numbers in the table suggest that in the first half of 2009, more than three-quarters of the prosecutions for ML or/and another offense ended up in a conviction for ML. Only 14 percent of the suspects were acquitted.

Results from prosecutions for pure and mixed ML prosecutions

(provided by the Ministry of Justice)

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Analysis of effectiveness

241. The authorities demonstrated a high level of knowledge of the various aspects of the Dutch ML provisions and the application of the provisions is further facilitated by a strong and mature institutional framework and a significant number of court decisions.

242. In comparison to other countries based on GDP and the number of citizens, the Netherlands have conducted a significant number of prosecutions and obtained a good number of convictions either for standalone ML or ML in connection with a predicate offense. These numbers reflect the fact that the Netherlands has a quite liberal approach to applying the money laundering offense, e.g., by not requiring the prosecution to establish exactly where and which predicate offense is involved in a specific case. As outlined above, however, in the absence of complete statistics on the number of investigations for ML, it is impossible to put the number of ML prosecutions and convictions in a domestic context.

243. While the overall number of prosecutions and convictions for ML is impressive, given the lack of more specific information on types of predicate offense and the nature of ML cases in which convictions were obtained, it is difficult for the assessors to determine how the ML provisions are being used by the authorities, e.g., whether they are mainly used in the context of basic offenses such as theft or whether they are also utilized as a tool to combat serious, organized, and transnational crime. Based on the sanctions imposed between 2004 and 2009 and the statistics provided in the table with the ML prosecutions combined with certain other offenses, however, it seems that the ML offenses are applied in both types of situation.

2.1.2 Recommendations and Comments
  • The authorities should review all information available with respect to the fines and prison sentence imposed in ML cases to determine whether the sanctions regime is applied effectively, including in relation to legal persons.

  • To determine whether the ML provisions are applied effectively in the Netherlands, accurate and complete statistics should be maintained on (1) the number and types of predicate offenses committed in the Netherlands (2) the number of investigations conducted for ML, including information on how these cases were initiated and the types of crime these cases relate to, the number of investigations terminated and the reasons for the termination, and the number of cases pending and (3) the types of predicate offenses involved in ML prosecutions and convictions.

2.1.3 Compliance with Recommendations 1 & 2
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2.2 Criminalization of Terrorist Financing (SR.II)

2.2.1 Description and Analysis
Legal Framework:

244. The Netherlands do not have a separate statutory offense of “terrorism financing.” The authorities stated that terrorism financing activities would be prosecuted either as “preparation of an offense” under Article 46 of the Penal Code or, where the financing relates to a terrorist organization, as “participation in a terrorist organization” under Article 140a of the Penal Code. Furthermore, criminal liability for terrorist financing may be incurred under the provisions of the Sanctions Act. It is worth noting at the outset that in practice, neither Article 46 nor Article 140a of the Penal Code has ever been used to prosecute or convict a person for terrorism financing activities

245. The Netherlands have ratified the International Convention for the Suppression of the Financing of Terrorism (“FT Convention”) on February 7, 2002 and have ratified all nine Conventions and Protocols listed in the Annex to the TF Convention.

Criminalization of Financing of Terrorism (c.II.1):

246. Article 46 of the Penal Code criminalizes the intentional acquisition, manufacturing, import, conveyance in transit, export or possession of any objects, substances, information carriers, premises or vehicle to be used in the commission of a criminal offense that is sanctionable with imprisonment for a term of eight years or more. Conduct pursuant to Article 46 of the Penal Code may be sanctioned with half the maximum penalty available for the underlying offense or, where the underlying offense is punishable with life imprisonment, with imprisonment of a term not exceeding fifteen years.

247. In extensive discussions with the authorities, it was explained that terrorism financing activities could be prosecuted under Article 46 even if no overt act has yet been undertaken to carry out or attempt the financed activity. The reference to “to be used” supports the authorities’ view that for Article 46 to apply, it is not required that objects have actually been used for the commission or attempted commission of a criminal offense and that the mere acquisition or possession of objects with the intention that they are to be used to commit a specific underlying offense is sufficient to trigger criminal responsibility for the preparation offense. This interpretation was also confirmed in discussions with representatives of the judiciary. Furthermore, the Supreme Court in a ruling of February 20, 2007 (Hoge Raad LJN: AZ0213) clarified that “preparation” is “an incomplete form of a criminal offense” whereby the “punishable preparation is further away from the completed criminal offense than the attempt […] but involves acts in which the perpetrator […] intentionally fabricate[s] or ha[s] at his disposal means that are […] intended for the commission of the criminal offense he has in mind.” In another ruling of September 17, 2007, the Amsterdam Court of Appeal held that “contrary to the principle of the ‘punishable attempt’, no first act towards the commission of the offense on which the intention of the offender is focused applies as yet during preparatory acts. Whereas the attempt always—by the first act in the commission—has a direct link with this ‘basic offense,’ the preparatory act should rather be considered as an independent basic offense, which is generally characterized by the fact that the preparations for said offense are at such an early stage that a first act in the commission of the offense does not yet apply. This early stage is therefore characteristic for the preparation doctrine.”

248. While Article 46 can be applied even if the underlying offense is still far removed, the fact remains that Article 46 is set out in the general parts of the Penal Code and that the sanctions that apply to the preparation offense are calculated based on the statutory sanction available for the prepared offense. As indicated in Dutch parliamentary documents, the offense of preparation is, thus, an offense “of which the reach and meaning are entirely accessory with respect to the actual interdiction of the autonomous offense.”56 The Supreme Court in a ruling of September 17, 2002 (Hoge Raad NJ 2002, 626) further stated that a charge under Article 46 must make it sufficiently clear what the prepared criminal offense was. In the context of terrorism financing, this means that Article 46 can only be used to prosecute the financing of specific terrorist acts but generally not the financing of individual terrorists or terrorist organizations.

249. Article 140a of the Penal Code provides that it is a criminal offense to participate in an organization whose aim it is to commit terrorist offenses, whereby paragraph 4 stipulates that the lending of monetary or other material support as well as the raising of funds or recruiting of persons for the benefit of such an organization would qualify as “participation.”

250. The sanctions applicable to Article 140a are imprisonment for a term not exceeding fifteen years or a fine of up to €76,000 or both. Stricter sanctions may be applied for leaders, founders, and directors of such organizations.

251. In addition to Articles 46 and 140a of the Penal Code, the provision of funds, financial assets or economic resources to or for the benefit of the individuals, entities, or organizations designated under UNSCR 1267, 1373, the EC Regulation or Sanctions Regulations may be punished based on the Sanctions Act. The collection of funds for the purpose of financing a designated person or entity would be criminalized only in relation to persons conducting such activity as part of professional financial services, but not in relation to private persons collecting such funds. In addition, the above-cited Sanctions Regulations do not extend to situations where funds are merely intended to be but have not yet been provided to a designated individual or entity.

252. Special Recommendation II of the FATF standard requires that the terrorist financing offense extend to any person who provides or collects funds by any means, directly or indirectly, with the intention that they be used (1) for terrorist acts as defined in the TF Convention, (2) by a terrorist organization or (3) by an individual terrorist.

253. The authorities stated that under Dutch law, the material element of “collecting funds” is covered under Article 46 of the Penal Code through the notions of “intentional acquisition” and “possession of” objects. The assessors agree that these references cover the collection of funds in many but not in all instances as funds do not necessarily have to be in the possession of or be acquired by the person who is collecting them.

254. In particular, the provision would not apply to situations where funds are not physically acquired or in actual possession of the financer. In response to this concern, the authorities provided a Supreme Court case (Hoge Raad 12 September 1978, NJ 1979, 84) in which the term “possession” had been interpreted to cover any situation in which a person has certain objects “at his disposal.” However, the term “collecting” as commonly used not only entails disposition authority over things but also covers situations in which a person merely locates or organizes funds. For example, sophisticated terrorism cells may employ a person exclusively for the purpose of developing fund-raising strategies and organizing fund-raising events. Such a person would typically not have any control powers over the funds raised and, thus, could not be held liable for terrorism financing pursuant to Article 46. The assessors acknowledge that in certain cases, such a person could be held criminally liable under Article 140a of the Penal Code for “raising funds” for the benefit of a terrorist organization. However, the fact remains that the “collection” of funds with the intention to support a specific terrorist act is not criminalized under Dutch law and in particular Article 46 of the Penal Code in all cases.57

255. The “provision of funds” is not expressly referenced in Article 46 but the authorities explained that the provision of funds would necessarily require the financer to “acquire” or “possess” the funds first. The notions of “acquisition” and “possession,” interpreted by the Supreme Court to mean “having disposal over” such funds, thus, also warrant criminal liability for “the provision” of funds to support terrorist acts.

256. Article 140a of the Penal Code covers both “collection and provision” through the references to “lending monetary and other material support” and “raising funds.”

257. Under Special Recommendation II, the terrorist financing provisions shall apply to assets of every kind, whether tangible or intangible, moveable or immovable, however acquired, and legal documents or instruments in any form, including electronic or digital, evidencing title to or interest in such assets, including but not limited to bank credits, travelers cheques, bank cheques, money orders, shares, securities, bonds, drafts, and letters of credit, whether from a legitimate or illegitimate source.

258. Article 46 of the Penal Code stipulates that the term “object” shall include any good or property right. A detailed discussion of the scope of this is provided under criterion 1.2 above. The term is used in criminal as well as civil law and includes both legitimate and illicit funds.

259. Until 2007, the language of Article 46 of the Penal Code required that objects must be “manifestly intended” to commit the prepared crime. Following a legislative amendment in 2007, the language of the provision was changed to merely require that objects are “to be used” in the commission of the prepared offense. In a ruling of November 18, 2003 (Hoge Raad LJN: AJ0535), which interpreted the meaning of “manifestly intended” as used under the previous version of Article 46, the Supreme Court held that the provision would apply also to legitimate property, such as, for example, a car, if the property was “clearly intended to be used for a criminal purpose.” In a ruling of February 20, 2007 (Hoge Raad; LJN AZ0213), the court considered this requirement to be met “if the items, separately or jointly, according to their outward appearance, could be instrumental to the criminal purpose that the Defendant had in mind with the use of these items” and further that “the suspect’s intent can give normal objects the status of preparatory objects.” The court, thus, applied a subjective test to determine whether objects were to be used for the commission of the prepared act.

260. The provisions may, thus, also be applied in relation to legitimate funds that are or intended to be used for terrorism financing.

261. In comparison, the reference in Article 140a to “monetary and other material support” suggests that the term is to be interpreted rather broadly and that the provision can, thus, be applied to all types of assets as required under the FATF standard, including legitimate funds. This view was also confirmed in the explanatory memorandum that was discussed at parliament before adoption of Article 140a.

Financing of Terrorist Acts as defined in the TF Convention:

262. Pursuant to Article 2 TF Convention, countries are required to criminalize the financing of “terrorist acts,” whereby the term includes (1) conduct covered by the offenses set forth in the nine Conventions and Protocols listed in the Annex to the TF Convention and (2) any other act intended to cause death or serious bodily injury to a civilian, or to any other person not taking an active part in the hostilities in a situation of armed conflict, when the purpose of such act, by its nature or context, is to intimidate a population, or to compel a government or an international organization to do or to abstain from doing any act.

263. As discussed above, Article 46 could be used to prosecute the financing of specific terrorist acts, including in situations where the act that was financed or intended to be financed has not yet been attempted. A number of offenses set out in the nine Conventions and Protocols listed in the Annex to the TF Convention are sanctioned under Dutch law with imprisonment of eight years or more and these provisions, thus, fall within the scope of Article 46.

264. In some cases, however, the statutory sanctions available are less than eight years. As a result, the financing of such acts cannot be prosecuted under Article 46. Examples of such offenses are “threat to commit a violent attack upon the person or liberty or property of an internationally protected person” (required under the Diplomatic Agents Convention), and “passing on information which is known to be incorrect and may jeopardize the safety of an aircraft in flight” (required under the Civil Aviation Convention).

265. In other cases, the statutory sanctions available for the basic offense are less than eight years but can be increased to eight years or more if the offense was committed with a “terrorist intent.” Accordingly, Article 46 of the Penal Code would apply in such cases. The term “terrorist intent” is defined in Article 83a of the Penal Code as “the objective to cause serious fear in (part) of the population in a country and/or to unlawfully force a government or international organisation to do something, not to do something, or to tolerate certain actions and/or to seriously disrupt or destroy the fundamental political, constitutional, economic or social structures of a country or an international organisation.” Article 2 of the TF Convention, however, requires countries to criminalize the financing of offenses defined in the Conventions and Protocols listed in the Annex to the TF Convention regardless of whether or not they were committed with a terrorist intent. The additional intent requirement under Dutch law, thus, goes beyond the TF Convention and is not in compliance with the FATF standard.

266. Offenses within the scope of the generic conduct of “carrying out any act intended to cause death or serious bodily injury to a civilian or to any other person not taking an active part in the hostilities in a situation of armed conflict, when the purpose of such act, by its nature or context, is to intimidate a population, or to compel a Government or an international organization to do or to abstain from doing any act” are covered under Dutch law by way of reference to existing criminal offenses carried out with a terroristic intent as indicated above. In particular, intentionally destroying or damaging public property or facilities, including infrastructure, depriving another of his liberty or committing manslaughter with terrorist intent are punishable with more than four years and, thus, the financing of such acts would fall within Article 46 of the Penal Code.

267. In sum, under Dutch law, a person may be held criminally liable for the financing of many but not all “terrorist acts” as defined under the FATF standard.58

Financing of Individual Terrorists pursuant to Special Recommendation II:

268. As indicated above, Article 46 of the Penal Code is limited in scope to situations where “objects, substances, information carriers, premises or vehicles [are] to be used in the commission of [a terrorism] offense.” The “making available” of funds, other assets or economic resources to persons, entities and organizations designated under UNSCR 1267, 1373, EC Regulations 881/2002, 2580/2001 or under Sanctions Regulation issued by the Dutch authorities is criminalized under the Sanctions Act, including in situations where the financer has no intention to support a specific terrorist act. However, the Sanctions Act would only cover the “provisions” but not in all cases the “collection” of funds for such persons, entities and organizations. Furthermore, the Regulations do not criminalize the financing of terrorists other than those designated under the Regulations listed above or apply in situations where the funds are merely indented to be but have not yet been provided to a designated individual.

269. As discussed above, Article 46 applies only in relation to a specific underlying offense and, thus, criminalizes the financing of individual terrorists only if funds are provided with the intention to support a specific terrorist act. In the absence of such intent, the general provision of support to an individual terrorist, for example, in form of shelter, food or education does not fall within the scope of Article 46. This interpretation was also confirmed by representatives of the judiciary with whom the assessors met.

270. While representatives of the public prosecutor’s office argued that the financing of individual terrorists could be covered under Article 46 even in cases where funds are not provided to support a specific terrorist act, the assessors do not see how this interpretation could possibly be applied in practice. For example, if person A provides support to person B, who has committed a terrorist attack in the past but has no intention to do so in the future, A could not be prosecuted for a preparation offense as the terrorist act has been committed before A provided any material support. Furthermore, the sanctions applicable to the “preparatory” offense are based on the sanctions applicable to the underlying criminal offense. In the absence of a determination as to which offense a preparatory act relates to, it is unclear which sanctions would be available for the financing activity.

271. In sum, Article 46 and the provisions of the EC and Sanctions Regulations are not sufficient to criminalize in all cases the provision and collection of funds with the intention that they are to be used by an individual terrorist. Dutch law, thus, falls short of the requirements of the FATF standard on this point.59

Financing of Terrorist Organizations pursuant to Special Recommendation II:

272. Article 140a of the Penal Code as outlined above covers the material elements of “collection and provision” of material support and funds for the benefit of an organization whose aim it is to commit terrorist offenses.

273. As indicated above, Article 140a applies to situations where a person finances an organization whose aim it is to commit a terrorist offense. The provision does not require that the funds are provided or collected with the intention to finance a specific terrorist act, or that the funds have actually been used in the commission of such an offense. Rather, Article 140a applies in all cases where funds are collected or provided for the benefit of a terrorist organization.

274. The term “terrorist offense” as defined in Article 83a of the Penal Code does not cover all acts that are within the definition of “terrorist act” for purposes of Special Recommendation II. The financing of organizations aimed at carrying out a criminal act not covered by Article 140a are nevertheless criminalized under Dutch law based on Article 140 of the Penal Code, which criminalizes the financing of an organization aimed at the commission of any criminal offense.

275. As discussed above, the “provision” of funds to terrorist organizations designated under UNSCR 1267, 1373, EC Regulations 881/2002, and 2580/2001 or under Sanctions Regulation issued by the Dutch authorities is criminalized even if the support is not provided in relation to a specific terrorist act. However, the Regulations do not cover the “collection” of funds for such organizations and are not applicable in relation to terrorist organizations other than those designated under the Regulations listed above. Furthermore, the cited Regulations do not cover situations in which funds are merely intended to be but have not yet been provided to a designated organization or entity.

276. In sum, Articles 140a, 140, and the provisions of the EC and Sanctions Regulations are sufficient to criminalize the provision and collection of funds with the intention that they are to be used by a terrorist organization in line with the FATF standard.

Attempt and ancillary offenses pursuant to Article 2(5) TF Convention:

277. “Terrorism financing” is not set out as a separate criminal offense under Dutch law. As outlined above, in certain cases terrorism financing activities could be prosecuted under the offenses of “preparation of an offense” or “participation in a terrorist organization” under Articles 46 and 140a of the Penal Code.

278. In relation to terrorism financing activities pursuant to Article 140a, a wide range of ancillary offenses apply as discussed under Recommendation 1 above. In particular, attempt to commit, aiding and abetting, facilitating and counseling the commission of an act pursuant to Article 140a is all criminalized.

279. With respect to terrorism financing activities prosecuted as “preparation” offense, the ancillary offenses set out under Articles 47 and 48 of the Penal Code (procuring, assisting, solicitation or aiding and abetting of an offense) are applicable. This was also confirmed in a ruling by the Court of Appeals of October 9, 2006 (LJN: AZ0908). However, the offense of “attempt” is not applicable in relation to Article 46 as the former carries a stricter sentence than the latter and, should the case arise, the attempt to finance terrorism would, thus, be prosecuted as an attempt to commit the terrorist act.60

Predicate Offense for Money Laundering (c. II.2):

280. “Terrorism financing” is not a separate statutory offense under Dutch law and does not, therefore, per se qualify as a predicate offense for ML. However, as indicated in the discussions under Recommendations 1 and 2 above, any offense under Dutch law may constitute predicate offenses for ML. Terrorism financing activities that fall within the scope of Articles 46 or 140a of the Penal Code are, thus, predicate offenses for ML.

Jurisdiction for Terrorist Financing Offense (c. II.3):

281. Articles 46 and 140a of the Penal Code do not address extraterritorial jurisdiction. However, the authorities stated that both Articles 46 and 140a could be applied regardless of whether the financed act or organization is located in the Netherlands or abroad. The authorities’ claim was supported by a number of rulings by the Supreme Court (Hoge Raad NJ 2008, 559, Hoge Raad NJ 2003, 315; Hoge Raad NJ 2009, 346) in which the court held that Article 46 also applies to the preparation of acts that are to be committed abroad and that Article 140 also applies to the participation in criminal organizations located outside the Netherlands. To the extent that Dutch law criminalized TF, the relevant legal provisions, thus, also apply in situations where merely the financing activity is carried out in the Netherlands, but the financed act/individual/organization is located abroad.

282. In addition, Articles 4 and 5 in combination with Article 78 of the Penal Code provide for extraterritorial jurisdiction in relation to the preparation of a list of offenses if these offenses are to be carried out with a terrorist intent.

The Mental Element of the TF Offense (applying c. 2.2 in R.2):

283. “Terrorism financing” is not a separate statutory offense under Dutch law. As discussed in detail above, in many instances, terrorist financing activities could, however, be prosecuted as “preparation of a serious offense” or “participation in a terrorist organization” under Articles 46 and 140a of the Penal Code.

284. Article 46 Penal Code requires that the perpetrator acts intentionally in carrying out the preparatory act (e.g., the acquiring, possessing, etc.).

285. In addition, Article 46 applies only in respect to objects that are “to be used” in the commission of the prepared offense. As indicated above, this requirement is established based on the perpetrator’s subjective intent. The Supreme Court, in a ruling of July 7, 2009 (LJN: BH9025), held that the subjective intent requirement under Article 46 of the Penal Code is one of a “conditional intent” and, thus, that the mens rea requirement is met if the prosecution can establish that the defendant in carrying out his/her action deliberately accepted the change that the underlying crime is completed” (“dolus eventualis”).

286. Article 46 of the Penal Code does not, however, apply in situations where funds or other property are collected for or provided to an individual terrorist or a terrorist organization for purposes other than to commit a specific terrorist act.

287. Article 140a is wider in scope than Article 46 in that it merely requires that the financier provides support or raises funds for the benefit of a terrorist organization. The provision, thus, also applies in the absence of intent or knowledge of a specific terrorist act.

288. Dutch law does not provide for a statutory provision that would regulate the inference of the mental element from objective factual circumstances. However, the Supreme Court has confirmed application of this principle in a number of criminal cases (Hoge Raad September 27, 2005, NJ 2006, 473; Hoge Raad September 28, 2004, NJ 2007, 278) and the authorities confirmed that if the case was to arise, the principle would also apply to terrorism financing conduct prosecuted under Articles 46 or 140a of the Penal Code.

Liability of Legal Persons (applying c. 2.3 & c. 2.4 in R.2):

289. Article 140a of the Penal Code applies to “any person” who carries out an act that constitutes participation in a terrorist organization. Article 46 applies to any perpetrator without differentiating between natural and legal persons.

290. Article 51 of the Penal Code establishes that any criminal offense under Dutch law may be committed by natural and legal persons. The provision, thus, also applies to the offenses under Articles 46 and 140a. Legal persons may be subject to criminal proceedings and be sanctioned with the penalties and nonpunitive orders as and where appropriate.

291. Article 51 of the Dutch Penal Code expressly stipulates that holding legal persons criminally liable does not preclude the possibility of parallel criminal proceedings against the persons who ordered the commission of or controlled the prohibited act. The authorities clarified that it would in theory be possible to initiate criminal proceedings against a legal person and at the same time to conduct civil or administrative proceedings. As a general rule, however, criminal proceedings would be carried out first and civil and administrative proceedings would be initiated only later. In certain cases, administrative permits may be revoked concurrently with the filing of criminal charges.

292. Legal persons designated pursuant to UNSCR 1267 or 1373 are automatically prohibited under Dutch law. In all other cases, a legal ban can be solicited by way of civil proceedings and based on Article 220(1) of the Penal Code.

Sanctions for TF (applying c. 2.5 in R.2):

293. Criminal conduct under Article 46 Penal Code is sanctioned with half the maximum penalty for the prepared criminal offense itself or imprisonment of a term not exceeding fifteen years if the main offense is punishable with life imprisonment. Given that only offenses punishable with imprisonment for eight years or more fall within the scope of Article 46, the minimum sanction applicable to conduct prosecuted under this provision would be four years.

294. The sanctions for offenses within the scope of Article 46 range from imprisonment for up to eight years to imprisonment of up to thirty years. The financing of such offenses could, thus, be punished under Article 46 with imprisonment for four years to fifteen years and a fine, depending on the severity of the underlying offense.

295. This is slightly stricter than the sanctions available for terrorism financing offenses in other FATF countries (Germany–six months to ten years; Norway–up to ten years; and Finland–four months to eight years), but in line with the sanctions available for other serious offenses under Dutch law, such as, for example, counterfeiting of currency or extortion (imprisonment of up to nine years and a fine of up to €76,000) and trafficking in human beings or illicit arms trafficking (imprisonment of up to eight years and a fine of up to €76,000).

296. Article 140a of the Penal Code sets out sanctions of imprisonment for a term not exceeding 15 years or a fine of up to €76,000. Stricter sanctions may be applied for leaders, founders, and directors of such terrorist organizations. The sanctions applicable to Article 140a seem to be stricter than the sanctions applicable to other serious crimes under Dutch law. For example, participation in an organized criminal group is punishable with imprisonment of up to six years and a fine of up to €76,000.

297. In the absence of any convictions for TF, it could not be determined that the amount and types of sanctions applied in practice are effective and dissuasive.

Statistics (R.32):

298. It is not clear how many investigations for TF have been conducted in the Netherlands but from discussions with the authorities, it seems that only two cases have so far been investigated. There have not been any prosecutions or convictions for TF.

Analysis of effectiveness

299. TF has not been established as a separate statutory offense under Dutch law. Nevertheless, the existing criminal provisions as outlined above allow the authorities to prosecute terrorism financing activities in certain situations envisaged by the international standard.

300. In the absence of reliable and accurate statistics on the number of investigations carried out in relation to terrorism financing activities and given the lack of any prosecutions and convictions for such activities, however, it is difficult to assess whether the authorities effectively apply the offenses of “preparation of a serious offense” or “participation in a terrorist organization” in relation to terrorism financing conduct. From discussions with the authorities, it seems that there have been increased efforts by law enforcement authorities, including the FIU, to detect cases of TF and to investigate money flows in the context of terrorist investigations. However, those efforts have not yet resulted in any actual case. In discussions with law enforcement authorities, it was stated that this may be due to the fact that TF is not criminalized as a separate offense and, thus, is not treated as an autonomous offense by law enforcement and prosecutorial authorities.61

301. Subsequent to the on-site visit, the assessors received a letter by the Board of Procurators General, in which it was stated that “the Public Prosecution Service does not experience any obstructions in current criminal provisions to the investigation and prosecution of the financing of terrorism.” While the assessors appreciate the clarification received by the Board of Procurators General, given the consistent message received in discussions with different law enforcement authorities, concerns remain that the lack of a specific TF offense may have a negative impact on the effective investigation and prosecution of terrorism financing activities in the Netherlands.

2.2.2 Recommendations and Comments
  • Criminalize terrorism financing fully in line with the FATF standard as per Ministerial Commitment.

  • Amend the law to expressly criminalize in all circumstances the “collection” of funds to commit a terrorist act, including in cases where the financer is neither in possession of nor has acquired the collected funds.

  • Amend the Penal Code to ensure that the financing of all “terrorist acts” as defined under the FATF standard is criminalized.

  • Criminalize the financing of individual terrorists including in cases where funds are provided for purposes other than to support the commission of a specific terrorist act or where the financing relates to terrorists other than those designated through the UN, EC, and Ministerial Sanctions Regulations.

  • Criminalize the attempt to finance a specific terrorist act.

  • Put in place mechanisms to ensure that TF activities are investigated and prosecuted effectively in the Netherlands, for example by providing for TF as a separate criminal offense in line with the UN Convention for the Suppression of the Financing of Terrorism.

2.2.3 Compliance with Special Recommendation II
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2.3 Confiscation, freezing and seizing of proceeds of crime (R.3)

2.3.1 Description and Analysis
Legal Framework:

302. Articles 33a and 36e of the Penal Code allow for the confiscation of proceeds of and instrumentalities used or intended to be used in the commission of criminal offenses. Provisional measures are set out in Articles 94 and 94a of the Criminal Procedure Code.

303. Confiscation measures pursuant to Article 33a and 36e are both conviction based. While confiscation under Article 33a must take place in relation to specific types of property or assets, which may also include instrumentalities, confiscation measures under Article 36e are value based and can only be applied to proceeds but not instrumentalities of crime.

304. However, the scope of Article 36e goes beyond that of Article 33a as the latter only covers proceeds or instrumentalities of the crime for which the criminal conviction was obtained. In comparison, Article 36e provides for confiscation not only of proceeds obtained from the offense for which the conviction was obtained, but also of offenses that are likely to have been committed in the course of the sanctioned act.

305. Both confiscation measures under Articles 33a and 36e are discretionary and can be and in practice have been applied both in parallel and in series. While confiscation under Article 33a is possible only as part of the conviction for the underlying criminal conduct, an application for a confiscation under Article 36e may be submitted by the public prosecutor up to two years after a conviction for a criminal offense has been issued by the court of first instance.

306. A general instruction by the Public Prosecution Service urges all prosecutors to initiate confiscation proceedings under Article 36e whenever criminal proceeds are estimated to amount to a value of €500 or more.

Confiscation of Property related to ML, TF, or other predicate offenses including property of corresponding value (c. 3.1):

307. Article 33a of the Dutch Penal Code allows for the court to order the confiscation of property and instrumentalities used or intended for use in the commission of crime as part of a conviction for any offense. Article 33a clarifies the types of property and assets that may be subject to confiscation under Article 33a, namely:

  • Objects that are owned or possessed or can be used by the convicted person and that have been fully or largely obtained through the criminal offense for which the conviction was obtained.

  • Objects in relation to which the offense has been committed (the objects of the crime).

  • Objects which have been or were intended to aid or were manufactured for the commission of the offense or were used to obstruct the criminal investigation.

308. The term “objects” includes any items and property rights. “Property right” is defined in Article 6 of Book 3 of the Civil Code to cover all “rights that are, either individual or as part of another right, transferable or provide the one who is eligible [to it] with material benefits or are received in exchange for supplied or promised material remuneration.” The term “goods” is defined in Article 2 of Book 3 to extend to all “material objects susceptible for human control.”

309. In discussions with the authorities, it was stated that the term “objects” would include everything of value, including but not limited to money, real estate, and property. To support this view, the authorities provided a ruling by the Amsterdam Appeals Court (Hof Amsterdam July 3, 2009, LJN: BJ1646, zaak Holleeder) in which the court considered cash, bank accounts, apartment rights, real estate, and company premises to constitute “objects” that directly or indirectly stem from a criminal offense.

310. Based on the broad language of Articles 2 and 6 of Book 3 of the Civil Code and the cited case law, the assessors conclude that the term “objects” includes assets of any kind, whether corporeal or incorporeal, moveable or immoveable, tangible or intangible, and legal documents or instruments evidencing title to, or interest in such assets, and that Dutch law is, thus, in compliance with the FATF standard on this point.

311. Article 36e of the Dutch Penal Code sets out an additional and rather broad confiscation provision. Pursuant to the provision, the court, upon request by the Public Prosecutor’s Office and based on a criminal conviction for any criminal offense, may order the convicted person to pay “a sum of money […] in confiscation of illegally obtained profits and advantages [obtained] by means of or from the commission of the criminal offense.” In addition, Article 36e also allows for confiscation of the following:

  • Profits and advantages gained from “similar offenses” as the one for which the conviction was obtained or from “any offense which is punishable with €76,000” based on “sufficient evidence” that the convict has committed that offense.

  • Only in cases where the conviction was obtained for an offense punishable with up to €76,000 profits and advantages that based on the results of a financial investigation are “likely” to have been obtained through the commission of any other criminal offense.

312. The notion “similar offense” is not defined in the law but the authorities explained that the term would extend to any offense that fall within the same category as the offense for which the conviction was obtained. For example, if person A is convicted for drug trafficking and it can be shown based on “sufficient evidence” that he also committed other drug offenses such as, for example, cultivation, Article 36e may be used to also confiscate the proceeds or benefits of the cultivation offense even though no conviction has been obtained for this act. Asked how the “sufficient evidence” standard was applied in practice, the authorities stated that the threshold could be met by showing, for example, that the person has been indicted for the “similar offense.”

313. With respect to the second case, namely, where the conviction was obtained for an offense punishable with up to €76,000, the prosecutor on the basis of the findings of a financial investigation may establish that the defendant is “likely” to also have obtained profits and advantages through the commission of other criminal offenses. Upon establishing this assumption, the defendant has an opportunity to show that the funds in question have in fact been obtained through licit means. Otherwise, the funds may be confiscated based on Article 36e.

314. With respect to equivalent value of proceeds of crime, confiscation orders under Article 36e are issued on the estimated benefit and it, therefore, does not matter whether the order is satisfied through the payment of illicit or legitimate funds or assets. While Article 33a does not allow for equivalent value confiscation, Article 36e can be applied in parallel to Article 33a as indicated above.

315. It is up to the court to determine the amount of the profits or advantages. Article 36e (4) provides that in calculating the amount to be confiscated, costs saved are to be treated as part of the profit and legal claims are to be subtracted. The value of property and property rights are to be estimated according to their market value at the time of the court order. The court has discretion to set the confiscation order at less than the estimated profit or advantage and also makes frequent use of this discretionary power in practice. The authorities stated that in the case where a confiscation order is not fully satisfied during the execution stage, the order would be adjusted to reflect the actual outstanding amount.

316. In sum, Article 33a allows for the confiscation of laundered property as well as of proceeds from, instrumentalities used, and instrumentalities intended to be used in the commission of any criminal offense. In addition, Article 36e provides for the confiscation of property laundered and proceeds from any criminal offense, including their equivalent value.

317. As indicated in Recommendation 1 above, all FATF-designated categories of predicate offenses are criminalized under Dutch law and, thus, Articles 33a and 36e apply to all such offenses. However, the shortcomings identified with respect to the existing provisions of “preparation of a serious offense” and “participation in a terrorist organization” only allow for a limited application of Articles 33a and 36e in relation to terrorist financing offenses.

Confiscation of Property Derived from Proceeds of Crime (c. 3.1.1 applying c. 3.1):

318. Article 36e (2) expressly refers to profits or advantages that have been obtained “by means of or from proceeds of the criminal offense” and the authorities confirmed that this language is to be interpreted to also cover indirect proceeds. While the general confiscation provision under Article 33a does not cover indirect proceeds, Article 36e can be applied in parallel to Article 33a as indicated above.

319. Under Article 33a, property held by third parties may be confiscated if the prosecution can establish that the defendant is the actual owner of the property or that the third party owning the property is aware or should have suspected that the property was obtained through or was used in connection with or in the commission of the criminal offense, or that it could not be determined by whom the property in the possession of a third party is owned.

320. While value-based confiscation orders under Article 36e are only applicable against property held or owned by the defendant but not versus third parties, Article 33a meets the requirements of the FATF standard on this point.

Provisional Measures to Prevent Dealing in Property subject to Confiscation (c. 3.2):

321. Article 94 and 94a of the Criminal Procedure Code set out seizing measures with respect to property laundered, proceeds of, and instrumentalities used or intended for use in the commission of any criminal offense.

322. Under Article 94, any object which “may serve to uncover the truth or to demonstrate illegally obtained gains pursuant to Article 36e of the Criminal Code” can be seized. In addition, Article 94a allows for the seizing of objects in the course of an investigation for a crime that is punishable with a fine of up to €76,000 and to safeguard the right of recourse with respect to “a fine to be imposed” or “the obligation to pay a sum of money to the state for the confiscation of illegally obtained benefits.” While Article 94, thus, allows for seizure of both instrumentalities and proceeds, the application of Article 94a is limited in scope to proceeds of crime.

323. Seizing measures under Article 94 may be carried out based on prosecutorial consent. In comparison, seizing measures under Article 94a require a judicial order or, in cases where a criminal financial investigation is carried out based on approval by an examining magistrate, a decision by the public prosecutor. Seizing orders are not subject to any time limitations. The authorities explained that the reference to confiscation under Article 36e in both Article 94 and 94a allows for proceeds of crime to be initially seized under Article 94 and subsequent to the obtaining of judicial order to be converted into a seizing measure pursuant to Article 94a. In urgent cases, law enforcement authorities are, thus, in a position to seize proceeds of crime even in the absence of a court order.

324. Legitimate assets equivalent in value to proceeds of crime or property laundered may be seized pursuant to Article 94a. Under Article 94a, property held by a third party may be seized if it can be established that the property is owned by the defendant. In all other cases, property owned by third parties may be seized only if it can be shown that the property constitutes proceeds of crime and may be confiscated under Article 33a or 36e of the Penal Code that the objects are owned by the third party to impede the sale thereof and that the third party knew or should have suspected that the objects were proceeds of crime. Instrumentalities held by third parties are also subject to seizure under Article 94 as the provision applies with respect to any evidence, regardless of where it is located.

325. In summary, Dutch law allows for the seizing of all objects that are or may become subject to confiscation under Articles 33a and 36e.

Ex Parte Application for Provisional Measures (c. 3.3):

326. The authorities indicated that seizing measures under both Article 94 and 94a of the Penal Procedure Code could and have in the past been issued ex-parte and without prior notice. Notification to the person by whom property is owned or held is, however, provided after the seizure has been applied.

Identification and Tracing of Property subject to Confiscation (c. 3.4):

327. For a detailed discussion of law enforcement authority’s tracing and identification powers, including the powers to access confidential information, see the discussion of Recommendation 28 of this report. In summary, law enforcement authorities have a wide range of mechanisms available to identify and trace assets that are or may become subject to confiscation. Information and documents held by FIs and DNFBPs may be accessed based on a prosecutorial decision. Information and documents held by lawyers and other legal professionals may, however, only be accessed in very limited circumstances, such as, for example, if the lawyer or legal professional himself is a suspect in a criminal investigation. Further information on this point is provided under Recommendation 28 below.

Protection of Bona Fide Third Parties (c. 3.5):

328. Bona fide third parties are protected under Dutch law through Articles 33a (2) and (3) of the Criminal Procedure Code, which allows for the confiscation of assets owned by a third party only if it can be established that the third party had actual knowledge or should have known that property represented proceeds or instrumentalities of crime.

329. Any affected person may challenge seizing measures at the district court level. From there, recourse to the Court of Appeals is possible. Bona fide third parties may also participate in a criminal trial as a victim of the crime.

Power to Void Actions (c. 3.6):

330. Article 3:40 of the BW stipulates that any acts in breach of public order are null and void. Contracts that were entered into in order to prejudice the recovery of confiscated property would, thus, not be valid under Dutch law. In addition, under Article 94d (2) of the Criminal Procedure Code the public prosecutor may declare null and void any fraudulent conveyances, including legal acts, which an accused or convicted person has entered into or carried out within one year prior to the commencement of a criminal investigation of that person.

Additional Elements (Rec 3)—Provision for a) Confiscation of assets from organizations principally criminal in nature; b) Civil forfeiture; and, c) Confiscation of Property which Reverses Burden of Proof (c. 3.7):

331. Assets from organizations principally criminal in nature may be confiscated under Article 36e of the Criminal Procedure Code, as the provision allows for confiscation of assets not only in relation to the crime for which the conviction was obtained but also in relation to assets obtained from similar crimes. In cases where the conviction was obtained for a crime punishable with up to €76,000, assets of a criminal organization may also be confiscated after it has been determined based on a financial investigation that such assets are “likely” to have been obtained through the commission of any other criminal offense.

332. Confiscation without a prior criminal conviction is generally not possible in the Netherlands. As noted in the analysis section above, in certain cases proceeds can, however, be confiscated even if they do not result from the offense for which the conviction was obtained.

333. At the time of the assessment, Dutch law did not yet provide for a reversed burden of proof in confiscation proceedings. However, the authorities advised that a new draft law which would introduce such a reversed burden had been submitted to and was being discussed by parliament.

Statistics (R.32):

334. Statistics provided by the authorities as indicated in the table “Amounts confiscated in criminal cases between 2006 and 2009” and “Types and Amounts of assets seized in criminal cases 2008 and in 2009” (see both tables below) show that between 2006 and 2009, the Dutch authorities have confiscated a total of €104 million (€93 on the basis of Article 36e and €11 on the basis of Article 33a) and seized €618 million in criminal cases.

Amounts confiscated in criminal cases between 2006 and 2009

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Types and Amounts of assets seized in criminal cases 2008 and in 2009

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335. The table below provides statistics on the number of Article 33a confiscation orders issued in relation to pure or mixed money laundering offenses and the relevant legal basis for the preceding seizure.

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336. The table below shows statistics on the number of Article 36e confiscation orders issued in relation to pure or mixed money laundering offenses and the number of cases in which a confiscation order was supported by a seizing measure either under Article 94 or 94a. According to these statistics, the Netherlands between 2005 and 2010 have confiscated approximately €93 million based on Article 36e in ML cases. The authorities indicated that the orders are not yet final and may be subject to appeal.

Judicial decision special confiscation 36e Penal Code Year of judicial decision

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337. The authorities do not maintain accurate statistics on the total number of ML cases in which seizing measures were applied, or the amounts seized in each case. In addition, the statistics provided under Recommendation 1 do not indicate how many investigations for ML were conducted in the Netherlands. In the absence of more comprehensive statistics, assessors are not in a position to come to a final conclusion on whether the seizing powers are applied effectively in ML cases.

338. With respect to confiscation, it seems that between 2005 and 2010, confiscation orders either based on Article 33a or Article 36e have been issued in about 1,172 pure or mixed ML cases, which equals about 60 percent of all cases in which a conviction was obtained. This seems to be in line with the number of confiscations in the context of other offenses.

339. Between 2006 and 2009, seizing measures were applied in approximately 3,000 cases and confiscation measures in approximately 5,000 cases related to drug offenses. Relying on the data provided under Recommendation 1 for the years 2004–2006 and assuming that the number of drug-related investigations has not gone down significantly, it can be estimated that in about 50 percent of all drug-related cases, confiscation measures were applied.

340. The total amount of assets confiscated is €104 million. The amounts actually realized between 2006 and 2009 are unclear.

Analysis of effectiveness

341. In the absence of better statistics on the number of ML and TF investigations conducted in the Netherlands and the number of cases in which assets were seized and the amounts seized in each case; and the amounts eventually realized in each case, it is not possible for the assessors to come to a final conclusion as to whether the seizing and confiscation measures are effectively applied with respect to ML, TF, and predicate offenses.

342. A preliminary analysis by IMF staff of freezing, seizing, and confiscation data in 15 countries assessed under the FATF 2004 Methodology for which data are available suggests that the Netherlands is slightly less effective at obtaining orders to get assets confiscated than other countries (€104 or $139 million in the Netherlands vs. $177 million comparative groups average).62

Comparative Information for Assets frozen, restrained, seized, forfeited or confiscated taken from 15 Mutual Evaluation or Detailed Assessment Reports for countries evaluated as LC or higher under the FATF 2004 Methodology

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The countries are: Australia, Canada, Denmark, Ireland, Italy, Japan, Mexico, Norway, Portugal, Russia, Singapore, Spain, Sweden, Thailand, the United Kingdom, and the United States.

343. With respect to confiscation, anecdotal evidence suggests that there remains a disconnect between the amount of assets requested by the prosecution to be confiscated, the amount of assets confiscated by the courts, and the amount of assets eventually recovered through execution of the confiscation orders. In the absence of any comprehensive and accurate statistics on this point, however, it is not possible for the assessors to verify this information.

344. Efforts are currently underway to further increase law enforcement authorities’ ability and skills to apply the seizing and confiscation provisions and to further recognize their usefulness in fighting ML, by, for example, putting in place training and outreach programs. One law enforcement authority also established a pilot program in some regions of the Netherlands (outside the main metropolitan areas as Amsterdam, Rotterdam, and The Hague), which resulted in a significant increase in the amount of assets and funds seized and eventually confiscated.

345. Overall, the assessors are of the view that the Netherlands have a strong and comprehensive legal confiscation framework in place. The application of the framework seems to be effective to a certain degree but could be further improved.

2.3.2 Recommendations and Comments
  • Ensure that access to appropriate information and documents held by lawyers and other legal professionals is available in all cases.

  • To determine whether the confiscation framework is applied effectively better statistics on (1) the number of ML and TF investigations conducted in the Netherlands and the number of cases in which assets were seized and the amounts seized in each case; (2) the total number of assets confiscated in ML and TF cases, including on the basis of Article 33a; and (3) the amounts requested to be seized and eventually realized in each case should be maintained.

2.3.3 Compliance with Recommendation 3
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2.4 Freezing of funds used for terrorist financing (SR.III)

2.4.1 Description and Analysis
Legal Framework:

346. The Netherlands freeze funds and assets used to finance terrorism on the basis of EC regulations and complementary domestic legislation. UN Security Council Resolution 1267 (1999), 1390 (2002), and 1455 (2003) are implemented by EC Regulation No. 881/2002 of May 27, 2001 and most parts of UN Security Council Resolution 1373 is implemented by EC Regulation No. 2580/2001 of December 27, 2001. Whereas the EC Regulation applies to any terrorist individuals or organizations, the latter applies only to such individuals and organizations that are linked or related to non-EU countries.

347. Both EC Regulations are directly applicable in the Netherlands and funds and assets may, thus, be frozen directly and immediately based on the Regulations’ provisions. However, infringements of the relevant provisions need to be penalized via national Dutch legislation.

348. The Sanctions Act 1977 serves as a legal basis for the penalization of infringements of the EC Regulations and for the Dutch authorities to freeze funds and assets of terrorist and terrorist organizations under UNSCR 1373. Article 2 of the Sanctions Act empowers the Minister of Foreign Affairs in concurrence with the Minister of Finance and the Minister of Justice to issue “orders and regulations to comply with international resolutions related to the fight of terrorism” (referred to in this report as “Sanctions Regulations”). Any person or entity located in the Netherlands could, thus, be subject to Sanctions Regulations and the freezing obligation stipulated therein could be applied to any assets and property within the scope of the two Security Council Regulations. The authorities provided the assessors with a translated copy of a number of Sanctions Regulations, which confirmed that Sanctions Regulations issued by the Ministry of Foreign Affairs are in fact applicable to all persons and entities located in the Netherlands and freeze both funds and other property held or controlled by designated terrorists or terrorist organizations.

349. As indicated above, persons, groups, and entities based or reside within the European Union, including the Netherlands (referred to herein as EU residents) do not fall within the scope of Council Regulation 2580/2001. Such persons are, however, covered under EU Council Common Positions No. 2001/931/CFSP and the Netherlands have implemented this Common Position through Sanctions Regulation Terrorism 2002-II. A cross reference to the Common Position ensures that any changes to the list of entities and persons attached to it are automatically integrated into Dutch law.

350. In addition, the Sanctions Act can be utilized to freeze the assets and funds of persons and entities that have not yet been designated by the EC but which the Dutch authorities consider to fall within the scope of UN Security Council Resolution 1373. The authorities stated that the funds and assets of twenty-one individuals and legal entities have so far been frozen based on the Sanctions Act, eleven of which have only been listed on the national list. Sanctions Regulations were issued with respect to six organizations of which five are legal entities and their assets were frozen on the basis of such Regulations. One of these cases was triggered by a request of a foreign jurisdiction to freeze assets pursuant to UN Security Council Resolution 1373. All other cases were initiated by the Dutch authorities based on sufficient indications. It was further stated that in the majority of these cases, the Dutch authorities later successfully requested the designation of those individuals and entities under EC Regulation 2580/2001.

Freezing Assets under S/Res/1267 (c.III.1):

351. The Netherlands implements the financing of terrorism aspects of UNSCR 1267 and subsequent resolutions through EC Regulation 881/2002, which is directly applicable in the Netherlands and, thus, does not require any implementing domestic legislation. However, infringements of the relevant provisions need to be penalized via national legislation; in particular Sanction Regulations on Osama bin Laden, Al-Qaida, and the Taliban 2002. Under the Regulation, all funds and economic resources belonging to or owned or held by a natural or legal person, group, or entity designated by the EU Sanctions Committee and listed in the annex to the regulation are automatically frozen. The list under EC Regulation 881/2002 contains both EU-externals and EU-internals. Funds are frozen directly and immediately upon entry into force of the amendments to the Council Regulation.

352. The freezing mechanism under EC Regulation 881/2002 applies to a broad notion of financial assets and economic resources, however acquired, that belong to or are owned, controlled, or held by designated persons or entities. The definition also covers funds derived from property owned or controlled by designated persons such as interest, dividends, or other income on or value accruing from or generated by such assets.

353. EC Regulation 881/2002 does not expressly cover financial assets and economic resources that are jointly owned or held property but only applies to funds and economic resources belonging to, or owned or held by, a designated person. However, EC Regulation 1286/2009, which amended EC Regulation 881/2002, later expanded the scope of the freezing measures to any “funds and economic resources belonging to, owned, held or controlled by a natural or legal person, entity, body or group that is listed in Annex 1 to the Regulation,” thus, allowing for a broad and unrestrictive application of the freezing measures also to funds and economic assets owned or controlled jointly by a designated and a nondesignated person, entity, or organization.

354. However, EC Regulation 881/2002 does not expressly cover “indirect” ownership or control over funds or economic assets and such reference is also not provided for in EC Regulation 1286/2009 or the EU Best Practices.

355. Situations in which a person is acting on behalf of or based on instructions from a designated person, entity, or organization and, thus, allows the latter to indirectly control funds or economic resources would, thus, not be covered by the Regulation. This falls short of the international standard, which specifically requires the freezing measures under UNSCR 1267 to apply to “funds or other assets owned or controlled directly or indirectly” by a designated person, entity, or organization.

356. Due to procedural and translation requirements, the European Commission takes a certain amount of time to update Regulation 881/2002 after the UN Security Council Committee lists a person, entity, or organization. In previous years, this delay has ranged from ten days to two months. To ensure that freezing measures under UNSCR 1267 are, nevertheless, applied without delay in the Netherlands, the Dutch authorities through Sanctions Regulations may also apply temporary freezing measures with respect to funds and assets of individuals and entities that have already been designated under UNSCR 1267 but not yet been added on the list under EC Regulation 881/2002.

357. While the assessors acknowledge that the Dutch legal framework allows for the possibility to freeze without delay and, thus, to circumnavigate the time delay on European level, it is questionable how effectively the authorities have made use of this possibility in the past as it was indicated that in only one case Sanctions Regulations were issued to overcome the indicated time delay.

Freezing Assets under S/Res/1373 (c. III.2):

358. The Netherlands implement the financing of terrorism aspects of UNSCR 1373 through EC Regulation 2580/2001 with respect to individuals and entities linked to non-EU Member States (referred to herein as non-EU residents) and various Sanctions Regulations issued based on Section 2 of the Sanctions Act with respect to EU residents.

359. Under the EC Regulation, all funds, financial assets and economic resources, however acquired, belonging to, directly or indirectly owned, controlled or held by a natural or legal person designated by the EU Sanctions Committee and listed in the annex to the Regulation are automatically frozen. The measure also applies to funds, financial assets and economic resources owned or held jointly by a listed person or entity and a nondesignated one. Funds are frozen directly and immediately upon entry into force of the amendments to the Council Regulation. Infringements of the relevant provisions are penalized via national legislation, in particular, the Sanctions Regulation on Terrorism 2002.

360. With respect to EU residents, including Dutch residents, the Netherlands can apply freezing measures through Sanctions Regulations based on Article 2 of the Sanctions Act as outlined above. Article 2 of the Sanctions Act allows for such Regulations to implement international resolutions for fighting terrorism and, thus is applicable to the same types of funds and assets as UN Security Council Resolution 1373. As indicated above, Sanctions Regulations issued by the Ministry of Foreign Affairs are applicable to both funds and other property held or controlled by designated terrorists or terrorist organizations.

361. To implement the provisions of the Sanctions Act, the Ministry of Foreign Affairs, the Ministry of Finance, the Ministry of Justice (the National Coordinator of Counter Terrorism), the Intelligence Service, and the Public Prosecutor meet at least twice a year to discuss the status of existing freezing mechanisms and to review the appropriateness of possible new measures under the Sanctions Act, whereby evidence will be reviewed and advise be formulated for the Minister of Foreign Affairs whether a new freezing measure should be applied. Meetings can also be called on an ad hoc basis if needed. In 2009, four meetings were held.

362. A decision as to whether or not a freezing measure should be applied will be taken by the Minister of Foreign Affairs on the basis of “sufficient indications” of terrorism or terrorism financing activities for a court to uphold the decision in case of a challenge. The authorities indicated that “sufficient indications” would, thus, be more than mere suspicion. One important weighing factor in this regard is the impact of such measures on possible criminal investigations or prosecutions.

363. Once the decision to apply a new measure has been made, the agencies forming part of the above-mentioned protocol informs the financial institutions of the freezing obligation. After that, the designation decision is published in the Dutch official journal and thus enters into force. The authorities stated that it would take about two weeks from the time a proposal for a decision is discussed between the agencies until publication of a decision by the Ministry of Foreign Affairs in the official journal. The designated individual or entity will only be informed of the measure after publication in the official journal. No prior notice is given.

364. Once a freezing measure based on the Sanctions Act has been taken, all financial institutions are instructed by the explanatory memorandum to the Regulation on Supervision Pursuant to the Sanctions Act to “ensure a timely check of its records” to prevent a dissipation of the financial assets prior to the freeze, whereby the institution may itself decide what exactly continues timely action given the services and products it offers. Representatives of the DNB further stated that, in the past, it had taken financial institutions about two business days from the day of publication of a Sanction Regulation to report any freezing measures taken on the basis thereof.

365. For persons and entities other than FIs and TCSPs, for example, real estate agents and lawyers, there is no express obligation to check client databases for any matches with the Sanctions Regulations and no guidance has been issued with respect to the timeframe within which assets and funds must be frozen. However, Article 4 of Regulation 2580/2001 requires bodies and persons other than banks and financial institutions to provide immediately any information which would facilitate compliance with the Regulation (such as accounts and amounts frozen in accordance with Article 2 and transactions executed pursuant to Articles 5 and 6) to the competent authorities of the Member States listed in the Annex and to cooperate with the competent authorities listed in the Annex in verifying this information.

Freezing Actions Taken by Other Countries (c. III.3):

366. For persons and entities designated through the EU regulations, the freezing mechanisms set out in the EU Regulations as explained above apply in the Netherlands. The authorities stated that EU Member States would generally opt to propose a specific person or entity for EU-wide designation through the EU regulations rather than to request a freeze based on a Sanction Regulation.

367. However, where a foreign freezing measure relates to EU residents and, therefore, does not fall within the scope of EC Regulation 2580/2001, or where a request relates to a non-EU resident that has not yet been integrated in the lists under the EC Regulations, the Netherlands may apply freezing measures through Sanctions Regulations issued on the basis of the Sanctions Act. The process outlined above is used to examine a foreign request and, where appropriate, give effect to it by freezing any funds or assets located in the Netherlands. The authorities stated that in one instance, a Sanctions Regulation has been issued based on a foreign request.

Extension of c. III.1-III.3 to funds or assets controlled by designated persons (c. III.4):

368. As indicated above, the freezing mechanisms under the EU Regulations apply to a broad notion of financial assets and economic resources, however acquired, that belong to or are directly owned, controlled, or held by designated persons or entities. The definition also covers funds derived from property owned or controlled by a designated person such as interest, dividends or other income on or value accruing from or generated by assets. This understanding is also confirmed by the EU Best Practices Paper relating to Restrictive Measures, which provides that “the freeze covers all funds and economic resources belonging to or owned by designated persons and entities, and also those held or controlled” by such persons (paragraph 28 EU Best Practices Paper).

369. While EC Regulations 1276/2001 expressly applies to all funds, financial assets and economic resources, however acquired, belonging to, directly or indirectly owned, controlled or held by a natural or legal person designated by the EU Sanctions Committee, EC Regulation 881/2001 does not expressly cover “indirect” ownership or control over funds or economic assets and such reference is also not provided for in EC Regulation 1286/2009 or the EU Best Practices. Situations in which a person is acting on behalf of or based on instructions from a designated person, entity or organization and thus allows the latter to indirectly control funds or economic resources would thus not be covered by the Regulation.

370. With respect to EU residents, Sanctions Regulations may be issued to implement international resolutions related to the furthering of the international rule of law, or to the fighting of terrorism, and could thus also be applied to the same type of funds and assets as UNSCR 1267 and 1373. Past freezing measures were issued with respect to both funds and other property held or controlled by designated terrorists or terrorist organizations.

371. The authorities stated that so far freezing measures resulted in the freezing of funds and also of insurance, pension claims, and real estate.

Communication to the Financial Sector (c. III.5):

372. Any Dutch person, whether natural or legal, including financial institutions and DNFBPs are required to comply directly with EC Regulations 881/2002 and 2580/2001, both of which are published in the Official Journal of the European Union. Infringements of the EC Regulations are penalized based on the Sanctions Act 1977. The authorities further stated that financial institutions would operate sophisticated IT systems which automatically update the relevant lists of designated entities and persons under the EC Regulations.

373. Moreover, as a service to financial institutions and others applying sanctions, the European Commission after amending the Annex to the relevant the EU Regulation enters the details of those listed in an electronic consolidated list of persons and entities subject to financial sanctions. The consolidated list includes all individuals, groups and entities subject to asset freezing in accordance with legislation based on the EC Treaty, so its contents goes beyond the lists made pursuant to Council Regulations (EC) No 2580/2001 and 881/2002, covering also persons and entities subject to other targeted sanctions decided on in the framework of the EU Council Common Positions. (It does not include the targets of asset freezing decided by an EU Member State.) The electronic consolidated list can be downloaded from the Commission website.

374. Sanctions Regulations based on the Sanctions Act are issued in the Dutch official journal. In addition, the Dutch Central Bank and the Authority for Financial Markets send circulars to all supervised financial institutions, TCSPs, and casinos to inform them of newly imposed freezing measures under the Sanctions Act. This circular is sent out once the decision to apply a new measure has been made and before the designation decision has been published in the Dutch official journal.

375. Pursuant to Section 10 of the Sanctions Act, financial institutions and TCSPs are supervised by the DNB and AFM for compliance with both the EC Regulations and the Sanctions Regulations. For such institutions and businesses, the Regulation on Supervision Pursuant to the Sanctions Act sets out a direct legal requirement to check any client, beneficiary of a transaction product, ultimate beneficiary of financial assets, correspondent banks, and any other party to a financial product or transaction against the lists under the EC and Sanctions Regulations. Section 3 of the Regulation further requires financial institutions to report any hits with any of these lists and furnish any relevant data in relation to the case to the AFM or the DNB, as the case may be.

376. Advocates are obliged on the basis of Article 7 of the By-Law on the Administration and Financial Integrity to satisfy the identity of the client and to check that there are no reasonable grounds to believe that the assignment may serve the preparation or support of or cover for illicit activities. Similar obligations exist for notaries based on the By-Law on Professional and Ethical Rules, which obliges notaries to verify the legal status of goods subject to compulsory registration. As part of this obligation, advocates and notaries have to check the names of customers against the lists set out under the EC Regulations and the Sanctions Regulations. Casinos fall under the Sanctions Act and the Regulation on Supervision Pursuant to the Sanctions Act through their money exchange permit and are supervised for this purpose by the DNB.

377. For real estate agents, there is no express obligation to check client databases for any matches with the Sanctions Regulations.

378. Overall, FIs the assessors met with were well aware of their obligations under both the EC and Sanctions Regulations and had received circulars with listed entities from the DNB. In practice, many institutions utilize external service providers to ensure that the client database is regularly checked against the lists under the EC Regulations. It is unclear whether such service providers also integrate Dutch Sanctions Regulations into their databases.

Guidance to Financial Institutions (c. III.6):

379. The Dutch Central Bank provides general guidance on its homepage for persons who hold funds or economic resources that are subject to an asset freeze (http://www.dnb.nl/openboek/extern/id/en/all/41-161263.html). The guidance sets out the obligations under the various legal instruments as outlined above and advises financial institutions and TCSPs on how to report a ‘hit’ to the Dutch Central Bank. The guidance also makes clear that queries concerning asset freezing and questions about the identity of designated persons and entities can be addressed to the central bank. The authorities stated that questions directed to DNB would generally relate to the procedures applicable to identify possible terrorists, i.e., how to verify that the person in their client files is the same as the person on one of the lists.

380. In addition, the EU has issued a Best Practices Paper for the effective implementation of restrictive measures, which is available through the DNB homepage.

381. The explanatory memorandum to the Regulation on Supervision Pursuant to the Sanctions Act also sets out in great detail the requirements by financial institutions and TCSPs under the EC Regulations and the Sanctions Regulations. Furthermore, the Ministry of Finance and DNB participate frequently in the sanctions working group of the bankers association, which meets about twice a year. To address any practical challenges in the implementation of freezing measures, the Ministry of Finance works closely together with the financial supervisors, the intelligence service and the bankers association on the basis of the Interagency Protocol outlined above. Both the Ministry of Finance and the DNB have designated points of contact for the private sector.

382. Based on meetings with private sector participants, however, the assessors gained the impression that there is still a certain level of uncertainty by persons or entities other than FIs or TCSPs as to what the obligations under the Regulations entail. In particular, no guidance specifically relevant to lawyers, accountants, and notaries has been issued.

De-Listing Requests and Unfreezing Funds of De-Listed Persons (c. III.7):

383. The EC Regulations do not grant national governments autonomy in deciding to de-list persons or entities or to unfreeze funds and assets as a whole. As such, any freezing (whether pursuant to EC Regulation 881/2002 or 2580/2001) remains in effect until otherwise decided by the EU. Common Position 2001/931/CFSP of the European Union implements S/RES 1373(2001) and provides for a regular (at least biannual) review of the sanctions list which it has established. Moreover, listed individuals and entities are informed about the listing, its reasons, and legal consequences. They are granted due process rights, including the possibility to present material which they consider sufficient for a de-listing. If the EU maintains the person or entity on its list, the latter can lodge an appeal before the General Court of Justice of the EU in order to contest the listing decision. Requests by the Dutch Government for de-listing have to be directed through the Ministry of Foreign Affairs and its representative in the relevant UN or EU body to the UN Sanctions Committee or the European Commission, as the case may be.

384. De-listing from the EC Regulations may only be pursued before the EU courts. In the case of refusal of a request of de-listing, the applicant can decide to have the matter presented to the European Court of First Instance and in second instance to the European Court of Justice. If the challenge is to the legality of a designation under the EC Regulations, the European Court of Justice of the EU can hear the complaint if made within two months after the designation.

385. Designations pursuant to the Sanctions Act can be challenged under the General Administrative Law Act (Awb). After a decision to designate has been issued in the Dutch Official Journal, the person affected by the decision is being notified of the freezing measures and is provided with information on how to initiate a de-listing request.

386. As a first step, the designated person can file an objection to the Minister of Foreign Affairs’ decision to freeze funds and assets. In a hearing, the person then has the possibility to explain his/her objection. The Minister of Foreign Affairs decides on the objection within six weeks or within twelve weeks in some circumstances. If no decision has been made within this timeframe or the decision was to deny the objection, the designated persons can contest the decision (or the absence thereof) before an administrative court in a hearing before one to three judges. The administrative court will decide on the appeal within four or in some circumstances within 12 weeks. Based on the administrative court decision, the designated person has the possibility to lodge an appeal with the Administrative Jurisdiction Division of the Council of State (Afdeling bestuursrechtspraak Raad van State). If at any step of this process the Minister’s decision is lifted, the frozen funds or other assets will immediately be unfrozen. The Minister of Foreign Affairs will immediately thereafter inform the de-listed person or entity as well as the DNB or AFM of the court’s decision to lift the freezing measure. The DNB or AFM will in turn inform the financial institutions and TCSPs. The authorities stated that so far, freezing measures under the Sanctions Regulations have been lifted with regard to nine individuals, seven of which were on an EU list.

Unfreezing Procedures of Funds of Persons Inadvertently Affected by Freezing Mechanism (c. III.8):

387. Due to the legal framework of freezing funds and assets through directly applicable EC Council Regulations, in a legal sense funds of persons that are not designated but bear, e.g., a name identical to, very similar to, or just resembling the name of a designated person, are not frozen in the Netherlands.

388. However, financial institutions may have blocked funds of such a person up until its identity is verified. In those cases, the person concerned as well as the financial institution may address the Ministry of Finance with a request to review the case. In cases where a reported freezing action is determined by the Ministry of Finance to not be an ‘exact hit,’ the DNB or AFM will immediately communicate this finding to the relevant financial institution, which in turn will immediately ‘unfreeze’ the funds/assets.

389. Individuals and entities inadvertently affected by a freezing mechanism under the Sanctions Act may file an objection as previously described under III.7.

Access to frozen funds for expenses and other purposes (c. III.9):

390. UNSCR 1267, as amended by UNSCR 1452, is implemented in the EU through a new Article 2a in EC Regulation 881/2002, which is directly applicable in the Netherlands. This provision authorizes access to funds that are frozen for basic expenses, certain fees, or for extraordinary expenses. The Ministry of Finance is the designated competent authority to receive requests from affected persons for exemptions under the Regulations. Any request received is also notified to the Al-Qaida or Taliban Sanctions Committee which, within, 48 hours may object to the exemption. The competent authority must also promptly notify the person that made the request, and any other person, body or entity known to be directly concerned, in writing, whether the request has been granted or not. Before a request may be granted, the competent authority has to inform other Member States as well.

391. A procedure is also envisioned in Articles 5 and 6 of EC Regulation 2580/2001 which relates to designations emanating from UNSCR 1373. Under Article 5, the competent authority may grant a specific authorization to unfreeze funds for essential human needs under such conditions as it deems appropriate. Article 6 establishes a broader power for competent authorities of EU Member States to grant specific authorizations, to protect the interests of the community and the interest of its citizens and residents and after consultations with the other Member States, the Council, and the Commission of the EU.

392. Funds frozen under the Sanctions Act may be accessed based on an exemption granted through a unilateral decision of the Minister of Finance based on Article 9 of the Sanctions Act. The Ministry can use its competence both upon request of an interested party (the designated person or entity, but also third parties with a directly related interest) and by virtue of its own office. These procedures are in accordance with S/RES/1452(2002). The authorities explained that a petition for exemption would be submitted to the Ministry of Finance, explaining why the exemption is requested and providing proof of the actual existence of the relevant claims or expenses. The authorities stated that about 20–30 exemptions have been granted in the past, whereby with respect to each freezing measure multiple exemptions may be granted.

393. Decisions by the Minister of Finance with respect to exemptions are subject to legal review by the administrative courts as outlined under criterion 7 above.

Review of Freezing Decisions (c. III.10):

394. As mentioned above, the freezing mechanisms in the relevant EC Regulations can be challenged at the European Court of Justice by any natural or legal person that is directly and individually affected under the general principle established by Article 230 of the Treaty on the functioning of the EU.

395. A number of appeals against freezing orders based on Council Regulations (EC) No. 2580/2001 and 881/2002 are pending in the European Court of Justice. The appeals focus on claims that the human rights of the designated individuals, groups, and entities were not respected. As regards Council Regulation (EC) No. 2580/2001, the Court of First Instance held in three judgments in 2006 and 2007 (T-228/02, People’s Mujahedin of Iran (OMPI), T-47/03, Sison, T-327/03, Stichting Al Aqsa) that the Council had to provide a statement of reasons to the designated individuals, groups, and entities concerned, so as to allow them to make their views known on it and to allow the court to conduct a review. These judgments are final. The Court of First Instance upheld this line of argument on April 3, 2008 in the cases T-229/02 and T-253/04, Kurdistan Workers’ Party (PKK) and Kongra-Gel, which concern Council decisions made in 2002 and 2004.

396. On September 3, 2008, the European Court of Justice issued a judgment in the Kadi and Al Barakaat International Foundation cases (C-402/05 P and C-415/05 P) that annulled the 2002 EU Council regulation that implements UNSCR 1267 and successor resolutions insofar as the regulation concerned the appellants. However, the Court, in essence, left the EU regulation in place for up to three months to permit the European Commission to remedy the violations found by the Court. The Court found violations of fundamental human rights, specifically, the right of defense and the right to an effective legal remedy. In December 2009, the EU issued EC Council Regulation 1286/2009 amending Regulation 881/2001 to ensure compliance with the judgment of the European Court of Justice.

397. For freezing mechanisms under the Sanctions Act, the review procedures as outlined under criterion III.7 are available. The authorities stated that so far, freezing measures under the Sanctions Regulations have been lifted in one case.

Freezing, Seizing, and Confiscation in Other Circumstances (applying c. 3.1-3.4 and 3.6 in R.3, c. III.11)

398. In the context of domestic criminal investigations, seizing measures pursuant to Article 94 and 94a can be used to restrain instrumentalities and proceeds of TF and terrorism offenses. For further detail on this issue, see the analysis section under Recommendation 3 above.

Protection of Rights of Third Parties (c. III.12):

399. The rights of bona fide third parties affected by a freezing measure under the EC Regulations, the Sanctions Regulations, or a seizure otherwise ordered in the Dutch system are protected by the relevant EC Regulation as well as by the general principles of Dutch law.

400. In relation to freezing measures imposed through Regulation 881/2002 or 2580/2001, bona fide third parties may institute proceedings before the European Court of Justice. EC Regulation 881/2002 through Article 6 also protects natural or legal persons that freeze assets or funds in good faith. The provision does, however, not protect negligence.

401. If the freeze has been undertaken pursuant to a Sanction Regulation under the Sanctions Act or a bona fide third party is adversely affected by the EC Regulations, a challenge based on the Dutch administrative law as outlined under criterion 7 above can also be brought.

Enforcing the Obligations under SR III (c. III.13):

402. Both Article 10 of the Council Regulation (EC) No. 881/2002 and Article 12 of the Council Regulation (EC) No. 2580/2001 oblige Member States to lay down rules on sanctions applicable to infringements of the provisions of the respective Council Regulation and ensure that they are implemented. Those sanctions must be effective, proportionate, and dissuasive. The penalty for violation, circumvention, or attempted violation or circumvention, of Council Regulations 2580/2001 and 881/2002 is a term of imprisonment of up to five years (see Section 34(4) of the FTPA). Negligent violations are sanctioned with imprisonment of up to three years or fines (see Section 34(7) of that Act). The Council Regulations also establish certain communication and notification requirements to the competent authorities of the Member States, concerning information that can guarantee compliance as far as frozen accounts and amounts are concerned. Failure to comply with the reporting obligations is an administrative offense.

403. Article 10 of Sanctions Act and the Regulation on Supervision pursuant to the Sanctions Act designate the DNB and AFM as the relevant authorities to ensure compliance by FIs and TCSPs with the obligations under the Sanctions Act, any Sanction Regulations issued on the basis thereof, and with the requirements under the EC Regulations. Pursuant to the Regulation on Supervision pursuant to the Sanctions Act, financial institutions and TCSPs are required to have internal administrative and control systems in place to enable the institution to comply with all requirements deriving from the above-mentioned laws and regulations, for example, by screening all customer relations for a match with the lists under the EC Regulations, informing the DNB or AFM of any hits, and keeping records of any such notification and underlying data for a period of five years after the designation. The DNB and AFM also have the power, based on the Sanctions Act 1977, to impose administrative fines and to issue “cease and desist” orders for failure to comply with the Sanctions Act, Sanctions Regulations issued on the basis thereof, or the obligations under the EC Regulations.

404. Furthermore, the Dutch Customs Authority has the power to control the import, transit, and export of the goods, including money and related goods that are subject to any sanction measures.

405. Pursuant to Section 13 of the Sanctions Act, Dutch nationals who commit an act under the Sanctions Act may be held criminally liable. Although criminal sanctions have not been applied under the Sanctions Act in relation to violations with obligations to freeze the funds of designated individuals or entities, the Public Prosecutor has recently indicted several individuals for violation of the Sanctions Act in relation to a listed entity.

406. Representatives of the DNB stated that on-site inspection exercises would in all cases involve an examination of the various procedures in place to ensure compliance with the Sanctions and EC Regulations, a verification that senior management is aware of the latest lists of entities and persons, and a sample testing to see whether certain names on the list should have resulted in a report to the supervisor. The DNB stated that, following audits held in the first quarter of 2010, in two cases FIs have been considered not to be in compliance with the EC Regulations and the Sanctions Regulations because the FIs did not check their client database against these lists on a regular basis. In both cases, sanctions are being considered.

407. The extent to which supervisory activities carried out by the AFM include monitoring for compliance with the EC Regulations and the Sanctions Regulations is less clear. In fact, the assessors could not establish that on-site monitoring exercises address these Regulations at all and which mechanisms are used by the AFM to evaluate FI compliance with the Regulations. The AFM has never detected or applied sanctions for noncompliance of supervised entities with the Sanctions Regulations.

408. The authorities confirmed that DNFBPs other than TCSPs are not subject to monitoring by specific supervisory body under the Sanctions Act. The FIOD-ECD as a general supervisory body and investigation service in the area of financial integrity could in theory carry out supervision in relation to DNFBPs to ensure compliance with the EC and Sanctions Regulations. Furthermore, the lawyer’s association could use its disciplinary sanctioning powers in relation to lawyers and notaries that fail to comply with the provisions of the EC or Sanctions Regulations. From meetings with the private sector, it does not seem that in practice the FIOD-ECD and lawyers association have made use of their power in this area. Casinos are subject to the monitoring mechanisms under the Sanctions Act through their money exchange permit.

409. Violations of the Sanctions Regulations or the EC Regulations may be sanctioned as economic offenses based on Articles 1 and 6 of the Economic Offenses Act. The statutory sanctions available include a prison sentence, community service, or a fine. In addition, for TCSPs and casinos administrative sanctions may be imposed by the DNB or AFM.

Additional Element (SR III)—Implementation of Measures in Best Practices Paper for SR III (c. III.14):

410. The authorities indicated that they have implemented the best practice paper for SR.III by way of the EU and domestic legislation described earlier in this section and that they fully cooperate with foreign jurisdictions.

Additional Element (SR III)—Implementation of Procedures to Access Frozen Funds (c. III.15):

411. See discussion under criteria 9.

Statistics (R.32):

412. The DNB maintains statistics on the reported freezing actions by financial institutions and gives an overview of the number of reports in its Annual Report. Since 2002, freezing measures were applied with respect to funds and other economic assets with respect to twenty-one subjects, whereby five of those subjects were legal persons. In most cases, the freeze related to bank accounts. Some cases also involved pension rights and health insurance claims. One case involved real estate. Other property of designated individuals or entities has so far not been identified in the Netherlands.

413. In total, €339,382 is frozen in the Netherlands pursuant to the obligations under UNSCR 1267 and 1373. The majority of funds were frozen based on a domestic Sanctions Regulation, whereby in a significant number of cases, the relevant person or entity was later added to the list of designated persons under EC Regulation 2580/2001. In three cases, freezing measures were applied pursuant to EC Regulation 881/2002.

Total of Reports received by DNB pursuant to the EC and Sanctions Regulations

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Analysis of effectiveness

414. The Netherlands have a strong and comprehensive framework in place to implement its obligations under UN Security Council Resolutions 1267 and 1373 and in a number of cases have effectively applied this framework to freeze the funds and assets of designated terrorists and terrorist organizations. The most important financial sectors are effectively supervised for compliance with their obligations under the EC and Sanctions Regulations and the procedures in place ensure that freezing measures are effectively communicated to the private sector. Merely some technical deficiencies have been identified as outlined in the analysis section above. Some concerns remain as to whether funds and assets are frozen without delay in all cases.

2.4.2 Recommendations and Comments
  • Provide more guidance to the private sector, especially the nonbanking financial industry and DNFBPs, on the freezing obligations stemming from the international standard, including the obligation to check client files and databases against those lists.

  • Ensure that all FIs, not only banks, are effectively monitored for compliance with the EC and Sanctions Regulations.

  • Extend the freezing obligations under UNSCR 1267 to funds and other assets owned or controlled “indirectly” by a designated individual, entity, or organization.

  • Ensure that funds and assets are frozen without delay in all cases.

2.4.3 Compliance with Special Recommendation III
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Authorities

2.5 The Financial Intelligence Unit and its Functions (R.26)

2.5.1. Description and Analysis
Legal Framework:
Foreword

415. The Dutch Financial Intelligence Unit was first established in 1994 as a “Disclosures Office” (Meldpunt ongebruikelijke transacties–MOT), pursuant to Article 2 of the Disclosure of Unusual Transaction Act (Act of December 16, 1993), an administrative-type FIU under the Ministry of Justice (MoJ). According to the 1993 law, the MoJ was responsible for the overall management, organization, and administration of the MOT.

416. With a view to enhancing the use of financial information “at the heart” of the law enforcement community, the Netherlands decided in 2005 to place the MOT in the Netherlands Police Agency (hereinafter KLPD) under the Ministry of the Interior (MoI) and with the goal to create a new structure, the FIU-Netherlands (hereinafter: FIU-NL), consisting of the MOT and of the Office for Police Support of the national officer of Justice (BLOM, a law enforcement unit established under the National Public Prosecutor, “for cases involving suspicious transactions,” specialized in the investigation of ML cases and also relocated within the KLPD, prior to MOT’s relocation).63

417. The new structure was established as an “umbrella organization” in the KLPD pursuant to an order of the MoJ of December 13, 2006 (“establishment decision”). The Minister of Justice maintained the legal responsibility for the overall management, organization, and administration of the MOT, but delegated it to the Minister of the Interior (“delegation decision” of October 13, 2006). The new structure was meant to operate in a “test phase” and in a “project form,” at the end of which (July 2008) a decision on the final merger between MOT and BLOM and on a definitive transfer of responsibility for the management of the MOT from the MoJ to the MoI should have been taken, based also on the results of an “evaluation study,” commissioned by the MoJ and conducted by an independent firm between May and September 2008 (the major findings of the study are discussed under criterion 26.6 and in the effectiveness section). In July 2008, when the agreement expired, the authorities agreed informally to extend the duration of the expired agreement until a new one was in place. A new delegation of authority concerning the MOT was adopted, following which appropriate changes in the legal framework should have followed to finalize the merger between the MOT and BLOM and the transfer of responsibilities.

418. The new AML/CFT law (WWFT, which entered into force on August 1, 2008 and replaced the 1994 AML law) confirmed the responsibility of the MoJ for “overall management, organization and administration of the FIU” (Article 13).

419. A new management agreement between the MoJ and the MoI was drafted in January 2009 (with a view to replacing the 2006 one, which expired on July 1, 2008 and addressing the main findings and recommendations of the evaluation study) and a new governance model for the FIU-NL designed. The authorities planned to finalize the merger between MOT and BLOM into the FIU-NL by the fall of 2009, as indicated in the MoJ Letter to the Head of the FIU-NL64, containing the policy objectives for the year 2010. The Parliament was informed about the relevant ministries’ intention not to undo the project organization, as well of the intention to place definitively the MOT into the KLPD.

420. However, at the time of the on-site visit, the finalization of the merger between MOT and BLOM had not yet taken place and the FIU-NL was still operating in a “project form.” Nor had the January 2009 draft management agreement been signed, although it had been drafted for more than one year, because of disagreements between the MoJ and the MoI, including over the responsibility of the management of the UTR database and the level of security of the UTR database (the issue will be discussed more in detail later).

421. After the on-site visit on September 8, 2010, the Minister of Justice issued a decree to amend the two 2006 establishment and delegation decisions with a reference to the WWFT’s “Meldpunt ongebruikelijke transacties” (MOT) in the articles of these decisions that refer to the “FIU-Netherlands.” The Decree entered into force on September 22, 2010. The Explanatory Notes of the Decree note the decision to merge MOT and BLOM definitively and state that these amendments anticipate a legislative proposal to change the law “which would anchor the positioning of FIU-Netherlands in the law.”

422. Another development that occurred after the on-site visit on September 10, is that a new Management Agreement for the FIU-NL was signed by the MoJ and the MoI. The Management Agreement foresees that the management of the FIU-NL “will” be handed over to the Minister of the Interior and Kingdom Relations and that thereby the general management, the organization, and the management of the Meldpunt ongebruikelijke transacties MOT “will be” mandated from the Minister of Justice to the Minister for the Interior and Kingdom Relations. The mandate provided “will” then be delegated to the manager of the KLPD. The management agreement also states that “the Minister of Justice, in consultation with the Minister of Finance, will put forward a proposal to amend the WWFT with the purpose of changing the legal framework to the new situation, whereby the Meldpunt ongebruikelijke transacties-MOT and the BLOM are definitively merged to form the FIU-NL and that the FIU-NL is housed with the KLPD, with due regard for national and international legislation, including the FATF (Financial Action Task Force) Recommendations.”

423. To date, the changes to the law referred to in the Minister of Justice Decree of September 8 and the Management Agreement as well as the final transfer of responsibilities for the FIU-NL from the MoJ to the MoI65 have not yet taken place.

Establishment of FIU as National Center (c. 26.1):

424. Article 12 of the WWFT establishes that a Reporting Point for Unusual Transaction (Meldpunt ongebruikelijke transacties-MOT) “shall be in place.” Article 13 of the WWFT establishes the functions of tasks of the FIU “with the view to the prevention and detection of money laundering and terrorist financing.” These tasks include the core functions of the FIU envisaged by Recommendation 26 and, specifically:

  • “To gather, register, edit and analyze the data that it obtains, in order to determine whether this data may be relevant to the prevention and detection of crimes” and “investigate developments in the area of money laundering and terrorist financing and the improvement of the methods to prevent and detect money laundering and terrorist financing” (“receiving” and “analysis”, Article 13 (a)).

  • “To pass on personal data and other information in accordance with this Act (the WWFT) and the provisions laid down in or pursuant to the Police Data Act” (“dissemination of STR and other relevant information regarding potential money laundering or terrorist financing” function, Article 13 (b)).

425. In addition to the FIU’s core functions envisaged by Recommendation 26, the FIU is also responsible to provide feedback to the institutions that made a disclosure of an unusual transaction (for the discussion of unusual transaction reporting-UTR, see analysis under R.13); to issue recommendations to the business sectors on the introduction of appropriate procedures for internal control and communication of other measures to be taken to prevent ML and TF, including the provision of information for prevention/detection purposes to business sectors and professional groups, the supervisors and the general public; and to provide information on the “disclosure behavior” of the reporting entities to the competent supervisory authorities.

426. The FIU is the national center for the performance of the above-mentioned tasks, in the case of money laundering and terrorist financing, as clearly stated by Article 13.

427. With regard to the FIU’s “receiving” task, this, as explained under the analysis of R.13, concerns “unusual transaction reports” received from the institutions subject to the WWFT, on the basis of “objective” and “subjective” indicators. For the purpose of the assessment of R13, only the UTRs filed under the “subjective indicators” are considered as amounting to “suspicious transaction reports.” Throughout the analysis of R.26, reference will be made to “UTRs” to indicate suspicious transaction reports in the sense of R.13 (i.e., the subjective indicators) and “other information regarding potential money laundering or terrorist financing” i.e., “objective indicators and the other reports that the FIU receives from other public bodies. With regard to the latter, the FIU receives data from the Customs on the cross-border transportation of cash (by virtue of the EC Regulation 1889/2005 and a 2007 agreement with the Customs); from the Tax authorities (upon authority and on a voluntarily basis); from the Supervisory authorities (pursuant to Article 25 of the WWFT), and by “Government administration” (upon authority and on a voluntarily basis).

428. It has also to be noted that, with regard to the institutions’ obligation to report UTRs, the Explanatory Memorandum to Article 16 WWFT (UTR-obligation) explains that when there is a “strong suspicion” of ML and TF, it is possible to report such “urgent” disclosures also to the Police “at the same time.” The FIU confirmed that it receives copies of these reports, which are classified under a special code and analyzed as in the case of the other information received pursuant to the WWFT. The authorities and the financial institutions met by the assessors explained that these cases of “strong suspicions” amount to a situation closer to “awareness of a crime being committed,” and indicated that in these circumstances, general principles of Dutch law require that the Police should be notified.

429. Please refer to the section on effectiveness for a more detailed explanation and analysis of the characteristics of the receiving and analysis process of the UTRs and the dissemination to law enforcement. It suffices to say here that the UTRs, as a result of the analysis, may be classified by the FIU as Suspicious Transaction Reports—STRs—and loaded into a database, the access to which, unlike the UTR database, is granted to law enforcement agencies.

Guidelines to Financial Institutions on Reporting STR (c. 26.2):

430. Article 18 of the WWFT empowers the FIU to “determine the manner in which a disclosure must be made,” including with regard to requests of additional information. Article 14 (2) of the WWFT states that “rules shall be laid down by order in council about the categories of persons whose data is processed by the FIU’s, the provision of data, the retention and destruction of data and the protocol requirement.” The Minister of Justice, in consultation with the Minister of Finance, would be the responsible authority to issue this order, but, to date this power has not been exercised.

431. The FIU provides guidance on the manner of reporting and on the procedures to be followed when reporting, and has issued a reporting regulation that also includes the specification of a reporting form. The FIU website contains a section on “reporting,” which specifies who is subject to reporting, including registration to the website and download of a software (MOT-Explorer) that allows reporting online to the FIU. MOT-Explorer also contains a manual that explains, inter alia, reporting procedures. Codes are provided to the reporting institutions for the classification of the transactions based on the subjective/objective indicators.

Access to Information on a Timely Basis by FIU (c. 26.3):

432. The FIU has access to financial, administrative, and law enforcement information, although there is no specific power laid down in the WWFT or in any other regulation for the FIU to request such information (except to reporting institutions). There are rules, laid down in the Police Act, that allow the provision of Police-related data to certain institutions/officials for the performance of the tasks attributed to these institutions/officials: this is the case of the MoJ “for the performance of the tasks of the Office for the Disclosures of Unusual transaction (i.e., the MOT) and to “the persons employed by the Office for the Disclosures of Unusual transaction for the task of this office as referred to in Article 13 of the WWFT (which sets out the FIU’s responsibilities),” pursuant to Articles 4.3.1.a., and 4.6.c, respectively, of the Police Data Act.

433. In addition to information maintained in various Police database (the VROS, which contains arrests, criminal records, and criminal intelligence files and the “Blueview” that allows consultation of enforcement updates and investigation information), the FIU-NL has access to a wide range of information, both from “closed” sources—fiscal information, income, assets, turnover of companies, imported/exported goods, through the four liaison officers of FIOD operating within the FIU—and from publicly- accessible database (such as the Commercial Register, the Cadastre, and the Public Service for Road). The FIU has also signed several agreements with public bodies for the exchange of information (with the Tax and Customs administration, with FIOD-ECD, the real Estate Information Centre, the FINEC program, and BOOM). The following table illustrates in detail the additional information the FIU has access to, broken down per type of information that can be accessed directly” or upon request.

434. Access to information is timely (as most information is directly accessible and available through the consultation of the above-mentioned databases) and enables the FIU to properly undertake its tasks, except when the request of information needed by the FIU leads to a disclosure of UTR-related personal data, which is classified as “secret.” If the FIU needs information (e.g., on a certain individual/company) which cannot be obtained otherwise (e.g., through access to a database), and the request of such information would lead to the disclosure of UTR-related information (e.g., the name of the person involved in a UTR), the information cannot be requested/obtained. As discussed with the FIU, this is the case for convictions (as the VROS does not contain such information) and for the information on the Commercial Register that is not available on line (such as in the case of the companies’ shareholders, which is only in the situations in which a single shareholder holds 100 percent of the shares; although in this situation the FIU stated that, with some safeguards, the information could be obtained, albeit that would require an on-site visit to the Commercial Register).

Systems and sources FIU-Netherlands

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435. Access to Customs information related to the cross-border transportation of cash is not entirely adequate. The FIU only receives the data from the declarations (which is not always accurate, as the information is loaded manually by Customs into their database from the handwritten declarations, so errors are frequent).

Additional Information from Reporting Parties (c. 26.4):

436. The WWFT clearly establishes the power of the FIU-NL to request additional information from reporting entities (Article 17 (1)). This power is not only limited to the reporting institution that has made the disclosure of a UTR, but clearly extended to any institution “involved in a transaction about which the FIU gathered data” in order to assess whether the data gathered should be disseminated to LEAs. Article 17 (2) provides for the obligation of the requested institution to provide such data, within the deadline established by the FIU, in writing or verbally in urgent cases. Noncompliance to such obligation is subject to a fine, pursuant to Article 27 WWFT. The FIU-NL explained that it has encountered no difficulties in obtaining such additional data, including from professions that are subject to privilege (except that this power was not tested but in one case concerning a lawyer). Despite the straightforward language of the law, the representatives from the Bar association and some private lawyers with whom the mission met held a different opinion, and considered that the FIU-NL has no power to obtain additional information held by a lawyer. However, the representatives of the Chamber of Notaries met by the mission—notaries have same legal privilege as lawyers—confirmed that legal privilege would not impede the FIU from requesting additional information pursuant to the WWFT and needed for the analysis of a UTR. For a more detailed discussion on the provision of information covered by legal privilege, please refer to R.13.

Dissemination of Information (c. 26.5):

437. The legal basis for the FIU to disseminate information is laid down by Article 13 b) and f) (3), described above. For a detailed description of the analysis of UTRs, see the implementation/effectiveness section. The analysis of UTRs consists mainly of matching the UTR information with other information the FIU has access to. In this case, the UTR is classified as an STR and loaded into the STR database, which can be accessed by law enforcement authorities for criminal investigations concerning any crime, not only ML/TF. The authorities explained that the rationale of the process for the substantiation of a UTR into an STR is to determine whether the transaction-related information is “relevant” for law enforcement authorities and to establish a link between the transaction and criminal activities; hence, the loading of the information into a database that can be accessed by law enforcement authorities. This task represents the most common way in which in practice the FIU is disseminating the information. In addition to this modality, there are also other ways in which the information is proactively disseminated to law enforcement agencies. Six officials in the BLOM unit (so called “account managers”) are responsible for Police at regional level, to whom they provide specific STR-related information of suspects operating in a certain area; 4 liaison officers of the FIOD operate within the BLOM; when STRs are linked to organized crime the National Crime Squad is informed by the account managers assigned to follow cases that follow within the responsibility of the National Crime Squad. STR-related information and cases are also discussed in the context of the financial expertise center and the supervisory authorities meeting (on a quarterly basis). Team leaders, who, across MOT/BLOM follow more complex cases, are also involved in the dissemination of information to law enforcement authorities. Cases related to TF are also disseminated to the National Crime Squad, with copy to the National Security Service.

438. The FIU explained that law enforcement authorities do not provide information as to whether queries to the STR database result or not in the opening of a criminal investigation. The FIU can determine, however, when STR-related information is used for an “official report:” a law enforcement user can request individuals or transaction-related information and draw up an official report (OR). Such an ‘official report’ (proces verbaal) is used in criminal court proceedings and is regarded as legal evidence. An ‘official report’ can trigger a new criminal investigation (start process verbaal) but can also be part of evidence in an ongoing investigation. Hence, a distinction cannot be made between ‘official reports’ that have triggered new criminal investigations and ‘official reports’ that are part of an ongoing investigation. Also, these queries that generate an “official report” can be done in the context of an investigation of crimes other than ML or TF.

439. The table below shows the STR database searches per investigation service.

Use of STR database by law enforcement (IVT)

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explanation:DETAIL: query on subject or transaction information, result watched ‘on screen’, total numberOR: query on subject or transaction information, result transformed into an ‘official report’ (see text), total numberR: query on subject or transaction information, result transformed into a report, total number