AMLD5

Since the enactment of the first Anti-Money Laundering Directive (hereafter AMLD) in 1991, combating money laundering has been a major theme in the European financial sector. This directive was soon succeeded by AMLD2 and then by AMLD3 in 2005. During this period, not only was the scope extended to various types of institutions, but there were also increasingly detailed rules for combating the financing of terrorism.

AMLD4 was implemented in the Prevention of Money Laundering and Terrorist Financing Act (Wwft) and in underlying regulations on 25 July 2018. An important aspect of the Wwft is its risk-based nature. This means that institutions covered by the Wwft are obliged to conduct a risk assessment of their Money Laundering (ML) and Terrorism Financing (TF) risks. Since 2018, the definition of PEP (politically prominent person) and UBO (Ultimate Beneficial Owner) has been tightened. Specific requirements for the Wwft governance of an institution also apply.  

Implementation of AMLD5 

Since 21 May 2020, the fifth anti-money laundering directive, AMLD5, has been implemented in Dutch law. This has led to several changes to the Wwft. For example, the scope has been further expanded: more industries are subject to Wwft obligations, including crypto service providers. 

Additionally, managers of real estate investment institutions now also have obligations regarding tenants of real estate within the investment institutions they manage. Since the implementation of AMLD5, the Wwft also applies to natural persons, legal entities or companies that mediate professionally or commercially in the creation and conclusion of rental agreements as referred to in Section 7:201 of the Dutch Civil Code. This applies when the monthly rent reaches €10,000 or more. From this threshold, the obligations of the Wwft come into effect, including conducting client investigations, monitoring transactions, and reporting unusual transactions to FIU-the Netherlands. 

Finally, the UBO register was introduced, which came into force on 27 September 2020. 

AMLD5 and cypto-service providers 

Based on AMLD5, the rules from the Wwft also apply to crypto service providers. They must now register with DNB to offer their services. This registration requirement only applies to parties that: 

  • offer custody wallets; or 
  • provide exchange functions for virtual currencies. 

Offering a custody wallet occurs when “a company offers services through which it secures cryptographic private keys on behalf of its clients to hold, store or transfer virtual currency”. This applies to companies that themselves hold their clients’ private keys. An exception to this are providers of non-custodian wallet, such as ‘software wallets’. 

The provision of exchange functions for virtual currency occurs when “a company performs or enables transactions for customers through which virtual currency is exchanged for cash and vice versa”. Thus, the exchange of virtual currency can be done in various ways, such as: 

  • by bringing together the buying and selling intentions of third parties in relation to crypto currencies in such a way that a contract results from it according to the rules of the platform; 
  • by acting as a counterparty itself; 
  • by acting as a broker); or 
  • by using Automated Teller Machines (ATMs). 

DNB Registration requirement 

The registration requirement only applies to crypto service providers operating in or from the Netherlands, or intending to do so. They must register with DNB. Without a registration, it is prohibited to operate in the Netherlands as a provider of crypto services. This also applies to Dutch entities with only foreign clients. 

What does the registration for crypto service providers entail? 

The dossier that must be submitted to DNB to obtain registration includes: 

  • general company information (incl. articles of association and an extract from the Chamber of Commerce); 
  • a detailed business plan (incl. the strategy, an overview of activities and a SWOT analysis); 
  • an elaboration of the governance (incl. organisational structure and transparent control structure); 
  • an elaboration of Sound and Ethical operatoinal management (incl. compliance and audit, reporting procedure, outsourcing and training & education); 
  • an elaboration of the sound operational management (incl. a systematic integrity risk analysis, client due diligence policy, policy to combat conflicts of interest, statement of the policymaker specifically charged with responsibility for compliance with the Wwft and Sanctions Act 1977); 
  • a file for each (co-)policymaker to be assessed for suitability and reliability. 

Compliance software Ruler 

Ruler helps you stay up to date with changes to the Wwft and other relevant laws and regulations, as soon as they are announced. This way you are always up-to-date and prepared for what’s going to change. 

Want to know more? 

Would you like to know if you qualify as a crypto service provider? Or do you need help applying for registration? Projective Group assists financial institutions with applying for registrations or licences. Please feel free to contact us.