On 1 January 2019, the Trust Offices Supervision Act 2018 (‘Wtt 2018’), together with the Trust Offices Supervision Decree 2018 and the Trust Offices Supervision Regulation 2018, came into force.
What does the Wtt 2018 entail?
Trust offices in the Netherlands are under supervision of the DNB. To carry out their activities, trust offices must meet various requirements in relation to their operations and organisation as set out in the Wtt 2018. The policymakers of trust offices are assessed for suitability and reliability.. The Wtt 2018 imposes stricter requirements on client due diligence and the compliance function compared to the Wwft (Anti-Money Laundering and Terrorism Financing Act). Additionally, the definition of trust services has been broadened, meaning more entities fall under the Wtt 2018.
What is the scope of the Wtt 2018?
The Wtt 2018 applies to all legal entities that professionally provide trust services. The Wtt 2018 defines trust services as follows:
- acting as a director/partner of a legal entity/company on behalf of a natural person/legal entity/company not belonging to the same group;
- providing a postal or visiting address to a target entity and performing ‘additional activities’ such as administration or tax returns (domicile plus);
- selling or mediating the sale of legal entities; or
- acting as a trustee.
A trust office is not allowed to split services with the intention to avoid that it will be subject to supervision under the Wtt 2018.
Key obligations under the Wtt 2018
Compliance function
A trust office must have an independent and effective compliance function. This function aims to ensure compliance with legal requirements and the internal rules of the trust office. Under Article 16(2) of the Wtt 2018, it is prohibited to outsource the compliance function of the trust office. The audit function may still be performed externally.
Annual reporting obligation
The Wtt 2018 requires a trust office to submit a reporting on its operations to the DNB on an annual basis. These reports are for instance the annual IRAP report (Integrity Risk Analysis Reporting) The supervisor may also request more frequent reports from the trust office at its discretion.
Mandatory legal form
Under the Wtt 2018, trust offices are required to have legal personality as a public limited company (N.V.), a private limited company (B.V.), or a European company (SE). This means that in the Netherlands, natural persons, foundations, or associations cannot obtain a licence to provide or perform trust services.
For foreign license holders active in the Netherlands, either cross-border or via a branch, the requirement of legal personality under the law of their home country also applies.
Two daily policymakers
The Wtt 2018 also stipulates that a trust office must be managed by at least two natural persons, both of whom must perform their duties from the Netherlands. This requirement aims to ensure the continuity and quality of the trust office’s operations and trust services. Policymakers are assessed by the DNB for suitability and reliability during an initial screening.
Client due diligence requirements
A trust office is required to conduct client due diligence (‘CDD’) before and during its services to a client. The goal of this CDD is to ensure that the trust office’s services are not misused for criminal or socially undesirable activities such as money laundering, terrorist financing, or aggressive tax planning.
The CDD requirements are specified per trust service, obliging a trust office to take additional measures for services to structures with inherently high integrity risks. Moreover, the investigation must not only focus on the client but also on the target entity and all relevant parts of the group structure to which the target entity belongs (e.g., UBOs, shareholders, sister entities of the target entity and direct and indirect subsidiary companies). A split has been made in the Wtt 2018, where various tasks within the CDD (e.g., identification and verification of the identity of the client, the target entity, and the UBO(s), establishing the source of funds) must be performed in such a manner that, either (i) there can be no reasonable doubt about the accuracy or completeness of the result—the so-called ‘result obligation’ (i.e. identification and verification of the client) and (ii) a trust office has used its best effort to obtain certain required information – the so-called ‘best effort obligation’ (i.e. financial position of the UBOs).
Want to know more?
Would you like to know more about complying with the Wtt 2018? Our specialists are happy to advise on how your organisation can meet the Wtt 2018 requirements. Read more about our services for the trust sector, or contact us.