How do you catch as many ‘criminals’ as possible who want to launder their criminal money, without bothering citizens and companies who simply want to arrange their financial affairs through their bank? By allowing banks to work together, Minister of Finance Eelco Heinen (VVD) wrote in a letter to the House of Representatives on Monday. He is therefore sticking to an approach that has received a lot of criticism in recent years from, among others, the Dutch Data Protection Authority.
According to Heinen, the banks’ anti-money laundering approach has now “stalled”. After the hefty fines for ING (775 million euros) and ABN Amro (480 million euros), because they had been seriously negligent in preventing fraudulent transactions by their customers, the stricter approach taken by banks since then is now “disproportionate” according to Heinen. for customers and is ‘insufficiently targeted’. The House of Representatives also concluded last year that this approach has gone too far.
Companies, foundations, associations, but also citizens have difficulty opening a current account – or even receive a zero response
Companies, foundations, associations, but also citizens have difficulty opening a current account – or even receive no response, Heinen now writes. Banks refused 34,000 potential customers in 2021, he cites as an example, with the anti-money laundering approach being the reason for refusal for one in five business and one in four private customers.
Banks also spend a lot of manpower and money on the approach: one in five bank employees is now busy screening customers and transactions for malpractice. Those thirteen thousand people cost banks 1.4 billion euros annually, “money that is not used for, for example, improving services,” says Heinen.
According to the VVD minister, interests must be weighed up for a more effective approach. “Being strict on criminals, no restrictions on privacy and less regulatory burden: it cannot all be done at the same time. We must dare to choose.” Heinen wants to come up with a proposal for the new approach in April, which he will draw up with Minister of Justice and Security David van Weel (VVD).
The Minister of Finance already writes that, as far as he is concerned, the priority should be “keeping the financial system clean of criminal money and reducing the regulatory burden.” “This means that we must give gatekeepers more space to, for example, share data with each other and make the investigations by gatekeepers more targeted.” However, he adds that the policy must “of course” also comply with the right to privacy, “which is a fundamental right.”
Transaction monitoring
However, according to critics, the latter has gone wrong in recent years. In recent years, the Netherlands has already given banks scope to collaborate. The four major banks and Triodos created the organization Transaction Monitoring Netherlands (TMNL) for this purpose. As a kind of test, encrypted data from business transaction data was compared, in order to better see which transactions were incorrect. The idea was that only the bank where the transaction took place could ultimately see who or what it involved. There was a bill strongly criticized by the Dutch Data Protection Authority to broaden this approach to transactions by private individuals, but last spring the government withdrew the bill and the five banks involved pulled the plug on the TMNL.
This discontinuation was the result of European legislation that will come into effect in 2027, the new Anti-Money Laundering Directive (AMLD). This only allows the exchange of data about payment transactions if the parties involved have already been placed in the “higher risk” category by the banks. Heinen now mainly wants to use this space in the new EU rules to achieve cooperation between the banks. In any case, he wants to introduce the European rules with few Dutch additions, because in his view they sufficiently prevent regulatory burden and unfair competition.
Heinen’s new approach will mainly build on future European rules
Heinen further writes that something else arises from the new EU rules that could lead to less pressure on banks and customers: the transition from reporting ‘unusual’ transactions, as is now mandatory in the Netherlands, to reporting only ‘suspicious’ transactions. transactions. Supervisor De Nederlandsche Bank already advocated this two years ago, but then Minister of Finance Sigrid Kaag (D66) was negative. Under the new European rules, the Netherlands is obliged to adjust this part of the policy.
Heinen’s letter precedes a debate in the House of Representatives on Wednesday about anti-money laundering policy in the Netherlands. A number of civil society organizations, including Privacy First and Human Right in Finance.eu (HRF), are using this debate to argue for an accelerated relaxation of the reporting obligation – from ‘unusual’ to only ‘suspect’ transactions – and not waiting until 2027, when the EU rules come into effect. This would quickly improve the quality of reports from banks (but also accountants and payment institutions) to the judicial authorities, they write. And moreover, they believe, the current approach with ‘unusual’ is already against (European) law.
Savings market
Heinen’s letter is not just about banks’ anti-money laundering approach. He also writes about the limited competition in the Dutch savings market, which the Netherlands Authority for Consumers and Markets also raised last year. Heinen agrees to investigate what the effect would be of a ban on ‘tying’ (that you are obliged to also have a paid checking account with a savings account). He also wants a better switching service and to see whether more competition – from foreign banks in the Netherlands and from Dutch banks abroad – can be stimulated.
Heinen continues to write about the future of de Volksbank. The House of Representatives adopted a motion in December calling for the state bank to remain in state hands in order to maintain services. Heinen maintains the decision to prepare the bank for sale or flotation. He writes that if de Volksbank has to offer more services than other commercial banks, “inefficiency” will arise. “De Volksbank can then no longer function as a normal, commercial company, with all the risks of poor operating performance and possible capital contributions. [door de overheid] of that. I find this inefficiency undesirable not only in view of healthy market forces, but also in view of the possible costs for the taxpayer.”