Foundations that cannot open a bank account, consumers who are constantly harassed with questions about their payments and companies that have to provide their company details to their bank time and time again. According to the Dutch Banking Association (NVB), these irritations, caused by the checks on money laundering payments and terrorist financing, will soon come to an end, at least in part. The banking umbrella has agreed new guidelines on this with De Nederlandsche Bank (DNB), it was announced on Wednesday.
Banks are required by law to screen all their customers and check all transactions they process for malpractice. In recent years, these controls have become much more intensive, after several banks were fined for being negligent in their role as gatekeepers to the financial sector. ING was fined 775 million euros, ABN Amro 480 million euros. A criminal investigation into Rabobank is still ongoing.
Since then, the banks have employed thousands of employees to organize customer files and verify transactions. Bank employees often err on the side of caution: rather one question or check too many than too few. This caused many annoyances among customers, but also meant high costs for the banks. At the same time, the banks questioned the effectiveness of all that work: would this stop erroneous transactions and keep rogue customers out of the system?
Evaluation DNB
Last autumn, this criticism from the banking sector was heard by DNB. In an evaluation, the watchdog concluded that the screening for money laundering should be “more targeted”. Since then, round tables have been organized by DNB with banks and other parties involved, such as the police and judicial authorities, to see how the screening can be made more ‘risk-based’. “What we want to emphasize now is: in which cases is it good enough? In which cases are the risks limited and can you suffice with a smaller effort?” said director Steven Maijoor about this in NRC at the time.
The first results of those talks were announced this Wednesday: five new “NVB standards”in which the banks, with the permission of DNB, mutually agree to focus less on low-risk customers, freeing up time to inspect customers who are considered to be higher risk.
Read also: DNB wants to focus money laundering approach more on high-risk clients: ‘The pipeline is overflowing’
High-risk countries
One of the new standards deals with transactions in countries that are considered high risk. This concerns, for example, Barbados, Morocco and Iran. “If someone goes on holiday to such a country and the expenditure remains in line with what you can expect from an ordinary tourist, then according to the new NVB standard there is no longer any reason for probing questions or stricter measures,” said the banking umbrella organization. .
Another example is determining who is the ultimate owner of a company: the ultimate beneficial owner (UBO). Customers now have to provide proof of who the UBO is for every institution with which they arrange financial affairs – in addition to banks, for example, ATM companies and civil-law notaries. The new NVB directive stipulates that for categories of companies that are not considered to pose a high risk for a bank, confirmation from the customer that the data in the UBO register is correct is sufficient.
Work will continue on twelve new ‘Standards’ in the coming months. These will target sectors that are seen by most banks as high risk, such as charities and crypto companies. Together with the sector organisations, the banks want to determine where the real risks lie for these types of customers, so that institutions in these sectors without these risk factors are less likely to receive no response when they apply for a bank account or want to transfer money.