Investigating financial services clients

Are you a financial service provider, such as a bank, an insurance company, a civil-law notary, or a tax consultant? In the Netherlands, you must investigate your clients and other parties concerned in order to confirm their identities. These cases are stipulated in the Money Laundering and Terrorist Financing (Prevention) Act (Wet ter voorkoming van witwassen en het financieren van terrorisme, Wwft, in Dutch).

When do you conduct customer due diligence?

You have to perform a customer due diligence check:

• before you conduct a sales transaction or mediation project
• before closing a business deal with your client and providing them with services.

Types of client investigation

If someone wishes to use your financial services, they must prove their identity. You must check the identity of your clients and record them for at least 5 years. Is your client a legal entity, such as an unlisted private or public limited company, or a general partnership? You must establish the ultimate beneficial owner (UBO). For instance, by verifying who the actual directors or shareholders of a company are.

You make your own risk assessment, based on your client’s background, the type of service they request, and the risk of money laundering and financing of terrorism. You include the way you perform your risk assessment in your compliance rules. You can use the recommendations from FIU-Netherlands to set up your customer due diligence check.

There are different types of customer due diligence checks:

• Normal, the standard customer due diligence to establish your client’s identity.
• Simple, for transactions with a low risk of money laundering or financing terrorism
• Comprehensive, if the client is settled in a state that has been signalled as high-risk for money laundering and financing terrorism by the European Commission, or if they are (related to) prominent political figures.

You can find out more on conducting customer due diligence checks (in Dutch) at the Dutch Tax and Customs Administration (Belastingdienst).

Unusual and cross-border transactions

Appraisers do not have to conduct a client investigation, but they should report unusual transactions.

Are you an estate agent or immovable goods mediator? You should also investigate the party your client partners up with for your assignment.

Do you work as an intermediary (such as accountant or tax consultant)? You have to report any cross-border constructions that you believe are set up to avoid taxes to the Dutch Tax and Customs Administration.