Financial institutions often serve many different customers in many different sectors, including customers in sectors with higher inherent integrity risks. The sector in which a customer operates is one of the factors that a financial institution...Read more
Policy Rule on Integrity in Commercial Real Estate Operations
For a number of years now, De Nederlandsche Bank has regarded real estate as one of the principal foci within its integrity supervision, holding that, by their very nature, commercial real estate operations involve a higher risk of fraud and money laundering. This is ascribed to such factors as the relatively high value of real estate, the frequent lack of transparency regarding pricing and the complexity of transactions.
In addition to soundness, integrity is a precondition for a stable financial market. Hence, it is important that institutions should recognise and control integrity risks. Integrity risks such as the risk of money laundering and the risk of fraud pose grave dangers to the proper operation of the financial system and thus to the economy in a broader sense.
The present Policy Rule relates to institutions’ integrity policy regarding commercial real estate operations. The various rules contained in the Financial Supervision Act (Wet op het financieel toezicht), the Pension Act (Pensioenwet) and the Anti-Money Laundering and Anti-Terrorist Financing Act (Wet ter voorkoming van witwassen en financieren van terrorisme) regarding the integrity of operations are mostly principle-based. The measures taken to control integrity risks must be in line with the gravity and the magnitude of the risk concerned.
The Policy Rule does not seek to limit the principle-based nature of the legislation concerned. It seeks to ensure that institutions engaging in commercial real estate operations take adequate control measures geared to their situation on the basis of the specific integrity risks inherent in these operations.
The Policy Rule does not seek to set new standards or rules, but provides guidelines permitting compliance with the existing rules. The Explanatory Notes to the Policy Rule centre especially on measures regarding customer due diligence and customer acceptance. It is stressed that this does not mitigate all integrity risks attending real estate operations. Regarding such matters as the control of the risk of conflicts of interest, additional measures are required.
- Clearing institutions
- Collective investment schemes
- Electronic money institutions
- Investment firms
- Payment institutions
- Pension funds
- Premium Pension institutions
- Trust offices