Taking measures in accordance with the sanction regulations
The AFM and DNB are responsible for supervising financial institutions’ compliance with the Sanctions Act (Sanctiewet 1977 – Sw). To that end, the two supervisory authorities have jointly adopted the Regulation on Supervision pursuant to the Sanctions Act (Regeling Toezicht Sanctiewet 1977 – RtSw). This regulations provide that banks must take measures to verify whether their relationships appear on one or more sanctions lists. These lists include EU Decisions and Regulations, Decisions by the Dutch Minister of Foreign Affairs based on the Regulation on Sanctions for the Suppression of Terrorism (Sanctieregeling terrorisme) 2007-II (the 'Nationale sanctielijst terrorisme’) or UN Security Council Resolutions.
The regulations describe several financial sanctions:
- an order to freeze the funds and assets of designated individuals or organisations
- a prohibition on making resources available to these individuals or organisations directly or indirectly;
- a prohibition or restriction on providing financial services or goods to designated individuals or entities
As a financial institution you must be able to check on an ongoing basis whether any party with which you are in a relationship figures on any sanctions list and whether services provided or transactions conducted are within the scope of sanctions regulations. You must also inform us without delay if this is the case on the basis of Section 3 of the RtSw.
You cannot adopt a risk-based approach to the sanctions regulations. This means you cannot choose whether or not to comply, or refrain from screening your relationships on an ongoing basis.
The role of DNB
As a supervisory authority, we assess and enforce the effectiveness of the procedures and measures undertaken by institutions aimed at compliance with sanctions regulations. In practical terms, when taking measures, you may align with existing rules regarding administrative organisation and internal control (AO/IC) that arise from other regulations such as the Financial Supervision Act (Wet op het financieel toezicht – Wft) and the Anti-Money Laundering and Anti-Terrorist Financing Act (Wet ter voorkoming van witwassen en financieren van terrorisme – Wwft). The basic principle for the implementation of AO/IC by financial institutions is that you must act in line with the objectives of the sanctions regulations.
Put briefly, this means that you must be able to check their records in such a way that sanctioned relationships, goods and transactions can be detected. You must be able to freeze the financial assets immediately and/or to prevent financial assets and/or services being made available. You are not allowed to terminate the relationship with existing customers and in some cases you can request an exemption from the Ministry of Finance.
The definition of a ‘relationship’
The RtSw applies the term 'relationship’ broadly and defines it as any party that is involved in a financial service or financial transaction. This includes:
- customers
- representatives or authorised agents
- UBOs of customers
- beneficiaries of a product (e.g. life insurance payments) or national and cross-border transfers of funds
- counterparties to a financial transaction or product (e.g. non-life insurance payments)
- parties in a financial transaction involving a company receiving services from a trust office.
- directors of customers and parties related to customers
Please note that this list is not exhaustive. The term 'relationship' is defined so broadly because both the direct and indirect provision of financial resources or services are covered by the sanctions regulations.
Notification to DNB
If you find that the identity of a relationship matches that of a person or entity mentioned in the sanctions regulations (a “hit”), you must notify us immediately, using the prescribed reporting form.Please email the report form to us at sancties@dnb.nl. You can download the report form from this page.
If you doubt whether it is an actual "hit", you must make further investigations to determine or exclude the possibility of a match with the sanctions lists. You may encounter many potential hits when screening against the sanction lists. These must all be checked for matches with the various lists before you report them to us. You must not report “false positives”.
We only assess the reports we receive for completeness. As a supervisor, we cannot give any advice or opinion on whether a hit is an actual hit.
Freezing of assets and FIU reports
If your institution freezes assets on the basis of a sanctions lists hit, we expect you to also look at the transaction history. The customer's past transactions must also be investigated to assess whether any transactions were effected that give cause to suspect that they may be related to money laundering or terrorist financing.
If you suspect money laundering or terrorist financing, you must report this to FIU-NL pursuant to Section 16 of the Wwft. You must ensure the assets remain frozen until the relevant sanctions regulation is changed and the obligation to freeze the assets is lifted, until an exemption is granted or until you otherwise receive notice to the contrary from the Ministry of Finance or from us/DNB. If you do not receive such notice, you must assume that the assets are to be considered an actual hit and must remain frozen until further notice.
Any data you report must be kept for a period of five years after the relevant sanctions regulation has ceased to have effect or has been rendered inoperative.