On 21 April 2020, the Dutch Senate (Eerste Kamer) adopted a legislative proposal implementing the Fifth Anti-Money Laundering Directive (5AMLD) and amending the Dutch Anti-Money Laundering and Terrorist Financing Act (Dutch Money Laundering Act), which is expected to enter into force on 18 May.
Crypto service providers must apply for registration with the Dutch Central Bank (DNB) before this date.
The Dutch implementation of the 5AMLD includes a registration requirement, which applies to everyone who, through their professional work or business, provides services as virtual currency-exchange providers or custodian-wallet providers based in the Netherlands. As a result, these crypto-service providers must register with DNB before providing these services within the Netherlands or in other jurisdictions while based in the Netherlands.
During the registration process, DNB will review each application and determine if a crypto-service provider is able to comply with the obligations set down in the Dutch Money Laundering Act.
Crypto-service providers may make use of a six-month transitional arrangement during which they can continue to offer crypto services without registration. Only crypto-service providers who applied for registration with DNB before 18 May will be eligible for this transitional arrangement. Crypto-service providers that do not register will no longer be allowed to provide crypto-exchange services and wallets.
On 8 January 2020, DNB published a draft registration form for providers of crypto services, which must be used to register with DNB. The draft registration form has been published together with a draft explanation that will help crypto-service providers prepare themselves properly and collect the required information in advance. The completed draft registration form can be accessed and submitted now as the submitted draft registration form will be automatically converted into a formal application when the legislation comes into force.
Initially, the legislation was to take effect on 10 January 2020. The legislative process, however, was delayed due to questions raised by members of the Dutch Senate about supervisory costs and implementation of the registration requirement.
Due diligence and reporting suspicious activities
Because virtual currency-exchange and custodian-wallet providers fall outside the reach of regulators (and hence do not face legal obligations to identify suspicious activity), EU lawmakers determined that the anonymous nature of virtual currencies makes them prone to criminal misuse, which is a problem that the 5AMLD attempts to address by making crypto services subject to customer due diligence and reporting if suspicious activities are detected.
As a result of amendments to the Dutch Money Laundering Act, crypto-service providers will need to fully comply with these obligations. In addition, their board members and some shareholders (qualifying holdings) will need to be assessed.
Specifically, virtual currency exchanges and wallets will need to adhere to 'know-your-customer' protocols and collect data on users that may need to be shared with authorities. Furthermore, crypto-service providers will be required to report unusual transactions to the Financial Intelligence Unit Netherlands and to cooperate with any investigations.