According to a legislative proposal issued by the Dutch Ministries of Finance and Justice, financial institutions involved in virtual currencies, crypto assets and ICOs may need a license to provide these services in the Netherlands.
Fifth Anti-Money Laundering Directive
In 2017, the Council and the European Parliament reached an agreement on strengthening EU rules to prevent money laundering and the financing of terrorist activities. This resulted in the fifth Anti-Money Laundering Directive (5AMLD), which amends the fourth directive and aims to combat the risks rising from the anonymity of virtual currencies. With this directive, providers engaged in exchange services and custodian wallet providers (entities that provide services to store private keys on behalf of its customers, to hold, store and transfer virtual currencies) were brought within the scope of anti-money laundering legislation.
The 5AMLD provides the first definition of virtual currency that covers all its potential uses, such as means of payment, means of exchange, investment, store-of-value products or use in online casinos.
The Dutch Ministry of Finance and the Ministry of Justice and Safety have opened a public consultation on this legislative proposal, which implements 5AMLD and amends the Dutch Money Laundering and Terrorist Financing Act (Wet ter voorkoming van witwassen en financieren van terrorisme).
The consultation proposes a licensing requirement whereby virtual currency exchange providers and custodian wallet providers would need to obtain licenses to provide crypto-services in the Netherlands. In this way, the Dutch implementation of the 5AMLD goes beyond EU rules for anti-money laundering legislation, which only requires registration (and not a license). During the authorisation phase, it will be assessed whether service providers are able to comply with their obligations under the Dutch money laundering act.
With the Dutch Central Bank acting as the supervising authority, the proposed licensing system is expected to prevent money laundering and the financing of terrorism.
Customer due diligence, reporting suspicious activities
Currently, virtual currency exchange providers and custodian wallet providers fall outside the reach of regulators and face no legal obligations to identify suspicious activity.
EU lawmakers, however, determined that the anonymous nature of virtual currencies make them prone to criminal misuse, which the 5AMLD addresses by requiring crypto-services to be subject to obligations for customer due diligence and the reporting of suspicious activities. Through the consultation and amendments to the Dutch money laundering act, crypto-service providers will need to comply fully with these obligations.
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 public authorities. Crypto-service providers will have the obligation to report unusual transactions to the Financial Intelligence Unit Netherlands and to cooperate with any investigation.