Dutch Banks Embrace Proportional Risk Management for Politically-Exposed Persons

Dutch banks are poised to adopt a more nuanced approach to monitoring politically-exposed persons (PEPs), shifting their focus towards assessing individual banking customers' actual risk profiles. The Dutch Banking Association (NVB) has collaborated with the Dutch central bank (DNB) and the Ministry of Finance to advocate for a more targeted strategy in investigations, promoting less invasive measures unless the situation warrants otherwise.

Under the guidance of the NVB, banks are encouraged to tailor their actions based on the proportionality of risks associated with each customer. The rationale behind this approach is that different PEPs may exhibit varying degrees of corrupt behavior based on their specific positions. The NVB emphasizes the importance of considering a customer's risk of money laundering, suggesting that assessments can leverage existing and up-to-date information when the risk is deemed low.

"The research must also focus on the customer and not on third parties. In this way, banks can limit unnecessary requests for information and documentation and reduce the impact on customers," stated the NVB.

The Dutch law governing anti-money laundering and counter-terrorism financing, known as Wwft, mandates banks to enhance their due diligence when dealing with PEPs. The NVB explained that PEPs pose risks as they may exploit their public office for personal gain and potentially use the financial system to launder ill-gotten proceeds. Due to their influential roles, PEPs may have access to public funds, control over public tendering, and the allocation of public works, rendering them susceptible to bribery and corruption.

The term "politically-exposed person" was further contextualized by the NVB, referencing the international anti-money laundering organization Financial Action Task Force (FATF). The FATF identified high-ranking political positions as particularly vulnerable to bribery and corruption, citing a corruption scandal in Nigeria that led to the withdrawal of billions of dollars from the state treasury. Initially targeting foreign PEPs, the FATF expanded its measures to include domestic politicians and authorities in 2018, as decided by the Tweede Kamer (House of Representatives).

This shift in approach by Dutch banks reflects a commitment to more targeted and proportional risk management in line with evolving international standards and the recognition of the diverse risk profiles within the category of politically-exposed persons.

By fLEXI tEAM