VBNL & Privacy First to Senate: Handle AMLD5 bills carefully!

On Tuesday 3 March, the Senate will discuss how to proceed with the legislative proposals regarding the Dutch implementation of the European anti-money laundering directive AMLD5. The United Bitcoin Companies of the Netherlands (VBNL) and the Privacy First foundation call on the Finance Committee to include all three related bills in the now planned information request to the Council of State, so that the Senate can be thoroughly informed about the legality and proportionality.

The Dutch implementation of the European anti-money laundering directive AMLD5 should have already become active on 10 January. That date was not met and as a result the European Commission has sent a reminder to the Netherlands. It now seems urgent.

The United Bitcoin Companies of the Netherlands (VBNL) and the Privacy First foundation are urging the Parliamentary Committee to treat it with due care. In a joint letter, they advise to include all three related bills in the currently planned information request to the Council of State about the privacy of ultimate beneficial owners (UBOs) and at the same time to ask whether the Council of State considers this to be appropriate. has been given to its previous legislative opinions.

However, the Ministry of Finance advocates a different approach. Under pressure from the European Commission, she is proposing that the legislative proposals should no longer be dealt with in conjunction, but that two of the three laws should be dealt with separately and ‘prosperously’ and introduced.

VBNL & Privacy First point out the coherence of the laws

The VBNL and Privacy First advise the Senate not to lose sight of the close interdependence of the three laws when requesting information. In their letter, they point out that the other two bills also contain independent provisions on UBOs that lead to separate registration and provision of UBO data.

“We therefore strongly recommend that the information provided by the Council of State be extended to all three laws. In this way, the lawfulness and proportionality of the treatment of customer and UBO data for all three laws separately, as well as assessed in the right context.” – letter VBNL & Privacy First to the Senate

Privacy First and VBNL also advise the Senate to ask the Council of State for all three laws whether the previous advice of the Council of State itself has been dealt with appropriately in the legislative process. The interest groups strongly doubt whether this is the case.

Leaked letters from regulator DNB in December last year showed that, at their insistence, far-reaching licensing rules from the strict Financial Supervision Act (Wft) have been added to the new Implementation Act, as amended fourth anti-money laundering directive . An independent legal analysis also concluded that the current legal text contains a disguised licensing system with additional requirements, even though the word ‘permit’ has been replaced with ‘registration’.

Such a disguised permit is at odds with the advice of the Council of State. They indicated that the planned registration obligation for crypto companies should not be a licensing system:

“The fact that the services have an increased risk of money laundering and terrorist financing, and that this is related to the anonymity of the services, as stated in the explanation (see note 10), cannot therefore justify the proposed licensing system…”

The fact that DNB and the AFM have advised, as stated in the explanatory notes, to introduce a licensing system because it contributes to the effectiveness and implementation of supervision does not, in the opinion of the Department, mean that the measure is proportional to the burdens that this entails for the service providers (see note 12).” – Advisory Council of State, 3 June 2019

There are also considerable concerns about privacy and proportionality about the still outstanding further rules of the proposed Implementation Decree accompanying the amended Fourth Implementation Act. This is also stated in a separate letter and appendix that were previously sent by the VBNL to the House of Representatives and the Senate.

More haste less speed

In their message to the Senate, both interest groups underline the importance of careful consideration of the AMLD5 bills. They are not satisfied with the Ministry’s proposal for separate and expeditious handling of two of the three bills. This would undermine the careful and comprehensive assessment appropriate to these proposals.

Moreover, a hurried and individual treatment could lead to a situation similar to that which was the case with the System Risk Indication (SyRI), the interest groups argue. The court recently ruled that this is in violation of the European Convention on Human Rights (ECHR). According to the court, the system, which connects data from different databases, leads to a disproportionate violation of privacy.

It will become clear on Tuesday 3 March whether the advice of VBNL and Privacy First will be followed.

What three laws are we talking about?

  1. The Registration of Ultimate Beneficial Owners (UBOs) Implementation Act: This act regulates the set-up of a so-called UBO register that contains the personal data of owners of all kinds of companies and organizations and has caused the most controversy in the Senate. The employers’ association VNO-NCW has expressed concern as to whether the privacy of those registered is sufficiently protected. In addition, there are detailed substantive questions.
  2. The Implementation Act amended fourth anti-money laundering directive : The Senate asked fundamental questions about this. Leaked letters from regulator DNB made it clear in December last year that the Ministry of Finance, at DNB’s insistence, has added far-reaching licensing rules from the strict Financial Supervision Act (Wft) to the new act. Until now, however, it remains unclear whether or not this tightening is in conflict with the advice of the Council of State and the European directive itself.
  3. The Bank Data Referral Portal Act : This act ensures that investigative services and tax authorities can request at least the bank and current account information of customers of banks. In the Dutch implementation variant, however, more customer and UBO data are requested and more government organizations are connected to the system than prescribed by the Directive. The Senate has not asked any additional information questions about this. This is remarkable given the recent court ruling on the unlawfulness of a system comparable to the System Risk Indication (SyRI).

Click here to read the letter that VBNL and Privacy First have sent to the Senate.

Click here for the advice of the Council of State.

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