Netherlands Needs Overhaul to Fight Billions in Laundered and Terrorist Money

April 21, 2011 International Tax CooperationTaxation in Netherlands

Money laundering in the NetherlandsThe Netherlands is making good efforts to combat international money laundering, financial crimes and terrorist financing, but several shortfalls in its infrastructures and legislation means that the country is still susceptible to the crimes.

According to IMF research released on April 19th in the Detailed Assessment Report on Anti-Money Laundering and Combating the Financing of Terrorism report, the level of proceeds from criminal activities in the Netherlands is now at approximately USD 14 billion per year, equivalent to approximately 1.8 percent of the national GDP. Fraud and tax fraud are currently seen as making up a significant portion of the criminal profits. According to the report the country’s large financial sector also makes it a target for foreign fund flows for the purposes of money laundering.

The report praised the Netherlands for its aggressive and effective approach to prosecutions for the crimes of money laundering and other financial offenses. However, the country’s Financial Intelligence Unit (FIU) was brought into question, with no tangible evidence that the analytic work of the unit has made any significant positive impact on the preventing international and national criminal activity.

The legal framework applicable to financial crimes and money laundering in the Netherlands was considered to be generally adequate, but there is a perceived shortfall in relation to the definition and treatment of beneficial owners of business structures. In particular the IMF is concerned that the obligation for financial institutions to investigate and understand the business control structures of their clients only applies in high-risk situation. There is also no obligation to determine whether the beneficial owner of a client’s structure is a “politically-exposed figure”, and a remaining lack of transparency for national business entities operating under foreign control. The Criminal Procedures Code of the Netherlands should also be revised in order to class money laundering as an extraditable offense, and to provide overseas tax authorities with greater assistance in collecting evidence during the investigation and prosecution of financial crimes.

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