Integrity of the financial markets

Criminals seek to misuse the financial system, for example to launder illegal assets. To combat financial crime, the Netherlands has passed laws to assure customers that they are dealing with honest institutions.

Laws to protect the integrity of the financial markets

The Netherlands wants to prevent and punish misuse of the financial sector. Financial institutions are required to check the identities of their customers and screen them. This reduces the risk of their doing business with terrorists or criminals. A number of laws protect the integrity of financial institutions.

International approach to money laundering and terrorist financing

Misuse of the financial system does not stop at the border. The Financial Action Task Force (FATF) has been established to combat money laundering and terrorist financing internationally. The Dutch Money Laundering and Terrorist Financing (Prevention) Act (WWFT) incorporates many recommendations made by the FATF. European directives on money laundering have also been incorporated into the WWFT.

Prevention of terrorist financing

Since the attacks in New York on 11 September 2001, the rules to prevent the financing of terrorists have been tightened up. All member states of the United Nations Security Council, for example, are required to freeze the balances of known terrorists. Financial institutions must also screen their customers and report unusual transactions. Terrorist financing has been made a criminal offence.

Anti-money laundering policy

The Netherlands takes a hard line on money laundering. Money laundering is a serious crime. Laws have been passed to make it easier to detect money laundering. The most important law is the Money Laundering and Terrorist Financing (Prevention) Act (WWFT). Under the WWFT, financial institutions are required to screen their customers and report unusual transactions to the supervisory authority.

Supervisory activities to counter money laundering in the Netherlands are a joint responsibility of:

Trust offices

Trust offices engaged to manage companies and other legal persons can be misused to launder money and carry out other crimes. To prevent this, the government has introduced the Trust Offices Supervision Act (WTT) . Trust offices are supervised and licensed by De Nederlandsche Bank (DNB).

DNB checks, for example, that a trust office’s directors and policymakers are reliable and have the necessary expertise. New directors must always be screened.

Trust offices must keep files on all their clients. The files must show that the services are not susceptible to misuse or serve a criminal purpose.

Market abuse and insider dealing

A company can deliberately influence its share price by releasing incorrect information or withholding price-sensitive information (market manipulation). To protect the integrity of the securities markets, companies in the Netherlands must share information and report suspicious transactions.

An investment firm must report suspected insider dealing and market abuse to the Netherlands Authority for the Financial Markets (AFM). The AFM then decides whether it needs to conduct an investigation.

The same rules on securities dealings apply wherever possible throughout the European Union (EU). The EU has issued directives and a regulation that all member states must observe. The Dutch Financial Supervision Act (WFT) also protects investors against market abuse and insider dealing.

The supervisors of the securities markets in Belgium, France, Portugal and the Netherlands have drawn up a guideline on how to respond to market manipulation. It includes several examples of manipulation of the securities markets, including opening and closing auctions of rights during the terms of a rights issue. The supervisory authorities consider these practices to be offences.

Responsible ministry