The Sumsuber

Best practices for KYC/AML

3 min read

AMLD5 in the Netherlands: How Crypto Companies Can Work With Dutch Clients

On 21 May 2020, AMLD5 came into force in the Netherlands in the form of the amendments to the Money Laundering and Terrorist Financing Prevention Act (Wwft). From now on, crypto service companies have to step out of the grey zone. What are the new strict requirements? We’ve gained insights into the multipage documents, just for you.

Who is affected

The new law covers the activity of two large categories of crypto companies.

  • Providers of exchange services between virtual and fiat currencies
  • Custodian wallet providers engaged in the safeguarding of private cryptographic keys on behalf of their customers, in addition to the holding, storing and transferring of virtual currencies

The companies who offer crypto-to-crypto exchanges are still not regulated. However, this could change due to the FATF Recommendations, which were adopted in June 2019. We’re constantly monitoring the situation. To be prepared for the changes, sign up to our newsletter down below.

What has changed

From 21 May 2020, crypto service providers became regulated in the Netherlands. It was the implementation of AMLD5 that made crypto companies comply with AML/CTF standards for the first time.

With AMLD5, European states get general recommendations for the necessary changes, and each state may choose how exactly they would like the changes to be implemented. The Dutch requirements for crypto companies turned out to be rigid.

  • Dutch registration is mandatory for work with Dutch clients
    If you work with Dutch clients, you must get registered with the Dutch National Bank (DNB), even if you already have an equivalent registration in another EU or EEA member state. To submit an application online visit the Digital Supervision Portal.

How is registration different from licensing? Both registration and licensing permit business activity in the sectors that need state supervision. However, the license is given for a certain period of time (e.g. for 1, 5 or 10 years) and warrants occasional supervision in cases such as license renewal or violation. On the other hand, registration warrants permanent state supervision for a company’s activities, post-registration.

  • Non-EU and Non-EEA companies can’t work with Dutch citizens
    To register with DNB, you need to establish a presence in the Netherlands, or any EU or EEA member state. The Minister of Finance is ready to make an exception for the companies that are resident, established or have their office in a third country, but the list of such countries hasn’t been announced yet.
  • Advertising for crypto services on the Dutch market is available with registration only
    If you conduct targeted crypto-service advertising on the Dutch market, you’ll need to get registered with DNB. Targeted advertising warrants the use of the Dutch language (e.g. on the website or in the contextual advertising) and using Dutch payment instruments (e.g. wallets, exchanges, etc).
  • Crypto providers must have well-adjusted KYC and AML processes
    To get registered with DNB, crypto companies need to demonstrate that they identify their customers, monitor transactions and can provide the Dutch authorities with this information. Clear processes of customer due diligence, sanction screening and transaction monitoring are a must.
  • Crypto providers must set up the procedure of reporting unusual transactions
    Your staff members should be educated and trained in the field of AML/CTF monitoring and should be able to report breaches of the law. If you identify any transaction, that seems to be involved in money laundering or terrorist financing, you should report it to the Dutch Financial Intelligence Unit (FIU-NL).

Fees for DNB registration:
1. Registration fee (including fit and proper assessments) – EUR 5,000.
2. Regular supervision fee – an amount will be calculated by DNB based on the measures taken for 2020. At the moment, the exact figures are not mentioned.

Deadlines. The law came into effect from 21 May 2020, and the transition period for existing companies will last until 21 November 2020.

  • Companies who requested registration before 21 May 2020 can continue their activity.
  • Companies who applied for registration after 21 May 2020, can’t offer their services while registration is pending.

Sanctions. Companies who do not apply for registration by 21 November 2020, must cease to operate. A fine of up to 250,000 USD can be imposed for an individual violation. Other possible penalties can be reviewed in the Dutch General Administrative Law Act, the Economic Offenses Act (EOA) and will depend on the Public Prosecution Service judgement.

Registered companies will go through a regular assessment. In the case where a company ceases to comply with the rules, the registration will be cancelled.

The сhanges in AML/CTF legislation have tightened the regime for the crypto sector in the Netherlands. Providers of crypto/fiat exchanges and custodian wallet services can carry out their direct and indirect activities with clients from the Netherlands only with a DNB registration.

This law doesn’t take into consideration crypto-to-crypto exchange services and other types of crypto companies. However, that may change soon due to FATF recommendations that were adopted in June 2019. To stay up to date with the situation and be prepared for changes, sign up to our newsletter down below.

Where to find out more