In January of this year, the Financial Supervision Office (Bureau Financieel Toezicht, BFT) surreptitiously published its internal Wwft penalty policy. It had already been clear from decisions published previously that the BFT was enforcing a penalty policy linking the amount of the penalties to, inter alia, the turnover realised by the violating institution. Until now, however, it was unknown how the BFT chose those percentages.

According to the BFT’s website, the policy that was just published was developed internally back in June 2016. It elaborates on the BFT’s authority to impose penalties and, based on that authority, to reduce the penalty amounts prescribed by the Wwft. The policy sets out five penalty categories, with each being linked to a percentage of the turnover realised by the violating institution (or Wwft professional):

Category

% of turnover

% of capital

Category 1

1%

2%

Category 2

2%

4%

Category 3

3%

6%

Category 4

4%

8%

Category 5

5%

10%

In principle, the percentage of the turnover is determinative. If the party being penalised cannot afford the proposed penalty, then the penalty will be based on a percentage of the party’s capital.

The category of penalty depends on the seriousness and duration of, and the party’s culpability for, the violation. In this respect, the BFT makes a distinction between a violation of the duty to report unusual transactions and the obligations relating to customer due diligence (CDD).

Factors that determine the category of a violation of the duty to report are:

  • how risky the transaction was
  • the degree to which there was an indication that a report should have been made
  • whether the institution made a serious Wwft assessment
  • the total amount of the transaction(s), e.g., under EUR 15,000 (Category 1), more than EUR 100,000 (Category 3), or more than EUR 500,000 (Category 4)
  • the number of unusual transactions that were not reported
  • a combination of the factors above

If the seriousness of, and culpability for, the violation fall into different categories, the penalty is premised on an average. If there are multiple violations, the penalty is premised on the most serious. The fact that there are multiple violations can, in itself, be a reason for increasing the penalty.

Factors that determine the category of a violation of the CDD are:

  • the seriousness of, and culpability for, the violation
  • the percentage of files for which a violation is noted: 30%-50% (Category 1), more than 50% (Category 2), or more than 50% in combination with another factor
  • the number of violations
  • a combination of the factors above

When assessing the seriousness of, and culpability for, a violation of the CDD obligations, the BFT makes a distinction between four degrees of seriousness and culpability: minor (e.g., unstructured recordkeeping), average (e.g., customer ID not verified), serious (e.g., unknown UBO), and very serious (e.g., origin of funds is not investigated or failure to perform a required higher-scrutiny CDD). In a case involving both a violation of the duty to report and the CDD obligations, the BFT adheres to the factors for violating the duty to report. The violation of the CDD obligations is considered a factor for ‘raising’ the category.

Although the policy regarding multiple violations seems to be just a factor justifying an increase in penalty, it must be kept in mind that, in principle, each violation of either the duty to report or the CDD obligations is a separate legal act for which individual penalties may be imposed.