Keywords: Trust Companies, Hoekstra, Conduit Companies, DNB,
After earlier interventions, the cabinet is considering a complete ban on trust offices under the lead of Outgoing Minister Hoekstra of the Dutch Ministry of Finance. But the Trust sector feels as though Hoekstra is lumping legal and illegal trust offices together. Research shows that almost half of the trust administrators operate illegally outside the scope of the regulator; De Nederlandse Bank (“DNB”). Hoekstra therefore has doubts about the added value of a sector that poses a very high integrity risk and has great difficulty complying with legislation and therefore wants to investigate if integrity in the trust sector is possible at all. In which 'the economic advantages and disadvantages' of a total ban are studied.
Research into Trust activities
Trust offices manage letterbox firms and provide other administrative services to foreign companies. They are gatekeepers who must keep criminal flows of money out of the Netherlands. Abuses can have serious consequences. 'Illegal trust offices, for example, do not comply with the requirements of client screening and transaction monitoring,' says a ministry of finance spokesperson. 'This ensures that rogue parties are less likely or not on the radar.'
It now appears that trust offices that have disappeared are still active, but without the regulator DNB having any insight into them. Research agency SEO Economic Research estimates on the basis of data analysis that it concerns approximately 45% of all trust administrators. But illegal trust providers have fewer clients, which means that according to the research published last month, about 15% of the sector is illegal.
The Dutch Trust organisation; Holland Quaestor says it supports Hoekstra's fight against illegal trust companies. We don't want to know anything about illegal trust services, that reflects negatively on the sector, which is working hard to tackle abuses," says chairman Martin Wörsdörfer. He is shocked by Hoekstra's exploration of a total ban, which to him comes out of nowhere. 'With a ban, there is precisely the risk that everything will disappear into illegality.'
How Trusts avoid supervision
According to the report of SEO DNB Many of the (illegal) Trust offices, avoid supervision by offering services that are cut loose from each other, so that they are no longer legally a trust office. That means far fewer rules and supervision costs. Some firms hire trust administrators temporarily to avoid the law. Or trust companies send employees to retire, after which they secretly continue working without a license.
This is a sensitive issue for The Netherlands because abuses in the trust sector are particularly seen by many on a national and international scale as signs of The Netherlands as a tax haven. According to SEO, the Netherlands in recent years - by stricter rules become less popular as a final destination of money flows - but it has remained to be a popular destination as a transit country.
Hoekstra was already planning to ban Conduit companies. These are subsidiaries of trust offices through which money is often channelled. Assignments of these companies will also be prohibited if they involve countries that are associated with money laundering or terrorist financing. The minister wants to get legislation for this through the Chambers after the summer 2021.
Now the minister is also going to discuss with DNB how to better tackle evasion of supervision and how to get all of the illegal trust offices in picture. DNB, the Fiscal Intelligence and Investigation Service (Fiod) and the Public Prosecution Service already started with this in January. Hoekstra is also considering stricter penalties for illegal trust services. Currently, DNB can impose fines of up to €5 mln and the judge can impose a two-year prison sentence.
We will have to wait and see what is going to happen with the Dutch trust sector in the coming years. But what is becoming more evident is the importance of actually exploring genuine business in The Netherlands.
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NAZALI TAX & LEGAL
 SEO - Economisch onderzoek. (2021, juli). Illegale Trustdienstverlening. https://25cjk227xfsu3mkyfg1m9xb7-wpengine.netdna-ssl.com/wp-content/uploads/2021/07/2021-01-Illegale-trustdienstverlening.pdf
 Financieel Dagblad. (2021, 23 augustus). Hoekstra onderzoekt verbod op trustkantoren vanwege misstanden. FD.nl. https://fd.nl/ondernemen/1408611/hoekstra-onderzoekt-verbod-op-trustkantoren-vanwege-misstanden
 De Minister van Financiën. (2020, april). Wijziging van de Wet toezicht trustkantoren 2018 in verband met aanvullende maatregelen om de integriteitrisico’s bij trustdienstverlening te beheersen. Ministerie van Financiën.
 Article 48 and 49 of WTT 2018).