The past year has seen a vast increase in attention paid to sanctions legislation due to the ongoing war in Ukraine. Investigations into non-compliance with Anti-Money Laundering (AML) regulations also remain a high priority for Dutch enforcement authorities. In addition, the Dutch Public Prosecution Service (DPPS) continues to focus on the prosecution of individuals, in cases where a legal entity enters a settlement with the DPPS. We expect increased scrutiny of tax integrity, cybercrime and business responsibility for human rights in 2023.
- Investigations trends/developments
- Significant law reforms impacting corporate criminal liability
- Sectors targeted by law reforms or enforcement action
- Cross border co-ordinated investigation or enforcement activity
- Predictions for 2023
Corporate crime defence
The DPPS remains focused on the criminal liability of individuals following high value settlements with legal entities. Implicated individuals are not automatically included in such settlements. The DPPS adheres to its ‘Instruction on High-Value Settlements’ which prescribes that implicated individuals will be prosecuted if possible. Each case will be judged on its own merits in connection with the DPPS’s decision to prosecute. For example, four former board members of a financial institution were recently identified as suspects in an ongoing investigation, while that financial institution reached a large settlement in the same case two years ago.
Anti-bribery and corruption
In July 2022, the DPPS issued its Instruction on the Investigation and Prosecution of Domestic Official Bribery which shows a renewed focus on the investigation and prosecution of bribery of domestic public officials. Although the Instruction relates to domestic bribery, it is expected that the focus on bribery of foreign officials will also increase.
Mediation and negotiated justice in criminal cases
Mediation plays an increasingly significant role in the Netherlands, including in criminal cases. As of 1 January 2023, the Dutch Criminal Code contains a new provision for a criminal case to be referred to mediation by a prosecutor or judge as part of a three year pilot for such mediation.
There is a particular willingness to engage in mediation by the Dutch tax authorities, and we therefore also expect to see this in tax fraud enforcement. Mediation helps foster a constructive relationship between the Dutch tax authorities and the parties involved after the settlement of the dispute.
‘Negotiated justice’ is another trend, involving an agreement between the prosecution and the defendant, such as a lower sentencing demand by the prosecutor, in exchange for a guilty plea. Although such agreements do not have a legal basis, they seem to be gradually accepted by different courts.
Other enforcement instruments
The DPPS used its inquiry power in a recent civil case after a miscreant former board member was reinstated as managing director in an IT company which provides services to the Dutch government. The right of inquiry is a form of dispute resolution in which interested parties request a special enterprise chamber of the court to investigate a company. The objectives of an inquiry procedure are remediation, the restoration of healthy relations within the company, opening up matters and determining who is responsible for possible mismanagement. In the right of inquiry, the interests of the enterprise driven by the company are the central focus. The DPPS rarely uses this power, which makes it striking that it has chosen to do so now. We are curious whether the DPPS will use this power more often when ESG issues are at stake.
Corporate criminal liability
The government’s ‘Money Laundering Action Plan’ proposes that an institution should, under certain conditions, take reasonable steps to investigate whether another institution has provided or refused an institution to certain high-risk clients, to prevent customers from ‘shopping around’ for an institution.
The requirement to register Ultimate Beneficial Owners (UBO) of trusts recently entered into force. UBOs of trusts must be registered before 1 February 2023. The UBO register currently cannot be accessed by the general public following a judgement by the Court of Justice of the EU about the access to the (Luxembourg) UBO register violating the right to privacy. Despite this, the obligations under the Dutch AML Act remain applicable, including the obligation to obtain proof of registration of UBOs in the register.
In 2022, the Dutch Child Labour Due Diligence Act was expected to come into force requiring companies that have a reasonable suspicion that child labour may be involved in their manufacturing process to develop and implement action plans to address these risks. Instead, the Dutch government will strive to incorporate this Act as part of broader EU legislation on international responsible business conduct.
The war in Ukraine has led to an unprecedented array of adopted sanctions in the European Union (EU). There has been an increase in the number of investigations for sanctions violations, with a focus on asset freezes and circumvention of sanctions. Supervision is also focused on the use of dual-use goods and unusual transactions to fall-back countries such as Kazakhstan. As a result, sanctions are a trending topic in many sectors and companies must remain vigilant around sanctions legislation. We expect a growing focus on sanction enforcement in the coming year.
Cybercrime has been growing exponentially over the past few years. Moreover, the DPPS is noticing an increase in the fusion of more traditional crimes and cybercrime. To effectively counter cybercrime, the Dutch Ministry of Justice and Security recently implemented a two-track system. The first track focuses on prevention of cybercrime and limiting the impact of cybercrime on victims. The second track focuses on investigation, prosecution and disruption. The prevention of cybercrime and the incorporation of a cyber-defence policy is a priority on an EU level too. A new proposed EU regulation aims to increase the cybersecurity resilience of EU Member States. The new legislation sets stricter requirements for companies, governments and infrastructure, and covers new “essential sectors” such as energy, transport, banking and health.
Whistleblower directive – implementation in Dutch law
The Dutch law to implement the 2019 EU whistleblowing directive was adopted on 20 December 2022. Whistleblowing was already partially regulated under Dutch law, but the newly adopted law has a broader scope. Under certain conditions, the Whistleblower Authority will be able to impose sanctions on employers through administrative law. The Whistleblower Authority may impose sanctions if the employer does not behave properly towards the whistleblower, does not follow up on the recommendations of the investigation department or has not set up a proper internal reporting channel.
In addition, employers are obliged to designate independent officials to whom a report can anonymously be made in their reporting procedure. This independent officer must have certified training, take an oath, and cannot work for the company. A lawyer is mentioned as an example of an independent officer. The law is expected to enter into force on 1 July 2023.
The scope of legal privilege in tax matters in the Netherlands was a hotly debated topic. A draft bill proposed that the legal privilege of lawyers and civil-law notaries would only cover information that is directly linked to a lawyer’s activities aimed at the determination of the legal position, representation and defence of their clients and advice before, during and after legal proceedings. The draft bill was met with criticism, including from the Dutch Bar Association and the Royal Notarial Association. Subsequently, the draft bill was amended and the current draft will not affect the lawyer's legal privilege.
As we predicted last year, the Dutch Central Bank (the DNB) has started imposing fines on exchange services between virtual and fiat currencies and custodial wallet providers for not complying with the registration requirement under the AML Act. The DNB will continue to closely monitor both registered providers as well as foreign providers without registration. Acting in breach of the registration requirement is a criminal offence under the Economic Offences Act (Wet op de Economische Delicten). The DNB focuses on institutions more recently placed under their supervision like audit firms and payment service providers, in addition to the focus on traditional financial institutions. Performing customer due diligence, unusual transaction reporting, and complying with other AML rules properly are vital responsibilities that the DNB monitors closely. There is, however, some room for innovation: a recent court ruling permitted the use of artificial intelligence as an aid for certain customer due diligence obligations under AML regulations.
DNB and the DPPS also work together for enforcement purposes. DNB notified the DPPS of potential breaches of the Dutch AML Act within a Dutch financial institution, and the DPPS recently announced it is investigating those alleged breaches. Prior to this investigation, two other Dutch financial institutions already negotiated large out-of-court settlements for culpable money laundering.
The European Public Prosecutor’s Office (the EPPO) has opened more than 4000 investigations across the EU since commencing its work in June 2021. One ongoing complex investigation into EUR 2.2 billion worth of VAT fraud is currently active in 14 EU Member States, including the Netherlands.
- We expect the Dutch enforcement authorities to have a growing focus on the financial sector, including traditional institutions (banks) as well as new participants such as crypto exchanges and electronic money institutions. Moreover, we expect more investigations into corruption.
- The Ministry of Finance has asked citizens and businesses to report conspicuous tax arrangements 'that comply with the letter of the law, but not with its spirit'. Reports can be made until the end of January 2023. After that, these reports will be investigated. In general, we expect an increased focus on tax integrity issues.
- The extensive EU sanctions package against Russia has led to a desire to renew the Sanctions Act, the Dutch legislation on the enforcement of sanctions violations. A draft bill for the modernisation is expected in the course of 2023.
- A bill is being drafted (Confiscation of Criminal Assets Bill) to enable the DPPS to confiscate criminally acquired assets without a criminal conviction (non-conviction based confiscation).
- We expect that the Dutch Parliament will start deliberations on the proposal for the judicial review of high transaction settlements. An independent Review Committee currently undertakes this review. At present, the Dutch Code of Criminal Procedure is being modernised. This modernisation includes the replacement of the Review Committee by a judicial review.
This article is part of the Allen & Overy Cross-border White collar Crime and Investigations Review. Please visit the review homepage for our overviews and insights in other jurisdictions.
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