Combating money laundering part 3: status in 2021

Disclosure system in place for unusual transactions ripe for next step

Private parties are disclosing more unusual transactions, law enforcement agencies are referring more cases to the Public Prosecution Service (OM) and more money laundering cases are being taken to court and prosecuted. The Netherlands Court of Audit concludes that there have been significant improvements combating money laundering in recent years but there are still opportunities to work more effectively. The Financial Intelligence Unit (FIU), law enforcement agencies and OM do not yet work optimally. They cannot guarantee that suspicious transactions with the highest risk will be investigated and ultimately prosecuted.

Improvements combating money laundering, time for the next step

Improvements combating money laundering, time for the next step
This audit found that the Minister of Finance and the Minister of Justice and Security (J&V) had made significant and meaningful improvements to combat money laundering in recent years and had increased their insight into the nature, scale and risks of money laundering. Partly in response to these improvements, they had introduced policy and monitoring and revised policy implementation. They had also established and organised alliances to share knowledge on money laundering transactions and combat them. The ministers had given higher priority to money laundering in recent years and released budgets to combat it. It is therefore to be expected that there were also improvements in the results that we used as indicators of the success of combating money laundering. Disclosing institutions such as banks, accountants and notaries have disclosed more unusual transactions in recent years. The Financial Intelligence Unit – Netherlands (FIU-NL), which receives and analyses the disclosures, has classified more of them as suspicious; the law enforcement agencies have referred more money laundering cases to the OM and the OM has in turn taken more cases to court. Finally, the courts have sanctioned more money laundering cases. 

We conclude from our audit that the disclosure system does not yet wok optimally and unusual and suspicious transactions could be dealt with more effectively and efficiently. We found that the law enforcement agencies and OM cannot guarantee that suspicious transactions with the highest risk will be investigated further and followed up where necessary. Furthermore, law enforcement officers can unintentionally investigate the same suspicious transactions without knowing of each other’s work. FIU-NL reports suspicious transactions simultaneously to all the law enforcement agencies but they do not make agreements on who will assess and investigate which transactions. The use of scarce financial expertise is therefore sub-optimal. Furthermore, the way in which FIU-NL shares intelligence on suspicious transactions with the law enforcement agencies is open to improvement. The agencies currently have difficulty selecting the transactions that will probably have the best results in terms of combating crime from the information provided by FIU-NL.

There are therefore opportunities to tackle money laundering more effectively and efficiently so that more justice is done to the efforts taken by private parties such as banks, currency exchange bureaus, accountants and notaries to disclose money laundering. In our opinion, the disclosure system in place for unusual transactions is ripe for the next step.
 

What are our recommendations?

Recommendation: put conditions in place to ensure effectiveness 

We recommend that the Minister of Finance and the Minister of J&V continue the positive developments regarding the selection of suspicious transactions and put the right conditions in place to optimise the effectiveness and efficiency of the disclosure system. The ministers can do this in cooperation with FIU-NL, the law enforcement agencies, the OM and the Anti-Money Laundering Centre (AMLC) by:
 

  • improving the FIU-NL’s provision of information to the law enforcement agencies such that they can identify, assess and follow up relevant information faster and more easily; 
  • ensuring that the transactions with the highest risk are investigated and followed up where necessary, ensuring that information on these transactions is collected and making optimal use of scarce financial expertise. This can build on initiatives taken in 2021 by the FIOD, the National Office for Serious Fraud, Environmental Crime and Asset Confiscation and the AMLC, such as the development of monthly reports and the identification of suspicious transactions involving suspects that are not known to the law enforcement agencies.

Recommendation: improve insight into efficiency

We also recommend that the Minister of Finance and the Minister of J&V improve their insight into and accountability for the efficiency and effectiveness of anti-money laundering measures and the part played by the disclosure system. They can do this together with FIU-NL, the law enforcement agencies and the OM by: 

  • formulating specific goals for what they want to achieve and setting targets for when anti-money laundering measures and the disclosure system are efficient and effective. The ministers can do this by establishing a concrete link between what their ambitions (measurable goals with performance indicators and targets) and the measures and budget necessary to achieve the ambitions; 
  • deciding what information is needed to determine whether they are achieving their ambitions with the budget and collecting that information as from 2023. 

Why did we audit measures to combat money laundering?

We have audited money laundering on two previous occasions. In 2008, we published Combating money laundering and terrorism financing (Netherlands Court of Audit, 2008) and in 2014 we published Combating money laundering, status in 2013 (Netherlands Court of Audit, 2014).

We carried out this third audit on account of the sharp increase in disclosures of unusual transactions by institutions such as banks. According to FIU-NL, which receives and analyses the disclosures, the number of disclosures has risen from about 200,000 in 2011 to more than 722,000 in 2020 (see chapter 3). For this reason and given the findings of our earlier audits, how the closures are dealt with is even more relevant.

This third audit looked at the situation in 2021 and asked whether the Minister of Finance and the Minister of J&V had resolved the shortcomings found in the past. We looked in particular at the operation and results of the disclosure system, which is pivotal to combat money laundering and other forms of crime.

Current status

The audit report was published on Wednesday 8 June 2022.