On 18 October 2022, the Trade and Industry Appeals Tribunal (College van Beroep voor het bedrijfsleven, CBb), ruled (full decision here) that bunq, an (online) bank located in the Netherlands, did not commit all offences on which DNB based its disciplinary instruction to bunq in 2019. In particular, bunq’s method of screening customers in order to establish the purpose and intended nature of the business relationship was found acceptable – contrary to the initial instruction from DNB.
The CBb, the highest economic administrative court in the Netherlands, did however find that bunq failed to investigate source of funds (Article 3(2)(d) of the Dutch Money Laundering and Terrorist Financing Prevention Act (Wet ter voorkoming van witwassen en financieren van terrorisme, Wwft)) and to obtain proper permissions for the on-boarding of politically exposed persons (PEPs) (Article 8(5) of the Wwft).1
Key takeaways
- It can be derived from the decision that companies such as bunq enjoy a certain level of discretion to select a method to comply with some obligations in the Wwft. Whereas the Wwft imposes a high amount of obligations to financial institutions, the CBb decision leaves room for the exact manner in which these financial institutions adhere to the obligations in the Wwft.
- It follows from the decision that the use of digital CDD tools and data analysis options is actually acceptable, according to the CBb.
- The bunq-decision may provide some space for financial institutions to tailor CDD processes to fit their business in a more suitable way. Nevertheless, it cannot be ruled out that the DNB will take a conservative view in this regard.
Background
Bunq is an online bank, which processes all its payment traffic through its app. Once a customer signs up, bunq assigns them a “regular user profile” (e.g., age between 18 and 60, up to 150 payments per month, maximum balance of €10,000). This profile is based on customer data analysis and artificial intelligence, and the vast majority of bunq’s customers fall within the parameters of this risk profile.
DNB, however, did not approve of this method. According to DNB, assigning such regular user profile to each new customer is not the same as performing customer due diligence (CDD) on the purpose and intended nature of the business relationship. In 2019, DNB therefore issued an instruction in which the regulator instructed bunq to follow a specified course of action. DNB’s chief concerns were that bunq failed to determine the purpose and intended nature of the business relationship, did not (sufficiently) identify and verify the ultimate beneficial owner of its customers, and did not adequately continuously monitor the business relationship with its customers.
Bunq filed an objection against DNB’s decision to issue a direction. In an unusual move, bunq filed an appeal with the court in Rotterdam once DNB refused its objection. Banks do not often elect to fight their battles with their regulators in the courtroom, and a case that makes it to the CBb is even less common.
CBb decision
The CBb ruled that the obligation to determine the purpose and intended nature of a business relationship as laid down in Article 3(2)(c) of the Wwft does not prescribe the exact method to be used for this assessment.2 As a result, of this judgement, bunq was considered to be able to determine the purpose and intended nature of the business relationships on the basis of the risk profile which was concluded in the course of their chosen method of assessment. The CBb found that bunq was therefore able to perform continuous transaction monitoring on the basis of the determined purpose of the business relationships.3
The aforementioned decision in favour of bunq is perceived as a certain legal victory for bunq.4 However, the CBb also ruled that two other aspects of the DNB’s instruction may be upheld. First, this includes the DNB’s conclusion that bunq violated Article 3(2)(d) of the Wwft insofar as it concerned the investigation into the source of the funds.5 Second, the CBb confirmed that bunq violated Article 8(5) of the Wwft, which determines that an institution, such as bunq, should maintain sufficient and suitable risk management systems for the determination of whether a client or ultimate beneficial owner is a politically exposed person.6 In summary, this means that although bunq prevailed in relation to the method of the determination of the purpose and nature of business relationships, they are still bound by the other two aspects of the initial instruction of the DNB.
DNB has indicated that they will take the decision into account during their discussions with the financial sector on the risk-oriented interpretation of statutory obligations and the use of technology in fighting money laundering.7
[1] CBb decision of 18 October 2022, ECLI:NL:CBB:2022:707.
[2] CBb decision of 18 October 2022, ECLI:NL:CBB:2022:707, par. 8.6.3.
[3] CBb decision of 18 October 2022, ECLI:NL:CBB:2022:707, par. 9.3-9.5.
[4] For example, the Dutch financial newspaper (het Financieele Dagblad) used the headline “Historically harsh judgement on anti-money laundering policies of DNB in bunq-decision”.
[5] CBb decision of 18 October 2022, ECLI:NL:CBB:2022:707, par. 10.4.
[6] CBb decision of 18 October 2022, ECLI:NL:CBB:2022:707, par. 11.4.
[7] DNB’s reaction to the CBb decision dated 18 October 2022.
