As the supervision of trust offices improves, illegal practices emerge elsewhere
Research image: Ibrahim Boran via Unsplash
A new evaluation finds that the Dutch Trust Offices Supervision Act has strengthened the integrity of trust offices. These provide financial and legal services to businesses and are supervised by De Nederlandsche Bank to prevent money laundering and tax avoidance.
Since the Trust Offices Supervision Act (Wtt 2018) significantly tightened the rules, supervision and enforcement have become more effective, according to an evaluation report published by SEO Amsterdam Economics commissioned by the Ministry of Finance. Professor of Company Law Harold Koster contributed to the study. Cooperation between the parties involved has also improved, including DNB, the Fiscal Information and Investigation Service (FIOD), the Public Prosecution Service (OM) and the Tax Administration.
Shifting problem
At the same time, the report identifies a persistent problem: as rules are tightened and problems are addressed in one area, new issues tend to emerge elsewhere – a phenomenon known as the ‘waterbed effect’. For example, trust services may shift to illegal trust offices, alternative service providers, or foreign jurisdictions. It is hard to ascertain the scale and impact of this trend, which is precisely the problem. Illegal trust service providers remain largely out of sight, though this is where integrity-related risks are often the greatest.
The report recommends strengthening efforts to tackle illegal services through better research, more effective enforcement, and smarter use of data. Combining data sources could help identify potentially illegal trust service providers at an earlier stage. The study also calls for greater European cooperation. Once the new European anti-money laundering rules (AMLR) apply across all EU Member States, it will be useful to assess how the Netherlands compares with other countries.
The full report (in Dutch) is available at seo.nl.