Bank relationships may be weaker than you would like

Since the Twin Towers attack in 2001 much has changed in the banking sector, and the Netherlands is no exception. A significant consequence has been the intensified and worldwide government hunt for terrorism and its enablers. One of these enablers is money. In the Netherlands, the ‘’Wet ter voorkoming van witwassen en financiering van terrorisme’’ (the law to prevent money laundering and terrorism financing) is aimed at disrupting, and eliminating illegal financing. The traditional way of moving money from one place to another is facilitated by banks, but there have been and will always be exceptions. In the past decade for example, crypto currencies and “the Dark web” became new additions. Nevertheless, banks are watched closely by national and international overseeing bodies that scrutinize bank traffic, leading to enormous consequences. The compliance function, anti-money laundering analysis and reporting departments have expanded significantly.

Agencies assigned to regulate and oversee banks have now imposed very strict requirement or conditions for when banks are taking on new clients, which also affects the existing relations with clients. In the past years the largest banks in the Netherlands (ABNAmro, ING and not yet fined but under review Rabobank) have been subjected to extensive investigations and have, in the opinion of the regulators, not been successful in meeting the conditions. Consequently, they have been met with hefty fines. Similar incidents have occurred but not (yet) on this scale. This resulted in even more careful behavior, with banks scrutinizing the backgrounds of clients and their money even though it contradicts the ambitions of wanting to improve relations with clients through simplification and digitalization. This is a dilemma for the financial sector, and remains a work in progress.

Our practice serves many internationals active or living in the Netherlands. In the last two years, some clients have experienced serious difficulties when opening a bank account in the Netherlands, or, changing a product tied to an existing bank account (mortgage, investment account, insurance) as they lived outside the European Union. Some clients are on a temporary assignment and unless you cancel your bank relationship as a whole while you domicile outside the Netherlands, changing it becomes difficult if not impossible.

Two recent decisions from the Dutch Institute for Financial Disputes, KiFID (1 December 2022 and 5 December 2022; in Dutch), ruled in favor of the banks terminating client accounts despite the decades-long relationships. In both cases the respective clients failed to provide sufficiently acceptable answers to rather specific queries on where they actually really lived, or proof of source of income or of wealth.

If this for example happens during an international secondment of an account holder, an extension of their home loan may prove not possible making it impossible to return home, unless they can prepay the home loan in cash.

Three take-aways:

• Please get your administration in order, especially if a beneficiary receives amounts, together or in one payment over €15,000. It makes sense to download bank transactions of past years, just in case.
• Before you move abroad, and more so if the destination is outside the EU, please review your other financial relationships with your bank. If you need to adjust it while abroad it may prove to be hard, and end up damaging the relationship with your bank.
• Be careful when answering queries of your bank. You may feel like the questions asked are inappropriate given the history you have with the bank.

However, the bank has a legal obligation to verify client behavior and respective money sources. While arguments have not emerged yet, please consider using a financial advisor to sort through the questions and draft a suitable reply. This will prove to be a lot cheaper compared to having to call in for legal advice to prove your point or contest the bank’s decision intention.

Two final notes:

• This is not a unique approach for the Netherlands. It is a global bank responsibility. Oversight and bank practices are not exactly the same everywhere; both the content of the approach and the tone of voice vary considerably.
• Rumor has it the €15.000 hurdle mentioned above may come down, hence having all bank transactions available later for you, your financial advisor or your legal counsel makes sense.