In the Satoshi Radio podcast of november 2019 (in Dutch), Simon Lelieveldt was invited to discuss the upcoming AMLD5 transposition into the Dutch laws. With Bart Mol en Wijnand Luijtjes he set out to explain it in terms that even their grandma could understand…. 😉
The European 5th Anti Money Laundering Directive ((EU) 2018/843) explicitly provides for a registration mechanism for crypto-service providers (those who offer fiat-crypto exchange services or provide hosted crypto wallets). While the Directive started out with the obligation of a license or registration regime for cryptoplayers, the possibility of a license regime has been explicitly been struck out in the final text, for considerations of proportionality.
However, the current text (november 2019) in Dutch Parliament lays out a supervisory regime in disguise, which is beyond the necessities of the AMLD5 and goes against the advice of the Council of State.. See the full update on this issue at my Medium blog.
Discussion in parliament: concern on costs, downplayed by Ministry of Finance
Despite strong and vocal warnings from Dutch crypto companies that the law would end up becoming a costly supervisory regime rather than the low cost accessible regime, the House of Parliament and Senate did approve the implementation law. Nevertheless, the Ministry of Finance was very clear that it would be proportional.
“A registration is an action and a license is being granted. That is truly something different”.
’The costs will be proportionate and really much lower than € 34.000 per year.’
Update 2021: We are now one year underway with the registration regime and we have witnessed that the crypto supervisor DNB failed to properly take onboard the Parliament explanations of the Ministry of Finance that a registration is merely an act. It has essentially applied a strict licensing procedure approach, failing to meet the 2 month deadline and applying risk scenario norms that are relevant for licensed institutions.
While already 2 months delayed in handing out registrations, in september 2020, DNB outlined a requirement for all registering parties, which did not find its basis in the law. Companies were forced to comply or shut down their business. As a result out of the 48 registering parties, some 38 were still in the race and 15 made it to the finish by end of November 2020. The companies all complied with the requirement.
DNB loses court case
One company, Bitonic, took DNB to court over this unlawful requirement and won the case, with the judge explaining that this September 2020 requirement on sanction screening was illegitimate and the registration process looked a lot like a licensing regime. In the end DNB agreed that it had unduly and disproportionally acted. What effectively happened was that DNB was frontrunning FATF-wallet screening requirements (see article here).
Other court case on cost coming up
At present the Dutch crypto companies are preparing for further law suits as DNB has incorrectly tried to apply the cost recovery regime for licensed companies onto the registered cryptocompanies. As a first step in the process DNB has swiftly admitted that it made one wrong calculation. However, a bill of almost 2 million euro still seems to be heading for 15 companies that were registered by november 2020. The discussion has become quite interesting as the local financial newspaper FD summarised the behind-the-screens discussion on cost recovery that played out between Ministry of Finance and DNB.
The long term perspective on this discussion may well be that the DNB supervision turns out to be temporary as the main supervisor could become the AFM. The pro-active initiative of DNB to visibly supervise crypto and be a strong enforcer will not really have turned out as they might have expected. Over the next years a couple of more pieces of open government information will be published that may further shed a light on the interactions that made DNB ignore the explicit letter and spirit of the AMLD5 and made them impose a de facto licensing supervisory regime (ignoring the legal advice of our Council of State in the process).