The Netherlands is poised for a significant transformation in its approach to combating money laundering. In a climate where current measures are increasingly seen as outdated and overly burdensome, both the government and the financial industry are pushing for reforms that not only tighten controls over illicit finance but also address unintended consequences like financial exclusion and privacy concerns.
Dutch government proposals for AML changes
Dutch Finance Minister Eelco Heinen has been vocal about the pressing need for reform. According to Heinen, the existing AML regime—particularly within the banking sector—has become “stuck.” He points to a culture of risk aversion and insufficiently targeted AML efforts that have, paradoxically, led to broader financial exclusion. Banks, facing heavy compliance burdens under the current regime, often implement overly cautious policies, which can inadvertently restrict access to essential financial services for low-risk customers.
Money laundering checks cost banks 1.4 billion euros annually, Heinen claimed. Banks in the Netherlands now jointly employ 13,000 people to monitor transactions and signal unusual patterns. That amounts to one in five bank employees focused only on detecting money laundering.
Five years ago, the previous Dutch administration proposed a series of modernisations to the AML framework. However, those proposals never materialized due to a mix of political and practical hurdles. Recent political shifts, along with the aftermath of the Dutch childcare reimbursements scandal which brought down the government of Mark Rutte, have created an environment more receptive to sweeping reforms.
Key elements of the proposed Dutch AML reforms
Refocusing reporting obligations
One of the most significant changes under consideration is the move from reporting “unusual” transactions to flagging only those transactions deemed genuinely suspicious. Under the current system, banks are required to report any activity that initially appears out of the ordinary, a practice that often results in an overwhelming volume of low-risk alerts.
By shifting to a model that emphasises “suspicion,” regulators hope to better focus investigative resources on high-risk clients and behaviours, in line with broader European Union standards.
However, defining “suspicion” remains a challenge. The lack of a clear, universally accepted definition could lead to discrepancies in reporting and enforcement, making the transition a critical area for careful policy crafting.
Enhanced data sharing protocols
Banks have expressed a strong interest in enhanced data-sharing protocols. The current system’s fragmented data landscape hampers the ability of financial institutions to pinpoint clients who pose a genuine risk of financial crime. With improved data-sharing, banks would be better equipped to collaborate with regulators and other financial institutions, enabling a more focused approach to AML efforts. This cooperation could lead to a reduction in unnecessary investigations and a more efficient allocation of resources.
Reduction of the regulatory burden
A key aspect of the proposed reforms is reducing the regulatory burden on financial institutions. According to advocates for change, the current one-size-fits-all approach has not only stifled innovation but has also imposed significant costs on banks. By recalibrating regulatory expectations, the government aims to create a more business-friendly environment that still upholds rigorous standards for financial integrity. This involves safeguarding customer privacy and promoting financial inclusion, ensuring that low-risk clients are not unjustly penalised by overzealous compliance measures.
Annual prioritisation of AML objectives
Banks have requested that a senior official or dedicated agency be tasked with setting national AML priorities on an annual basis. This move is intended to ensure that the system remains agile, capable of adapting to emerging risks and evolving criminal tactics. Such an approach would better align the Netherlands with regulations across the EU.
Alignment with the EU AML Package
The upcoming draft Dutch legislation, expected to be published in April, is set to incorporate new requirements from the EU AML ‘single rulebook’ package adopted last year. The EU single rulebook requirements will likely necessitate significant adjustments within the Dutch framework anyway, and also presents an opportunity to streamline processes overall.
Challenges in reforming Dutch AML laws
While there is broad consensus on the need for reform, achieving the right balance will be challenging. Some of the key hurdles include:
Definitional ambiguity: Clarifying what constitutes a “suspicious” transaction is critical. Without clear guidelines, there is a risk of inconsistent application across the sector.
Data privacy concerns: Enhanced data sharing, while beneficial for AML efforts, raises legitimate concerns about customer privacy and data protection. Establishing robust safeguards alongside GDPR and EU AI Act compliance will be essential.
Implementation costs: Reducing regulatory burdens should not come at the expense of weakening AML measures. Financial institutions and regulators will need to work closely to ensure that any cost savings are reinvested in more effective monitoring and enforcement mechanisms.
Political and institutional coordination: With the political landscape shifting since previous reform attempts, there will be a need for careful coordination among various stakeholders, including government agencies, banks, and international partners to maintain confidence in the Dutch AML regime.
The path forward for Dutch authorities
The proposed changes to the Netherlands’ AML framework represent a bold attempt to modernise a system that many agree is no longer fit for purpose. By refocusing reporting obligations, enhancing data sharing, reducing unnecessary regulatory burdens, and aligning more closely with EU standards, the Netherlands aims to create a more targeted and efficient approach to combating money laundering.
For the financial sector, these reforms offer an opportunity to transition from a regime long-characterised by risk aversion and over-reporting to one that prioritises intelligent, data-driven risk management.
As the government prepares to unveil draft legislation in April, the focus will be on how these proposals are received by the industry, and whether they can successfully balance the often competing demands of security, privacy, and financial inclusion.
