02/08/2022
Relevant Case-law
The Kingdom of the Netherlands
1. The Netherlands Supreme Court dated 9 July 2019, alternative scenario :
The Court of Appeal based its conviction on the indirect method of proof. In short it means that an accused can be convicted of money laundering even though the predicate offence from which his illegal (and laundered) earnings originated from, is unknown: the Court only needs to exclude any legal source of origin. This can be done by following six steps.
So first of all, there is no specific predicate offence to connect to the laundered objects. Second, whether there a suspicion of money laundering. If so, how does the accused respond when confronted with this suspicion; fourth, can the accused provide a statement that is concrete and more or less verifiable – and not highly unlikely? Fifth, if that’s the case, police and the Public Prosecution Service are obliged to further investigate this statement. Sixth, based on the outcome of such an investigation the Court has to decide whether the accused statement is valid: if not and a lawful origin can be excluded, the accused can be convicted of money laundering.
In this particular case the accused had three bank accounts in which cash sums totaling more than € 300,000 were deposited over the course of about six years. During the appeal the question arose whether the accused’s statement on the origin of this amount was sufficiently concrete and verifiable and not highly unlikely. With respect to the origin of the money, the accused stated that he had acquired large sums of money from, inter alia, property sales, revenue from a snack bar, poker winnings, rent and the sale of figurines and gold. The accused kept the money at home and, on occasion, at his friends’. Money would sometimes also be deposited in bank accounts, with a view to make payments that required bank transfers. Investigation into his tax returns showed that the accused did not have any income or assets which could explain the cash deposits. Nor did the accused submit any evidence that showed a record being kept of the cash flows. The accused has not given any substantiation or explanation with regard to the cash flows that led to the cash deposits in the three bank accounts. The Court of Appeal thus concludes that the accused has not in any way provided a statement that is both concrete and verifiable in terms of the origin of the cash deposits. It therefore determines that there is no need for further investigation of the accused’s statement and convicts the accused of money laundering. The Supreme Court does not deem the Court of Appeal’s judgment to be incomprehensible since the cash flow was not made transparent, either prior to and during the period found.
The accused was sentenced to a 12-month imprisonment.
2. Overijssel Court, 13 February 2018, cash in rolled chicken meat :
The suspect has emerged during a money laundering investigation, aimed at co-suspects in Aruba. The investigation showed that the suspect spoke in veiled terms with co-suspect X about moving large amounts of cash. Subsequently in Aruba a sea container was seized in which a cash amount of €2,833,340 was found in boxes with chicken products. The sea container was shipped by company A, of which the suspect was the sole shareholder. When the suspect was arrested in Aruba he stated that he was not only involved in this money transport, but also in an earlier transport of €4,000,000. The money allegedly originates from co-suspect Y.
According to the court the transport of two large cash amounts justifies the suspicion of money laundering. Because of the way in which the money was transported (and the security risks involved) and because it is a well-known fact that various forms of crime involve large amounts of cash. The suspect did not give a statement explaining the origin of the cash. This means that the court reaches the conclusion that the amounts of money must originate from crime. According to the court the suspect laundered the two amounts of money, totaling €6,833,340.
Among other things, the Public Prosecution Service also charged the suspect with laundering an amount of €975,000. According to the court, the case showed that company A supplied meat products to (among others) company E (established in Bulgaria). A part of the invoices, however, was issued in the name of company B (established in Panama). As a result, it seems as if company B supplied meat to company E, whereas the business accounts show that everything was supplied by company A. This means that the invoices (to the amount of €972,579) to company B are false and that the flows of money –therefore- originate from crime. Company B subsequently provided loans to the amount of €975,000 to companies C and D (both established in Bulgaria). This means possession and turning over of money originating from crime. The investigation shows that all the companies involved are affiliated with the suspect. Therefore, the court imputes all the acts between the companies to the suspect and as a result he is considered to be the perpetrator of money laundering.
Misuse of trade flows to move values may indicate trade based money laundering. Criminal money is moved internationally through trade and is given a seemingly legal origin. In this case it is unclear whether the €972,579 was criminal money or that it concerned a tax structure. The court dismisses that question and argues that the money had a criminal origin from the moment that company B paid company E as a result of false invoices.
The suspect is also convicted of laundering €309,000 and €17,000. Considering the duration and frequency of the acts the court is of the opinion that it concerns habitual money laundering.
3. Court of Justice in The Hague, 15 September 2017: Money laundering by filing a tax return
This was a case where fraud in medical expenses was brought to light. False invoices were made up in which more hours were charged than had been given in treatment. A substantial portion of the amounts that were deposited in the bank account of the health care provider in question carne from payments of criminal origin. The suspect (managing director of the health care provider) used the bank account for making payments for the purchase of a house and a car.
The judge ruled that this was a case of money laundering, seeing that these purchases were (in any case partially) financed by money from criminal activities, and it was no longer possible to trace whether, and if so to what degree, they had been combined with legally obtained funds. The suspect argued that income tax had been paid over the extra hours that had been invoiced. According to the judge, the fiscal declaration of that income can be interpreted as an act of concealment and considered punishable as a form of money laundering.
The standpoint that filing a tax return gives the income as it were the appearance of legality, and thus constitutes money laundering on its own, is open to discussion. This is certainly the case given the fiscally valid concept 'fiscal neutrality': in principle, for income tax purposes it is not important whether the income has been earned by criminal actions or not. In this case, however, it does seem as though there was a substantial act of concealment that is closely related to fraud: invoices were made up for treatment that had not been delivered, the invoices were entered in the accounting system, and the income so generated was reported to the Tax and Customs Administration. In addition, several parties collaborated in carrying this out. The question remains whether, in a case like this, the charge of money laundering has some kind of added value when money laundering is so closely related to the predicate offence.
4. The Court of Appeal of The Hague, dated 24 October 2018, seizure of bitcoins :
In a criminal case, the Dutch Public Prosecution Service has had to return a large amount of bitcoins as it could not be proven that these had been ‘mined’ via stolen electricity. The Court of Appeal rules that in respect of the return in principle the value of the bitcoin at the time of the seizure is decisive. In this matter, 157,000 euros had to be returned, the value of the Bitcoin at the moment of seizure. While the amount would have been 3.3 million euros, had the exchange rate upon the moment of the return of the bitcoins been decisive.
The suspect mined bitcoins using equipment that was generated with stolen electricity. The computer that had been seized on 18 February 2014 was found to have a bitcoin wallet. The first investigation into the computer on 20 February 2014 showed that the wallet had a balance of 127 bitcoins. Further investigation on 23 October 2014 and following synchronization with the bitcoin network showed that the wallet turned out to have a much higher balance, namely a total of 712 bitcoins. These 712 bitcoins are subsequently seized and sold by the Public Prosecution’s Service on 24 October 2014.
The Court of Appeal establishes that the suspect has mined a total of 127 bitcoins during the period in which the electricity was stolen. These are confiscated. The Court of Appeal cannot establish a relationship between the other 585 bitcoins that had been seized and the theft of electricity and ordered for these to be returned to the suspect.
Upon calculating the value of the 127 forfeited bitcoins, the Court of Appeal starts with the basic premise that the value of the bitcoin is as it was at the time of the actual moment of seizure. The Court of Appeal sets the exact moment of valuation in the present case at one week after the seizure of the computer. This one week is considered to be a reasonable period for an investigation into the computer and for the disposing of the bitcoins, thus the Court of Appeal. Subsequently, the Court of Appeal derives the value at that moment in time (date seizure + 1 week) from ‘publicly available (internet) sources’, taking into account the average value on that day. In this case, this was about 500 euros per bitcoin. Meaning that 127 bitcoins with a counter value of approximately 63,500 euros are to be forfeited.
The 585 bitcoins that have to be returned were not seized and actually removed from the control of the seized party until October. As those bitcoins had been disposed of very shortly afterwards, the amount that the disposing actually generated is taken as a point of reference for calculating the value of those 585 bitcoins: approximately 270 euros for each bitcoin.
5. Criminal bitcoins and money laundering
In November 2017 two investigations dealing with the conversion of criminal bitcoins into cash were brought before a Dutch court. The first investigation covered a drug dealer who operated via Darknet; the drugs were paid for in bitcoins, and the bitcoins were then converted into cash using a bitcoin dealer. The bitcoin dealer guaranteed anonymity in return for a high commission. The court ruled that by using a bitcoin dealer, the criminal origin of the bitcoins had been concealed.
In the second investigation the bitcoin dealer himself was put on trial. The dealer bought up large quantities of bitcoins that had been earned on Darknet, sold these through regular markets, and received a high commission. The court's premise was that practically all bitcoins from the Darknet have a criminal origin. An expert's investigation demonstrated that nearly exclusively illegal goods are traded on Darknet and that the only payment is with bitcoins. Given the high commission, the dealer must have known about the origin of the bitcoins, since 'a legal economic motive is lacking for selling bitcoins at the rate employed'.
In this investigation a bitcoin mixer also came up for discussion. Bitcoins paid out on Darknet had been mixed and then turned into cash. The reason for the use of a mixer was to conceal the origin of the bitcoins, the court said.
The judgements are in line with the money laundering typologies recently established in the Netherlands for monitoring the trade in virtual forms of payment and the use of a bitcoin mixer.
6. Zschüschen, ECHR indirect method of proof
The Dutchman Zschüschen opens a bank account in Belgium in March 2003 and deposits a total amount of € 75.000 in 5 transactions within 2 months. Zschüschen has a history of drug trafficking and no income (in the Netherlands). A money laundering case is started against him in Belgium. Initially, he states that the money was earned with untaxed (undeclared) work during a 4-year period. He does not want to give the names of employers. During the entire proceedings he claims the right to remain silent. In 2006, Zschüschen is sentenced in Belgium (10 months’ suspended sentence, a € 5.000 penalty and confiscation of the € 75.000).
The legal questions:
Zschüschen first of all relies on article 6, par. 1 and 2 of the ECHR. More specifically on the breach of the right to a “fair trial”, the presumption of innocence and the right to remain silent. The fact that the predicate offence is not specified during the proceedings, allegedly is a breach of his defence rights as well as a breach of the right to be informed promptly about the charges. In addition, article 6, par. 3(a) ECHR is also relied on.
In summary, the conclusion of the ECHR is that Zschüschen loses the case on all counts.
7. Self-laundering
Section 420bis.1 of the Dutch Criminal Code reads as follows:
"Money laundering that consists of no more than acquiring and or being in possession of an object that originates directly from a person's own criminal activity is punishable with a maximum term of imprisonment of six months or a fourth-category fine."
Prior to the penalization the situation of being in possession or acquiring an object that directly originates from a person’s own criminal activity usually resulted in discharge from prosecution if no actions to disguise the criminal origin were taken. The Supreme Court argued that merely acquiring and being in possession of an object that originates directly from a person's own criminal activity does not necessarily qualify as money laundering. For the qualification 'money laundering' the suspect must have performed an act aimed at hiding or concealing the criminal origin of the object in question.
The Explanatory Memorandum states that the raison d'être of self-laundering lies in the prevention of impunity. The impression had been created that the qualification-ground for exclusion too often led to impunity if the predicate offence could not be proven.
Recently the first judgment in which the new self-laundering article was proved was published . Some of the details of this case are discussed below.
The suspect committed fraud. The suspect approached the victims via Whatsapp where he presented himself as a relative or close acquaintance of the victim. The victim would be persuaded to transfer large amounts of money to account numbers belonging to straw men. After the amounts of money had been deposited the suspect would receive the money from the straw men.
According to the Court, as from that moment the suspect was in possession of money that originated from his own criminal activity. The evidence does not show that the suspect performed acts to hide/conceal the criminal origin after receiving the money. Therefore, the proved facts cannot be qualified as money laundering and, therefore, the qualification-ground for exclusion applies, in the Court’s opinion. It is noteworthy that the Court does not regard the use of straw men as an act aimed concealing the criminal origin. It seems that the Court regards this as part of the fraud itself.
But, the Court argues, article 420bis.1 of the Dutch Criminal Code came into force on 1 January 2017. As a result, the possession of an object that originates directly from a person’s own criminal activity is penalized in the form of self-laundering. The laundering took place after the date of coming into force. Therefore, the Court does consider it proved that the suspect committed self-laundering.
Declaring both the basic offence and the (culpable) self-laundering proved may lead to discussions about the application of the convergence rule. The Supreme Court suggested to charge the suspect with (culpable) self-laundering in the alternative to the predicate offence in order to prevent convergence. The first thing that is notable about this judgment is the fact that the Public Prosecution Service did not charge the self-laundering nor, therefore, the element 'from a person’s own criminal activity'. As a result, the element 'from a person’s own criminal activity' also does not reappear in the declaration of proved facts. In addition, the Court considers both the basic offence and the self-laundering of the proceeds of the fraud proved, but it does not address the possibility of convergence. In sentencing, the Court only appears to take into consideration the sophisticated nature of the fraud, the number of victims and the straw men who were not aware of the fact that their bank accounts were misused by defrauding people. It is unclear whether declaring the self-laundering proved has increased the sentence.
8. ING Bank and VimpelCom
Dutch bank ING Groep NV admitted criminals had been able to launder money through its accounts and agreed to pay EUR 775 million to settle the case.
“The shortcomings identified resulted in clients having been able to use their bank accounts for money laundering practices for years”, ING said in a statement, after signing one the largest ever such settlements in the Netherlands.
Dutch financial crime prosecutors said ING had violated laws on preventing money laundering and financing terrorism “structurally and for years” by not properly vetting the beneficial owners of client accounts and by not noticing unusual transactions through them.
The fine is not ING’s first for failing to prevent illegal transactions. In 2012 it paid a penalty of $619 million for facilitating billions of dollars-worth of payments through the U.S. banking system on behalf of Cuban and Iranian clients.
In the latest case, which had led to questions from regulators in the United States, Dutch prosecutors said they had begun their investigation in 2016 after realizing that a pattern of violations was a signal of deeper underlying problems at ING.
They cited four examples where ING accounts were used for crime, most notably for bribes paid by telecommunications company VEON, formerly VimpelCom, in Uzbekistan. Veon settled U.S. and Dutch charges for $835 million in 2016.
“We had various ongoing criminal investigations and ING bank accounts cropped up repeatedly”, Frohberg said in a telephone interview. “Since 2008, ING was repeatedly warned, but it failed to take sufficient measures to stop the practice.”
Some of the shortcomings the Dutch authorities found in the bank’s AML transaction monitoring system are:
- The settings on the transaction monitoring system limited monitoring on some accounts.
- Monitoring was conducted at the account rather than the customer level, preventing an integrated review of all activities by a given customer.
- The transaction monitoring system’s settings limited the number of alerts generated per account to 3 a day. This limit was apparently set to keep the transaction review workload for compliance personnel manageable.
- The settings looked at only percentage changes in activity, not the total value involved, so that the system did not identify a pattern of improbably high-value transactions. For example, transactions worth €150 million passed through the account of a customer identified as an “underwear trader.”
The significance of these shortcomings is that they were essentially technical, and could presumably be remedied by “simply” changing the relevant settings. Of course, expanding the universe of transactions monitored, and the number of alerts generated, would require committing additional resources to process and review all the new information. The Dutch government’s conclusion was that, in at least some cases, the settings were deliberately set so as not to overwhelm the personnel available, precisely because there weren’t enough personnel to handle a larger number of alerts.
9. Anti-money laundering and counter-terrorist financing measures in The Netherlands and in Ukraine
This case is about a trust company which provides trust services to natural persons and legal entities. The trust company provided her services to a natural person who owned real estate in Ukraine (person A). The real estate was worth USD 10,000,000. Person A issued certificates of the real estate portfolio to a legal entity (entity B). The shares of entity B were held by a nominee shareholder of Ukrainian nationality (person C). Therefore, person C was the ultimate beneficiary owner of the real estate portfolio. At a certain moment, person C transferred his shares to another person (person D). Person C did not receive anything in return for these shares, they were transferred to person D free of charge. Person A informed the trust company about the transfer of shares and the trust company appointed person D as the new ultimate beneficiary owner of the real estate.
A few months later, the trust company informed the Dutch Financial Investigation Unit (FIU) of several transactions, including the transfer of shares mentioned before. This is when the problems arose. After being informed of the transfer of shares from person C to person D, the Dutch National Bank (DND) imposed a fine of EUR 40,000 on the trust company. Reason for this was failure to comply with the Wwft. According to DNB, the trust company should have suspected that the transfer of shares could be related to money laundering or terrorist financing, since the shares were transferred free of charge while the real estate portfolio was worth a lot of money. Therefore, the trust company should have reported this transaction within fourteen days, which derives from the Wwft. This offence is usually punished with a fine of EUR 500,000. However, the Dutch National Bank has moderated this fine to an amount of EUR 40,000 because of the extent of the offence and the track record of the trust company.
The trust company took the case to court because she believed the fine was imposed unlawfully. The trust company argued that the transaction was not a transaction as described in the Wwft, since the transaction was supposedly not a transaction on behalf of person A. However, the Commission thinks otherwise. The formation between person A, entity B and person C was constructed in order to avoid a possible tax collection from the Ukrainian government. Person A played a key role in this construction. Furthermore, the ultimate beneficial owner of the real estate changed by transferring the shares from person C to person D. This also involved a change in the position of person A, since person A no longer held the real estate for person C but for person D. Person A was closely involved with the transaction and therefore the transaction was on behalf of person A. Since person A is a client of the trust company, the trust company should have reported the transaction. Furthermore, the Commission stated that the transfer of the shares is an unusual transaction. This lies in the fact that the shares were transferred free of charge, while the worth of the real estate represented USD 10,000,000. Also, the worth of the real estate was remarkable in combination with the other assets of person C. Lastly, one of the directors of the trust office pointed out that the transaction was ‘highly unusual’, which acknowledges the strangeness of the transaction. The transaction therefore arises suspicion of money laundering or terrorist financing and should have been reported without delay. The fine was therefore imposed lawfully.
10. A present of 8 million euros (ECLI:NL:CBB:2018:6) – failure to report on time an unusual transaction
A trust office had failed to report a transfer of shares /depositary receipts for shares in time to FIU-Netherlands and consequently received an administrative penalty.
This judgment was rendered by the Dutch Trade and Industry Appeals Tribunal (College van Beroep voor het Bedrijfsleven) on 17 January 2018. Earlier, the court had come to the same conclusion.
DNB had imposed an administrative penalty of 40,000 euros on the trust office since the office had not reported the above transfer to FIU-Netherlands until four months later.
The case started in December 2013 when a client, who had only recently been accepted by the office, reported the matter. Without any consideration, 8 million euros worth of property, placed with a legal entity organized and existing under the laws of the Seychelles, had been transferred to another party. It was not until April 2014 that the trust office reported the transfer to FIU-Netherlands.
The Tribunal agreed with DNB that, because of several suspicious aspects to the transfer, the trust office should have reported the transfer without delay as laid down in the provisions of Wwft. The penalty of 40,000 euros has therefore been confirmed.
