This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 07 THE HAGUE 003338 
 
SIPDIS 
 
STATE FOR INL/C/CP(ERINDLER), EUR/ERA, EUR/UBI 
STATE ALSO FOR EB/ESC/TFS, S/CT, EUR/PGI 
TREASURY FOR U/S LEVEY AND A/S O'BRIEN 
TREASURY PLEASE PASS FINCEN 
STATE PLEASE PASS FEDERAL RESERVE 
DEA HQS FOR OFE AND OKF 
JUSTICE FOR OIA, AFMLS AND NDDS 
PARIS ALSO FOR OECD 
USEU FOR UNDERWOOD 
 
E.O. 12958:  N/A 
TAGS: EFIN KCRM KTFN PTER ETTC NL
SUBJECT: 2005 INTERNATIONAL NARCOTICS CONTROL STRATEGY 
REPORT (INCSR) FOR THE NETHERLANDS - PART II: MONEY 
LAUNDERING AND FINANCIAL CRIMES 
 
REF:  STATE 210351 
 
¶1.  The following is Embassy The Hague's submission of Part 
II of the 2005 International Narcotics Control Strategy 
Report: Money Laundering and Financial Crimes.  Embassy 
Point of Contact for this report is Deputy TFCO/Econoff 
Karen Enstrom at enstromkl@state.gov.  As requested reftel, 
Post will also email the report to Ed Rindler. 
 
¶2.  BEGIN TEXT OF REPORT. 
 
THE NETHERLANDS 
 
The Netherlands is a major financial center and as such is 
an attractive target for the laundering of funds generated 
from a variety of illicit activities. Activities involving 
money laundering are often related to the sale of heroin, 
cocaine, cannabis, or synthetic and designer drugs (such as 
ecstasy). As global players, several Dutch financial 
institutions engage in international business transactions 
involving large amounts of United States currency. There 
are, however, no indications that significant parts of 
dollar transactions by financial institutions in the 
Netherlands stem from illicit activities. Activities 
involving financial fraud are believed to generate a 
considerable portion of domestic money laundering. Much of 
the money laundered in the Netherlands is likely owned by 
major drug cartels and other international criminal 
organizations. There are no indications of syndicate-type 
structures in organized crime or money laundering, and there 
is virtually no black market for smuggled goods in the 
Netherlands. There is no evidence that money laundering is 
focused on any particular part of the financial sector. 
Although, under the Schengen Accord, there are no formal 
controls of the borders with Germany and Belgium, the Dutch 
authorities run special operations in border areas to keep 
smuggling to a minimum. The Netherlands is not an offshore 
financial center nor are there any free trade zones in the 
Netherlands. 
 
In 1994, the Government of the Netherlands (GON) 
criminalized money laundering related to all crimes. In 
December 2001, legislation was enacted making the 
facilitating, encouraging, or engaging in money laundering a 
separate criminal offense, easing the public prosecutor's 
burden of proof regarding the criminal origins of proceeds. 
Under the law, the public prosecutor needs only to prove 
that the proceeds "apparently" originated from a crime; self- 
laundering is also covered. In two cases in 2004 and 2005, 
the Dutch Supreme Court confirmed the wide application of 
the money laundering offenses by stating that the public 
prosecutor does not need to prove the exact origin of 
laundered proceeds and that the general criminal origin as 
well as the knowledge of the perpetrator may be deducted 
from objective circumstances. 
 
The Netherlands has an 'all offenses' regime for predicate 
offenses of money laundering. The penalty for deliberate 
acts of money laundering is a maximum of four years 
imprisonment and a maximum fine of 45,000 euros ($53,842), 
while liable acts of money laundering (of people who do not 
know first-hand of the criminal nature of the origin of the 
money, but should have reason to suspect it) are subject to 
a maximum imprisonment of one year and a fine no greater 
than 45,000 euros ($53,842). Habitual money laundering may 
be punished with a maximum imprisonment of six years and a 
maximum fine of 45,000 euros ($53,842), and those convicted 
may also have their professional licenses revoked. In 
addition to criminal prosecution for money laundering 
offenses, money laundering suspects can also be charged with 
participation in a criminal organization (Article 140 of the 
Penal Code), violations of the financial regulatory acts, 
violations of the Sanctions Act, or noncompliance with the 
obligation to declare unusual transactions according to the 
Economic Offenses Act. 
 
The Netherlands has comprehensive anti-money laundering 
legislation. The Services Identification Act and the 
Disclosure Act set forth identification and reporting 
requirements. All financial institutions in the Netherlands, 
including banks, bureaux de change, casinos, life insurance 
companies, securities firms, stock brokers, and credit card 
companies, are required to report transactions that appear 
unusual, a broader standard than "suspicious" transactions, 
to the Office for Disclosure of Unusual Transactions (MOT), 
the Netherlands' financial intelligence unit (FIU). In 
December 2001, the reporting requirements were expanded to 
include trust companies, financing companies, and commercial 
dealers of high-value goods. In June 2003, notaries, 
lawyers, real estate agents/intermediaries, accountants, 
business economic consultants, independent legal advisers, 
trust companies and other providers of trust related 
services, and tax advisors were added. Reporting entities 
which fail to file reports with the MOT may be fined 11,250 
euros ($13,461) or be imprisoned up to two years. Under the 
Services Identification Act, all institutions that are 
subject to reporting obligations must identify their 
clients, including the identity of ultimate beneficial 
owners, either at the time of the transaction or at some 
point prior to the transaction, before providing financial 
services. 
 
In 2004, an evaluation of the anti-money laundering 
reporting system, commissioned by the Minister of Justice, 
was published. In response to the report, the GON enacted a 
number of measures to enhance the effectiveness of the 
existing system. In November 2005, the Board of Procurators 
General issued a National Directive on Money Laundering 
Crime that included an obligation to conduct a financial 
investigation in every serious crime case, guidelines for 
determining when to prosecute for money laundering, and 
technical explanations of money laundering offenses, case 
law, and the use of financial intelligence. A new set of so- 
called indicators, which determine when an unusual 
transaction must be filed, also entered into force in 
November 2005. These new indicators represent a partial 
shift from a rule-based to a risk-based system and are aimed 
at reducing the administrative costs of reporting unusual 
transactions for the reporting institutions without limiting 
the preventive nature of the reporting system. The Dutch 
Parliament has also approved amendments to the Services 
Identification Act and Disclosure Act, which will take 
effect in 2006, that expand supervision authority and 
introduce punitive damages. 
 
Financial institutions are also required by law to maintain 
records necessary to reconstruct financial transactions for 
at least seven years. The requirements also have been 
applicable to the Central Bank of the Netherlands (to the 
extent that it provides covered services) since 1998. There 
are no secrecy laws or fiscal regulations that prohibit 
Dutch banks from disclosing client and owner information to 
bank supervisors, law enforcement officials, or tax 
authorities. Under the Code of Criminal Conduct, for 
example, law enforcement officials can request bank records. 
Financial institutions and all other institutions under the 
reporting and identification acts, and their employees, are 
specifically protected by law from criminal or civil 
liability related to cooperation with law enforcement or 
bank supervisory authorities. Furthermore, current 
legislation requires Customs authorities to report unusual 
transactions to the MOT; however, the Dutch do not currently 
have a currency declaration requirement for incoming 
travelers. Under the 2004 Dutch EU Presidency, the EU 
reached agreement on a Cash Courier Regulation, which 
implements Financial Action Task Force (FATF) Special 
Recommendation IX on terrorist financing. Implementation is 
expected in 2007. 
 
The Money Transfer and Exchange Offices Act, which was 
passed in June 2001, requires money transfer offices, as 
well as exchange offices, to obtain a permit to operate, and 
subjects them to supervision by the Central Bank. Every 
money transfer client has to be identified. 
 
The Central Bank of the Netherlands, which merged with the 
Pension and Insurance Chamber in April 2004, and the 
Financial Markets Authority, as the supervisors of the Dutch 
financial sector, regularly exchange information nationally 
and internationally. Sharing of information by Dutch 
supervisors does not require formal agreements or memoranda 
of understanding (MOUs). 
The MOT, which was established in 1994, reviews and analyzes 
the unusual transactions and cash transactions filed by 
banks and financial institutions. The MOT receives over 98 
percent of unusual transaction reports electronically 
through its secure website. It forwards suspicious 
transaction reports with preliminary investigative 
information to the Police Investigation Service and to the 
office for operational support of the National Public 
Prosecutor for MOT cases (BLOM). In 2006, MOT and BLOM will 
merge and both entities will be integrated within the 
National Police (KLPD). This new FIU structure (MOT/BLOM) 
will provide an administrative function that will receive, 
analyze, and disseminate unusual currency transaction 
reports. It will also provide a police function that will 
serve as a point of contact for law enforcement. Foreign 
FIUs will be able to turn to this new organization with 
requests for financial and law enforcement information. Over 
the last five years, MOT and BLOM have cooperated closely in 
responding to international requests for information, so 
this merger will not change the nature of the Dutch 
reporting system. 
 
In 2003, the MOT received 177,157 reports (totaling over 1.5 
billion euros or approximately $1.7 billion) and forwarded 
37,748 to the BLOM and other police services as suspicious 
transactions for further investigation. In 2004, the MOT 
received 174,835 reports (totaling over 3 billion euros or 
$3.6 billion) and forwarded 41,003 to the BLOM and other 
police services for further investigation. The average 
amount reported was 79,000 euros (approximately $94,500) in 
2004, an increase from the 41,000 euros (approximately 
$49,000) reported (on average) in 2003. This significant 
increase was due to a few large transactions. 
 
In order to facilitate the forwarding of suspicious 
transactions, the MOT and BLOM created an electronic network 
called Intranet Suspicious Transactions (IST). Also, a 
secure website for the actual reporting of unusual 
transactions by financial institutions was developed, thus 
completing the electronic infrastructure. Furthermore, fully 
automatic matches of data with the police databases are 
included with the unusual transaction reports forwarded to 
the BLOM. Since the money laundering detection system also 
covers areas outside the financial sector, the system is 
used for detecting and tracing terrorist financing activity. 
 
On January 1, 2003, the MOT and BLOM formed a special unit 
(the MBA-unit) to work together to analyze data generated 
from the IST. Once the data is analyzed by the MBA-unit, it 
forwards reports to the police. In 2004, the MBA-unit sent 
200 reports to the police for further investigations. 
 
In 2004, BLOM opened 712 investigations, which involved 
15,203 transactions. BLOM conducted 80 Hit-And-Run Money 
Laundering (HARM) actions, including eight involving 
exchange transactions, 60 involving the physical presence of 
large amounts of cash money (cross border), and six cases 
involving withdrawals, deposits, wire transfers or offers of 
bank checks. Of these 80 HARM actions, 58 were the result of 
BLOM's own investigations. With regard to the cross-border 
movement of cash, the Royal Constabulary apprehended 60 
outgoing cash couriers at Amsterdam Schiphol airport and 
confiscated nearly 10 million euros ($12 million) in cash. 
In 2004, the Office of the Public Prosecutor issued summons 
for money laundering offenses in 244 cases, resulting in 138 
convictions with 87 cases still pending. 
The Public Prosecutor HARM team was established in 2001. 
Both the MOT and BLOM are internationally recognized 
institutions that play a major role in the Egmont Group. 
BLOM provides the anti-money laundering division of Europol 
with suspicious transaction reports, and Europol applies the 
same analysis tools as BLOM. 
The Netherlands has enacted legislation governing asset 
forfeitures. The 1992 Asset Seizure and Confiscation Act 
enables the authorities to confiscate assets that are 
illicitly obtained or otherwise connected to criminal acts. 
The legislation was amended in 2003 to improve and 
strengthen the options for identifying, freezing, and 
seizing criminal assets. The police and several special 
investigation services are responsible for enforcement in 
this area. These entities have adequate powers and resources 
to trace and seize assets. Asset seizure has been integrated 
into all law enforcement investigations into serious crime. 
The system is principally value-based, though property-based 
orders can also be made. Any tangible assets, such as real 
estate or other conveyances that were purchased directly 
with the proceeds of a crime tracked to illegal activities, 
may be seized. Property subject to confiscation as an 
instrumentality may consist of both moveable property and 
claims. Assets can be seized as a value-based confiscation. 
Asset seizure and confiscation legislation also provides for 
the seizure of additional assets controlled by drug 
traffickers. Legislation defines property for the purpose of 
confiscation as "any object and any property right." 
Proceeds from narcotics asset seizures and forfeitures are 
deposited in the general fund of the Ministry of Finance. 
Dutch authorities have not identified any significant legal 
loopholes that allow drug traffickers to shield assets. 
 
In order to promote the confiscation of criminal assets, 
special court procedures have been created, enabling law 
enforcement to continue financial investigations in order to 
prepare confiscation after the underlying crimes have been 
successfully adjudicated. All police services investigating 
in the field of organized crime can rely on the real time 
assistance of financial detectives and accountants, as well 
as on the assistance of BOOM, the special bureau advising 
the Office of the Public Prosecutor in complex (i.e. 
international) seizure and confiscation cases. To further 
international cooperation in this area, the Camden Asset 
Recovery Network (CARIN) was set up in The Hague in 
September 2004. BOOM played a leading role in the 
establishment of this informal international network of 
asset recovery specialists, whose aim is the exchange of 
information and expertise in the area of asset recovery. 
 
Statistics provided by the Office of the Public Prosecutor 
show that the amount of assets seized in 2004 amounted to 11 
million euros ($13 million), compared to 10 million euros 
($11 million) in 2003. (These figures do not include tax- 
related confiscations. Dutch tax authorities can tax any 
income, whether legal or illegal.) The United States and the 
Netherlands have an agreement on asset sharing dating back 
to 1994. The Netherlands also has a treaty on asset sharing 
with the UK, as well as an agreement with Luxembourg. Dutch 
agencies do react to tips from U.S. government officials and 
from officials of other countries. 
 
In June 2004, the Minister of Justice sent an evaluation 
study to the Parliament on specific problems encountered 
with asset forfeiture in large, complex cases. In response 
to this report, the GON announced several measures to 
improve the effectiveness of asset seizure enforcement, 
including steps to increase expertise in the financial and 
economic field, assign extra public prosecutors to improve 
the coordination and handling of large, complex cases, and 
establish a specific asset forfeiture fund. The Office of 
the Public Prosecutor has designed a new centralized 
approach for large confiscation cases and a more flexible 
approach for handling smaller cases. Both will take effect 
in 2006. These measures should significantly increase BOOM's 
capacity to handle asset forfeiture cases. 
 
Terrorist financing is a crime in the Netherlands. The 
"Sanction Provision for the Duty to Report on Terrorism" was 
passed in 1977 and amended in June 2002, to implement 
European Union (EU) Regulation 2580/2001 and UNSCR 1373. 
This ministerial decree provides authority to the 
Netherlands to identify, freeze, and seize terrorist finance 
assets. The decree also requires financial institutions to 
report to the MOT all transactions (actually carried out or 
intended) that involve persons, groups, and entities that 
have been linked, either domestically or internationally, 
with terrorism. Any terrorist crime will automatically 
qualify as a predicate offense under the Netherlands "all 
offenses" regime for predicate offenses of money laundering. 
Involvement in financial transactions with individuals 
and/or organizations designated nationally, by the EU, or by 
the UN has been made a criminal offense. The Dutch Finance 
Ministry, in close coordination with the Foreign Affairs 
Ministry, distributes lists of designated entities to 
financial institutions and relevant government bodies 
(including local tax authorities). Freezing of assets is an 
administrative procedure. The Netherlands has frozen more 
terrorist related assets than any other EU member state. 
 
The Act on Terrorist Offenses took effect on August 10, 
¶2004. The Act introduced Article 140A of the Criminal Code, 
which criminalizes participation in an organization when the 
intent is to commit acts of terrorism, and defines 
participation as membership or providing provision of 
monetary or other material support. Article 140A carries a 
maximum penalty of fifteen years imprisonment for 
participation in and life imprisonment for leadership of a 
terrorist organization. The GON is considering new 
legislation that would expand, among other things, 
investigative powers and the use of coercive measures in 
anti-terrorist inquiries. 
 
Unusual transactions reported by the financial sector are 
the first filter against the abuse of religious 
organizations, foundations and charitable institutions for 
terrorist financing. No individual or legal entity (churches 
or religious institutions included) is exempt from the 
obligation of identification when using the financial 
system. Financial institutions must also inquire about the 
identity of the ultimate beneficial owners. A paper trail is 
thus maintained throughout the payment chain. A second 
filter is provided by Dutch civil law, which requires 
registration of all active foundations in the registers of 
the Chambers of Commerce. Each foundation's formal statutes 
(creation of the foundation must be certified by a notary of 
law) must be submitted to the Chambers. Charitable 
institutions also register with, and report to, the tax 
authorities in order to qualify for favorable tax treatment. 
Approximately 15,000 organizations (and their managements) 
are registered in this way. The organizations have to file 
their statutes, showing their purpose and mode of 
operations, and submit annual reports. Samples are taken for 
auditing. Finally, many Dutch charities are registered with 
or monitored by private watchdog organizations or self- 
regulatory bodies, the most important of which is the 
Central Bureau for Fund Raising. In April 2005, the GON 
approved a plan to replace the current initial screening of 
founders of private and public-limited partnerships and 
foundations with an on-going screening system. The new 
system, which will be introduced in the course of 2007, will 
implement FATF Special Recommendation XXX and improve Dutch 
efforts to fight fraud, money laundering, and terrorist 
financing. 
 
Data about informal "hawala" banking as a potential money 
laundering/terrorist financing source is still scarce. 
Initial research by the Dutch police and Internal Revenue 
Service and Economic Control Service (FIOD/ECD) indicates 
that the number of "hawala" banks in the Netherlands is 
rising. The Dutch government plans to implement improved 
procedures for tracing and prosecuting informal (unlicensed) 
or "hawala" banking, with the Dutch Central Bank, FIOD/ECD, 
the Financial Expertise Center, and the police playing a 
coordinating and central role. The Dutch Finance Ministry 
plans to participate in a World Bank-initiated international 
survey on money flows by immigrants to their native 
countries, with a focus on relations between the Netherlands 
and Suriname. The Dutch Central Bank will also initiate a 
study into the number of informal banking institutions in 
the Netherlands. In Amsterdam, a special police-unit has 
been investigating underground bankers. These investigations 
have resulted in the disruption of three major underground 
banking schemes. 
 
The Netherlands is in full compliance with all FATF 
Recommendations, with respect to both legislation and 
enforcement. The Netherlands also complies with the EU 
Second Money Laundering Directive, and in some areas, is 
ahead of the EU legislation (such as full money laundering 
controls on money remitters, including licensing and 
identification of customers). In December 2004, the Dutch EU 
Presidency reached political agreement within the EU on the 
Third Money Laundering Directive, which was subsequently 
adopted by the EU in 2005 with full implementation by EU 
member states by 2007. The Dutch have already implemented 
some obligations resulting from this directive, such as 
effective supervision of currency exchange offices and trust 
companies. 
 
In December 2003, the International Monetary Fund (IMF) 
conducted an assessment of the Netherlands' anti-money 
laundering and counter-terrorist financing system. The 
Report on the Observance of Standards and Codes (ROSC), 
released in September 2004, indicates that the Netherlands 
has a sound anti-money laundering and counter-terrorist 
financing framework. In 2005, the second round of the 
Council of Europe's Group of States Against Corruption 
(GRECO) evaluation of the Netherlands resulted in positive 
conclusions regarding Dutch seizure and confiscation 
legislation. 
 
The MOT supervised the PHARE Project for the European Union 
(March 2002 - December 2003). The PHARE Project was the 
European Commission's Anti-Money Laundering Project for 
Economic Reconstruction Assistance to Estonia, Latvia, 
Lithuania, Poland, the Czech Republic, Slovakia, Hungary, 
Slovenia, Romania, Bulgaria, Cyprus, and Malta. The purpose 
of the project was to provide support to Central and Eastern 
European countries in the development and/or improvement of 
anti-money laundering regulations. For this purpose, the MOT 
established a project team and a consortium of international 
experts. 
 
Although the PHARE project concluded in December 2003, the 
MOT has moved forward with the development of the FIU.NET 
Project (an electronic exchange of current information 
between European FIUs by means of a secure internet). 
FIU.NET is not exclusively for European countries; other 
countries can also be connected. 
 
The United States enjoys good cooperation with the 
Netherlands in fighting international crime, including money 
laundering. In September 2004, the United States and the 
Netherlands signed two agreements in the area of mutual 
legal assistance and extradition, stemming from the 
agreements that were concluded in 2003 between the EU and 
the United States. One of the amendments to the existing 
bilateral agreement is the exchange of information on bank 
accounts. The MOT has established close links with the U.S 
Treasury's FinCEN and is also involved in efforts to expand 
international cooperation between disclosure offices. 
 
The Netherlands is a member of the FATF and Moneyval and 
participates in the Caribbean Financial Action Task Force as 
a Cooperating and Supporting Nation. The MOT is a member of 
the Egmont Group. MOT has concluded formal information 
sharing MOUs with Belgium, Aruba and the Netherlands 
Antilles. The Netherlands is a party to the 1988 UN Drug 
Convention and the 1990 Council of Europe Convention on 
Laundering, Search, Seizure, and Confiscation of the 
Proceeds from Crime, as well as the new Council of Europe 
Convention of 2005. The Dutch participate in the Basel 
Committee, and have endorsed the Committee's "Core 
Principles for Effective Banking Supervision." The 
Netherlands is a party to the UN International Convention 
for the Suppression of the Financing of Terrorism and the UN 
Convention against Transnational Organized Crime. 
 
END TEXT OF REPORT. 
 
BLAKEMAN