New Act on the supervision of trust offices 2018

On 1 January 2019, the Act on the supervision of trust offices was cancelled and replaced by the new Act on the supervision of trust offices 2018 (Wet toezicht trustkantoren 2018, the Wtt 2018).

The Wtt 2018 brings a number of changes, all pertaining to a tightening of the regulatory regime. There are many trust offices operating in the Netherlands, most likely thanks to the favorable business climate; many foreign enterprises make use of trust offices. The Dutch legislator is of the view that, in respect of these foreign enterprises, there is a high risk of abuse. Generally, tax driven structures are used, often from “offshore” jurisdictions and there is an increasing development in structures aimed to provide as less transparency as possible (e.g. “asset protection” structures). Another important issue is that trust offices usually do not meet their clients and their ultimate beneficial owners in person.

The changes are summarized as inter alia (i) strengthening integrity and professionality of trust offices; (ii) improvement of client identification procedures and (iii) extension of administrative instruments of the supervisory authority (the Dutch Central Bank, the DNB) in terms of supervision and enforcement.

In respect of strengthening integrity and professionality, the following new provisions in the Wtt 2018 are of interest:

Organization

• a trust office with seat in the Netherlands shall, in order to obtain a license from the DNB, be organized in the form of a public or private limited liability company under Dutch law, or a European limited liability company (Societas Europaea) (i.e.: natural persons are not eligible for a license under the Wtt 2018);
• a trust office shall have a minimum of two persons who are charged with the day-to-day policy-making within the trust office, as to safeguard continuity, quality of service and governance in general and
• each trust office needs to appoint a compliance officer. This function cannot be outsourced (as used to be the case under the former act).

Client identification

In respect of client identification procedures, the following new provisions in the Wtt 2018 are of interest:

• specific rules have been introduced for provision of services to special legal entities such as partnerships and trusts. Furthermore, rules apply in respect of each specific trust service that will be provided to a client;
• the concept of “ultimate beneficial owner” is further elaborated on, including that, apart from the formal control structure, also the structure of de facto control is of interest and shall be investigated by the trust office and
• under the Wtt 2018, a trust office may not rely on client identification procedures carried out by an accountant, tax advisor, lawyer or civil law notary but the trust office shall independently carry out its client identification.

No combination with tax advice

The Wtt 2018 contains a specific prohibition to provide trust services insofar these services relate to the implementation of tax advice that has been extended to the client by the trust office itself or by a natural person, legal person or other entity forming part of the same group of companies the trust office belongs to.

Additional trust service

The Decree on the supervision of trust offices 2018 (Besluit toezicht trustkantoren 2018) promulgated under the Wtt 2018, provides for an extension of the definition of “trust service”. Functioning as an attorney on the basis of a power of attorney, insofar such power of attorney extends to the exercise of general managerial powers for a trust office’s object company, qualifies as a trust service within the meaning of the Wtt 2018.

This newsletter gives a brief overview of the changes brought by the Wtt 2018. The lawyers of Buren can assist you with any questions regarding the new Wtt 2018 and the requirements for trust offices.