News

The Cornerstone Report

Safeguarding America Through Financial Investigations

June 2009 - Table of Contents

Facts and Findings of the Dutch Regulation on Money Transfer Businesses

In the Netherlands, the first specific legislation on money transfer businesses dates from 1995. Before 1995, money transfer businesses fell under the scope of a general prohibition without a banking license. The money transfer business provided a growing niche market, so more money exchange offices and money transfer businesses were established. One important factor of the growth of the money transfer businesses is immigration and the desire to support family members abroad.

However, already in 1995 it was clear from law enforcement investigations that in drug related and money laundering cases, both money exchange and money transfer businesses were frequently used to transfer money. From that moment onwards, legislation and AML-CFT supervision for money exchange and money transfer businesses were introduced.

After the terrorist attacks of 2001, the legislation for money transfer businesses was strengthened and a new act on money services businesses came into force on July 19, 2002. The stringent new legislation resulted in a considerable decrease in the number of providers, as shown by the chart above.

The risk of such a significant decrease in providers is that the providers might continue to offer their services, but without a license, essentially transforming themselves into an underground banking system. Close cooperation between law enforcement and financial supervisors ensured that previously licensed providers did indeed withdraw from the market.

Further amendments to the legislation are on the way. To promote an open European integrated financial market, the member states of the European Union drafted, with the European Commission, the Payment Service Directive (PSD). This legislation enables payment service providers, like money transfer businesses, to use similar payment structures. To implement the PSD, our national legislation will be amended, especially in relation to the licensing requirements. The new legislation is planned to come into force on November 1, 2009.