Your real estate transaction in the Netherlands and client due diligence in five questions

Did you know there is a Fraud Film Festival? The 7^th edition took place in 2021 in Amsterdam in the Royal Tuschinski Theatre which had just celebrated its centenary, which shows how much focus there is on fraud and fighting fraud.

Those are national and international topics, which bring about legislation at a national and international level, such as the European anti-money laundering directive which the member states must implement in their national laws and regulations. The Netherlands integrated this directive in the Prevention of Money Laundering and Terrorism Financing Act (WWFT).

This law applies, inter alia, to every real estate transaction in the Netherlands. Pursuant to this law a WWFT-institution (for instance a civil-law notary, a bank or a lawyer) must conduct client due diligence and must report unusual transactions to the Financial Intelligence Unit (Financial Intelligence Unit-Nederland / FIU-Nederland).

I am summarizing what this law entails for you as a client of a civil-law notary in terms of your intended real estate transaction in The Netherlands in the next five questions which shall be put to you.

What does your real estate transaction entail?

The WWFT is applicable, inter alia, to every purchase or sale of real estate in the Netherlands, such as a plot of land, a house or a commercial building and when establishing a right of mortgage.

You need to inform the civil-law notary about the background and aim of the intended real estate transaction.

Who are you?

You must be able to identify yourself. The most usual way of doing so is naturally by showing a valid proof of identity. The civil-law notary will use this to verify your identity.

For legal entities and partnerships: who is the ultimate beneficial owner?

Who has a stake in excess of 25% in the company through shares, voting right or ownership? This person qualifies as ultimate beneficial owner (also referred to as UBO). Several people can be UBO. In the absence of a UBO the person who is part of the senior management staff of the company is pseudo-UBO. Several people can be pseudo-UBO.

The (UBO or pseudo)UBO must identify himself too.

UBOs of organisations founded in the Netherlands must be registered in the UBO-register on 26 March 2022 at the latest.

This registration duty does not apply to every organization founded in the Netherlands.

Are you a politically exposed person?

Are you (and/or the UBO) a politically exposed person / a PEP? You qualify as a PEP if you are a minister, a member of parliament, a member of a supreme court or an ambassador for example.

The Dutch tax office provides an overview of PEPs on its website.

This overview is not exhaustive and only mentions positions in the Netherlands.

There can be reasons to consider you as a PEP, even if your position is not mentioned in the overview. For example, if you are a mayor and become privately involved in a transaction, the nature of which leads you to be considered as a PEP.

Please note, you are also a PEP if:

you are a close relative (partner, child, son or daughter in law, parent) of a PEP, or
a close associate of a PEP (for instance because you have close business ties with the PEP).

Where does the money for the real estate transaction come from?

Does the money come from, for instance, a mortgage loan, savings or from your company? You must indicate this and be able to demonstrate it with supporting documents, such as a bank statement, your income tax return, your annual account statement, a copy of your labour agreement, tenancy agreement, donation agreement and so on.

Handy hints to make the process as smooth as possible:

Gather all the required documents in one place in due time. Not only the civil-law notary, but also other WWFT-institutions who may be involved in the real estate transaction, might request those documents.
Send the documents on the civil-law notary’s first request. Pursuant to law the civil-law notary can only provide the requested services after completing the client due diligence.

Finally:

Depending on the real estate transaction the civil-law notary may ask for more information.
A thorough preparation in terms of legal content is not the only factor that comes in the equation. A successful real estate transaction also depends on other issues, including procedural aspects such as the WWFT. It’s important to be well prepared in those areas too.

Please feel free to contact me for more information on this topic.

(Picture: Paul Siewert, Unsplash)