Dutch Notaries Used as Pawns to Set Up Structures to Avoid Tax

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By Linda A. Thompson

A June 13 parliamentary hearing revealed that a handful of the country’s 1,400 notaries are used as pawns by trust companies, tax advisers, and lawyers to set up structures designed to shift or reroute profits through the Netherlands.

Lawmakers at the hearing were told there are few questions asked about the clients behind these setups in which a dozen notaries in the Netherlands play an oft-overlooked but critical role in abetting tax avoidance and tax evasion.

Martin Jan van Mourik, emeritus professor in notary law at Leiden University, said these notaries fit one of two categories. They are either:

  •  small, one-person offices that operate with little input or checks from fellow notaries, or
  •  providers of services in a large firm that employs both notaries and lawyers.

Van Mourik said notaries in the first category often are located in a remote Dutch polder, and “they rock a little bit to and fro there and have ties to certain persons.”

An example of notaries in the other category would be where just one or two of them are in a firm with 70 lawyers. “Such a notary is really at the mercy of the lawyers in this case,” he said. Notaries should operate independently and not be “tied to the leash of lawyers,” the professor said.

Van Mourik, a retired notary himself, refused to name the law firms, but said they “are often composite firms with the initiative mostly taken by the tax specialists in these firms, together with the lawyers, and the notary is used as a wheelbarrow.”

Chinese Wall

Van Mourik spoke at a hearing organized as part of an investigative parliamentary inquiry into the role played by Dutch financial service providers in rerouting and shifting of profits through or out of the Netherlands. The inquiry was established in the wake of the Panama Papers revelations.

Van Mourik said the six-member panel of lawmakers, chaired by Henk Nijboer of the Labour Party, should consider introducing rules that would require a law firm’s notary and advisory activities to be independently run and organized.

“I think that Chinese walls are critical in this regard,” he said, adding that notaries and lawyers shouldn’t derive too great a benefit from each other’s practices. “The file administration should be separate; the lawyers certainly shouldn’t have access to the notaries’ files and the finances should be separate.”

Like witnesses who spoke during previous hearings, Van Mourik said he considers entities located in the British Virgins Islands or in other Caribbean islands a red flag pointing to a potential shell company. The presence of a Liechtenstein stiftung—a type of trust—and the involvement of a Luxembourg bank or a legal entity in a Luxembourg or Swiss canton similarly would be a cause for concern, Van Mourik said.

“You have to pay attention to where the entity is located, and who is behind it,” he said, noting that notaries are bound by client due diligence rules under the Law Aimed at Preventing Money Laundering and the Financing of Terrorism (Wet ter voorkoming van witwassen en financieren van terrorisme) which requires them to determine the location, purpose, and people behind legal entities before providing their services to a client.

But, he said: “There are notaries of whom it is known that they go along with these things a little bit more easy.” There are 10 such notaries in the Netherlands at most, Van Mourik said.

To contact the reporter on this story: Linda A. Thompson in Brussels at correspondents@bna.com

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bna.com

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