Trust Bloomberg Tax for the international news and analysis to navigate the complex tax treaty networks and global business regulations.
By Linda A. Thompson
The Dutch watchdog tasked with monitoring the country’s vast trust sector is calling on local agencies to investigate if any of their clients are connected to the recent Paradise Papers revelations.
De Nederlandsche Bank (DNB) asked resident trust agencies to verify whether any of their clients appear in the 13.4 million documents from a Bermuda-based law firm that were leaked to the International Consortium of Investigative Journalists, according to a Nov. 29 news release. A database containing the leaked documents, which revealed multinational companies’ and high-net-worth individuals’ use of complex offshore tax planning, was made accessible to the public Nov. 17.
The Dutch trust sector has been under increased scrutiny from lawmakers and transparency advocates since a June parliamentary inquiry revealed that many of the country’s 227 licensed trust agencies are failing to meet due diligence requirements under legislation aimed at curbing tax evasion and money laundering.
The Dutch watchdog wants trust agencies to examine any database hits and to investigate “why and in what context a relation occurs in the database,” and investigate if they should reevaluate their relationship, as well as if there are any other connections to the leaks.
“We expect trust agencies to report any relationship with” individuals or companies mentioned in the Paradise Papers, Corina Ruhe, a spokeswoman for DNB told Bloomberg Tax in a Nov. 29 email.
Lawmakers are currently working on updating a 2003 law aimed at ensuring that trust agencies act fully fulfill their role as gatekeepers to the Dutch financial system. The draft law is likely be sent to the House of Representatives early next year.
As financial service providers, trust companies allow typically foreign clients to create a financial entity in the Netherlands that is often interposed in complex international set-ups designed by tax advisers and law firms. Individuals and companies based abroad can become residents of the Netherlands for tax purposes—accessing the country’s bilateral tax agreements—by having a public limited company in the Netherlands that is registered in the address of the trust agency and managed by it.
Mariet van den Berg, association manager at Holland Quaestor, the Dutch industry association for trust companies, welcomed DNB’s call in an email statement to Bloomberg Tax Nov. 29.
It is “completely logical and necessary” that trust agencies, and Holland Quaestor members in particular, verify whether their clients were mentioned in the documents, van den Berg said.
Ruhe said that the Paradise Papers trove of documents might for instance mention clients of trust agencies based in the Netherlands, and that such agencies sometimes provide services to foreign clients mentioned in the documents. Trust agencies might also appear in the documents because they manage a Dutch company that is part of an international structure that in turn comprises entities based in “Paradise countries.”
Still, being mentioned in the Paradise Papers doesn't “mean that illegal activities are being conducted,” van den Berg said. She stressed that while clients of Dutch trust agencies might "have a connection to" the Paradise Papers, this should not be interpreted to mean that a Netherlands-based trust agency was in fact involved. "Multinational corporations might for instance do business with trust agencies in multiple jurisdictions," she said.
(Tenth paragraph corrected to reflect attribution to Corina Ruhe)
To contact the reporter on this story: Linda A. Thompson in Brussels at firstname.lastname@example.org
To contact the editor on this story: Penny Sukhraj in London at email@example.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)