There is a lot to be done in the trust sector. The legislation is subject to change and the supervisor (DNB) more assertively present on the playing field than before. What exactly do you need to pay attention to as a director of a trust office?
On January 1st, 2015, the new Regulation on Sound Operational Management (Rib Wtt 2014) was enacted for trust offices.
This regulation has considerably tightened the requirements for trust offices regarding operational management and client research. Among others, trust offices are required to:
- have an audit function in their organisation;
- perform a periodic risk assessment of their own operational management and take appropriate measures to control the identified risks;
- strengthen the role and duties of the compliance function, and;
- perform a risk analysis for each client to obtain a good picture of the integrity risks.
At the end of 2014, DNB drafted further guidance in the form of Q&As to help trust offices with implementing the altered requirements for sound operational management. These Q&As are available on the DNB website under the "Open Book Supervision".
The Q&As Operational Management give proper guidance for complying with the amended regulations concerning corporate integrity.
Supervision –Investigations by DNB
We regularly see that trust offices have insufficient knowledge on which themes are important for DNB (and hence also for the trust offices) and may therefore be subject to examination by DNB.
This seems odd, since DNB gives more and more insight into its way of working and the planning of its investigations. DNB writes newsletters for each sector and identifies its supervision themes in the brochure "Themes DNB Supervision". However, since DNB has not yet included its planned investigations for 2015 for the trust sector in the newsletter for trust offices—and has included these investigations in the brochure "Themes DNB Supervision" under the "cross-sectoral investigations" instead—we can understand why trust offices are not yet fully aware of DNB's planned investigations. We would like to refer you to a DNB newsletter (for pension funds). since the content of this newsletter is also relevant for trust offices. The brochure "Themes DNB Supervision" is particularly important.
The following overview is included on page 19 of the brochure. From this, you can deduce which investigations DNB has planned for the trust sector in 2015.
DNB vigorously initiated its investigation planning in 2015. Some of our customers have already received a request to supply information regarding the systematic integrity risk analysis. This analysis is obligatory for trust offices as of January 1st, 2015 (Rib, Wtt 2014). This shows how DNB is "on the ball". It seems that DNB wants to hit "home runs’ fast, to stimulate the trust sector to comply with the new regulations.
The annex of the booklet includes a schedule of the theme investigations for each quarter of the year. Below you can find the planning regarding several important investigations that will also be conducted in the trust sector.
More information about DNB's investigations, you can find here.
Suitability of directors
In December 2014, DNB has released its most recent newsletter for trust offices. This newsletter was specifically focused on the topic "Director, know your law."
DNB finds it very important that directors have adequate knowledge of laws and regulations. After all, trust offices have a legal duty as gatekeeper. They decide which international customers will be allowed into the Dutch financial system. That is why DNB attaches a lot of value to the policymakers to know which legal requirements they need to take into account. They need to be aware of the relevant regulations, such as the Act on Supervision of Trust Offices (Wtt), Rib Wtt 2014, Act on the Prevention of Money Laundering and Financing of Terrorism (Wwft), and the Sanction's Act. These laws form the foundation of the way in which trust offices organise their operational management and report which minimum requirements apply to the investigation of the client. Without this knowledge, the trust office director cannot fully executive its gatekeeper function, according to the DNB. DNB does not only expect directors of trust offices to know the main themes of the Rib Wtt, but that they also know what the changes are and how they need to translate them to their daily activities.
What DNB does not explicitly mention, but what is important for you to know, is the following:
If DNB identifies any shortcomings during an investigation at a trust office, DNB will not only be able to take enforcement measures, but it will also impose a 'supervisory antecedent' on the individual directors. In principle, these supervisory antecedents are held against all the current directors of the trust office. The 'permanent' suitability of an individual director therefore depends on the supervisory antecedents that are held against him or her.
You need to be aware of the fact that, fundamentally, every formal enforcement measure that is imposed on a trust office will result in a supervisory antecedent for all current directors. Examples of enforcement measures are e.g. a written warning, a direction, or a fine. In case an enforcement measure is imposed and you believe that a supervisory antecedent for one or multiple directors is unfounded, e.g. because the director has only just been installed and could not have been responsible for the infringement, we advise you to inform DNB in order to prevent said director receiving a supervisory antecedent. After all, a director needs to be parsimonious with his or her "slate", and to monitor it well.
As advisors in the area of compliance and risk management, we often experience that trust offices are, in practice, well aware of the changes in Rib Wtt 2014, but that they have a problem with translating these changes to the correct applications in policy, procedures, systems, and controls. In case your organisation needs support in implementing the required changes effectively and efficiently, Charco & Dique is at your service.
Charco & Dique also has in-depth experience in supporting institutions and directors in DNB investigations. The investigations can lead to enforcement measures and supervisory antecedents. Charco & Dique can help you prevent enforcement measures and/or supervisory antecedents, to adequately address these measures, or to limit their impact.
In case you still have one of the following questions:
- With which laws and regulations should my trust office comply?
- How am I informed of future changes in regulations on time?
- How do I determine whether my trust office is in compliance with all relevant regulations?
Then go to the Ruler website for information.
Ruler is an application, developed by Charco & Dique, which is designed to present relevant laws and regulations in a user-friendly way. Ruler makes it possible for you to quickly and clearly determine with which laws and regulations you need to comply, which future changes in regulations are coming up, and how you can structurally determine whether or not you are in compliance with regulations. You do not only create an insight into the level of control that you are in regarding compliance with laws and regulations, but you can also use Ruler to show supervisors in what way you are "in control".
In case you would like to find out more about this subject, Charco & Dique is at your service. For more information, you can contact Charco & Dique via telephone (at +31 (0) 20 416 54 03) or via email at firstname.lastname@example.org.