The Human Rights in Finance foundation faced De Nederlandsche Bank in court last Wednesday, Sept. 11. The regulator, according to the foundation, must act against the five major banks and guarantee that banks' outsourcing agreement with Transaction Monitoring Netherlands is terminated. The controversial cooperation between the government, regulators and banks is denied by the parties, but their own documents show that the cooperation began as early as 2020, on the initiative of the Ministry of Finance. The Rotterdam court is now considering whether the regulator should end the allegedly tolerated structure.
The government is in disrepute because of the "data hunger" from which government and regulators allegedly suffer. According to report of the Financieele Dagblad, a number of new laws would significantly expand the powers of supervisors to request data from banks. Experts warned of overly broad powers for supervisors that would also extend beyond their legal duties. But this is not a new trend. Indeed, the Dutch Central Bank has been involved for years in the illegal collaboration under Transaction Monitoring Netherlands (TMNL) in which personal data was processed on an "unprecedented" scale, at the expense of the privacy of an estimated 21 million account holders. Read here my extensive article on the legality of TMNL.
In the Lower House debate on money laundering legislation last Tuesday, Sept. 10, Minister Heinen (Finance) explained that the cooperation under TMNL would have been an initiative of banks - ABN AMRO, ING, Volksbank, Triodos and Rabobank - themselves. "It was not mandated from the government to start monitoring. So this was an initiative of the gatekeepers themselves, precisely from the belief that they should reduce the regulatory burden." The minister briefly explained the workings of TMNL: "A bank that saw a crook wanted to be able to say to another bank: that's a crook, who I wouldn't take on if I were you."
From a room letter from the Ministry of Finance on combating money laundering dated Jan. 22, 2020:
"Over the past period, significant strides have been made toward our goal of preventing criminals from staying out of the reach of government agencies and others and enjoying illegally amassed assets undisturbed. We are taking advantage of innovative initiatives, such as creating joint transaction monitoring capabilities. With these initiatives, we are going beyond international standards."
Minister Heinen justified the project with the French stroke. In fact, it was the Ministry of Finance itself that supported the "innovative" initiative that eventually led to the TMNL cooperation. The minister also gave a distorted view of TMNL's operation. After all, joint transaction monitoring was prohibited. The minister "forgot" that such monitoring took place in the period from 2020 to July 15 last year without a legal title. Moreover, it would be one thing if banks shared mutual data on "crooks. But the objectionable thing about TMNL is precisely that the major banks shared transaction data with one central entity - namely TMNL - and then TMNL analyzed that data with AI.
Human Rights in Finance Foundation argued in court that banks violated the outsourcing prohibition of the Wft by securing cooperation with each other and TMNL. The central argument is that the regulator knew about the cooperation and did not act on it. The regulator knew about the cooperation at least in October 2022 when it published in a report of its own wrote that "DNB is not a partner in the project but supports it and contributes in the form of knowledge.
The Human Rights in Finance plea describes the outsourcing of transaction monitoring by five banks as a "Super-Syri, but with no legal basis." By this, the foundation is referring to the controversial SyRI legislation that was ruled on in 2020 ruled that it violated the European Convention on Human Rights.
Since 2021, the banks, in cooperation with the Dutch Banking Association (NVB), have been outsourcing their transaction monitoring to an unauthorized third party, despite an explicit ban on this in the Money Laundering and Terrorist Financing Act (Wwft). In doing so, the banks, with the support of DNB, anticipated a change in the law that was ultimately not implemented. The foundation claims that as a result, data of some 21 million account holders were unlawfully shared with TMNL and that TMNL monitored between 10 and 14 billion transaction data in recent years.
The court will now consider whether the foundation should be deemed admissible and whether De Nederlandsche Bank should take enforcement action against the five banks. Judgment will follow in about two weeks. We will keep you informed of the ruling and any reactions from those involved via this website.
