The Impact of the AMLR on Holdings

The introduction of the EU Anti-Money Laundering Regulation (AMLR) marks a significant shift in the regulatory landscape. This also impacts holding companies. With the AMLR set to come into effect in July 2027, holding companies that are not the subsidiary of another undertaking and have at least one subsidiary that is an obliged entity are also required to comply with anti-money laundering (AML), countering the financing of terrorism (CFT) and targeted financial sanctions (TFS) obligations. This new regulation expands the scope of AML laws beyond the current requirements under the Dutch Anti-Money Laundering and Terrorist Financing (Prevention) Act (Wwft). This article explores the implications of this expansion for holding companies, particularly those that will now fall under the AMLR.

Holding companies are entities whose business purpose is holding a controlling (ownership) interest in other companies (‘subsidiaries’). Holding companies often oversee the strategic management of the group and (may) provide centralized services, while the operating business is typically delegated to its subsidiaries. By virtue of their function, holding companies are regularly the parent undertaking of (corporate) groups.

The AMLR introduces a broader scope of application, encompassing various types of holding companies, including financial holding companies, mixed financial holding companies, financial mixed activity holding companies, and non-financial mixed activity holding companies. Just the mere fact that a holding company that is not the subsidiary of another undertaking has one obliged entity in its structure, will trigger it to become an obliged entity in itself. This means that such holding companies that were previously not within scope of the Wwft, will now need to comply with AMLR requirements. The AMLR imposes several critical obligations on these obliged holding companies, including the following:

1. Governance and Compliance: Article 11 AMLR mandates stringent governance requirements, including the appointment of a compliance manager and compliance officer at the group level. These roles are essential for ensuring that the obliged holding company adheres to the AMLR and maintains robust internal controls.
2. Group-Wide AML/CFT/TFS Risk Assessment: According to article 16 AMLR, they will be required to conduct a risk assessment for the entire group, including subsidiaries that are not themselves obliged entities. This comprehensive risk assessment is crucial for identifying and mitigating potential AML risks across the group. The risk assessment should cover all entities within the group, even those that are not obliged entities themselves.
3. Group-Wide Policies, Procedures and Controls: Under article 16 AMLR, they must establish and implement group-wide AML policies, procedures and controls. However, next to the obliged (parent) holding companies themselves, only entities that are also obliged under the AMLR are required to implement these group-wide requirements.
4. Customer Due Diligence (CDD): Under articles 19 and 20 AMLR, they will need to perform CDD. This process involves collecting and analyzing information about business relationships to assess their risk profile. They must, for example, identify and verify the identity of their clients (and ultimate beneficial owners (UBOs)) and establish the purpose and intended nature of the business relationship.
5. Ongoing monitoring: According to article 26 AMLR, they must implement robust monitoring systems to detect and report suspicious activities. This includes analyzing transactions to ensure that those transactions are consistent with the knowledge of the client, the business and risk profile, or to identify patterns that may indicate money laundering or terrorist financing.
6. Reporting suspicious activities: Article 69 AMLR requires them to report any suspicious activities or transactions to the Financial Intelligence Unit (FIU) promptly.
7. Training and Awareness: According to article 12 AMLR, they must provide regular training and awareness programs for employees to ensure they are knowledgeable about AML policies, procedures, and their responsibilities. This helps in maintaining a high level of vigilance and compliance across the organization.

The transition to AMLR compliance presents both challenges and opportunities for obliged holding companies. On the one hand, the new requirements will necessitate significant changes in governance, risk management, and both operational and compliance processes. This includes upgrading systems to monitor transactions effectively (using data analysis) and training staff to recognize and report suspicious activities. In short, obliged holdings will need to invest in training, technology, and resources (e.g. compliance officers) to meet these obligations effectively.

On the other hand, proactive compliance with the AMLR can enhance the reputation of obliged holding companies, fostering trust among business partners and investors. By anticipating and addressing these regulatory changes early, holdings can position themselves as leaders in AMLR compliance, gaining a competitive edge in the market.

Given the complexity and scope of the AMLR requirements, obliged holding companies should start preparing for the future of AML, CFT and TFS well in advance of the 10 July 2027 deadline. This preparation should include:

• conducting a thorough group-wide AML/CFT/TFS risk assessment to identify and assess AML/CFT risks as well as risks of non-implementation and evasion of TFS;
• establishing a robust governance framework with clearly defined roles and responsibilities for AMLR compliance;
• developing and implementing comprehensive group-wide AML/CFT/TFS policies, procedures and controls, including on data protection and on information sharing within the group for AML/CFT/TFS purposes;
• investing in technology and training to support effective CDD and monitoring processes.

The expansion of AML legislation under the AMLR to include holdings represents a significant change for many companies. At KPMG, we understand the challenges that obliged entities face in navigating the evolving AML, CFT and sanctions regulatory landscape. Our team of experts can provide tailored solutions to help you achieve AMLR compliance efficiently and effectively. From conducting risk assessments to developing compliance frameworks, we offer a range of services designed to meet your specific needs.

Contact us to learn more about how we can support you in your AMLR journey.