Repatriation of funds: how do the clarified requirements impact you?

The NBB has clarified its compliance expectations regarding repatriation of funds and fiscal regularization procedures. Here is a summary.

Context

On 8 June 2021, the National Bank of Belgium (NBB) published its Circular (NBB_2021_12) which clarifies the due diligence obligations regarding repatriation of funds from outside of Belgium and fiscal regularization regimes in the context of the AML Law of 18 September 2017. This latest AML legislation redefined financial institutions’ obligations, which led them to request a clarification of the expectations.

The purpose of this Circular is to level the playing field, give guidance and clarify the NBB’s expectations of Belgian financial institutions. More specifically, it clarifies the enhanced due diligence measures to be taken on repatriated funds, taking into account:

• the fiscal regularization of the funds in the context of ‘Eénmalig Bevrijdende Aangiften (EBAs)/Déclaration Libératoire Unique (DLUs)’; and
  
  
• the reporting of suspicions of money laundering or terrorist financing towards the ‘Cel voor Financiële Informatieverwerking (CFI)/Cellule de Traitement des Informations Financière (CTIF)’.

Scope

The Circular applies to Belgian credit institutions, brokerage firms, insurance companies and their branches. Due to their asset management activities or the commercialization of life insurance contracts with a single premium, these institutions can indeed be confronted with severe fiscal fraud on the part of their clients.

What is expected from financial institutions and their clients?

From financial institutions for new repatriations?

They are required to enhance their due diligence on repatriated funds, considering the fiscal regularization of the funds in the context of EBAquater. Furthermore, it is necessary to continuously report suspicions of money laundering or terrorist financing towards the CFI/CTIF.

From financial institutions for former repatriations?

The NBB clarifies the special attention needed from financial institutions on funds repatriated in the past and the active role to play by the internal audit function.

Active role of the internal audit function

The NBB expects the internal audit function of the impacted financial institutions to perform an internal audit mission aiming to evaluate the internal vigilance practices and procedures. Where relevant, this has to be done in collaboration with other departments. More concretely, this audit of the institution’s procedures regarding the repatriation of funds from foreign countries should assess its:

• design;
  
  
• compliance with defined procedures, based on a representative sample of repatriation files.

The deadline for the planning of the internal audit mission is set to 31 October 2021 and the mission should be finalized at the latest by 30 June 2022.

Based on the results of the internal audit, the management’s action plan to remediate the findings is expected to be ready within three months after closure of the audit mission and should be submitted to the NBB, together with the final audit report. 

Reporting of suspicions

If the financial institution knows, suspects or has reasonable grounds to suspect that funds – even the ones received in the past –, transactions or established facts are related to money laundering or terrorist financing, they are obliged to report these suspicions to the CFI/CTIF.  

From clients?

The client bears the onus of proof. They need to prepare themselves to reconstruct their wealth and document the (lawful) origin of their funds held at Belgian financial institutions. The client needs to take into account that, under the regularization principles of EBAquater, time-barred income and non-time-barred income as well as the original capital are in scope. It is possible to regularize under EBAquater until 31 December 2022.

Considering a tax regularization related to regional taxes (e.g. inheritance tax), might cause a problem as the temporary Flemish regularization system ended on 31 December 2020. In addition, since the beginning of the year it is no longer possible to submit so-called mixed regularization files, which contain both federal and regional taxes, but for which no exact split is possible. Regularization files relating to purely federal taxes can still be submitted until the end of 2022.

How EY can help

Thanks to our in-depth knowledge of the subject and practical experience, our EY expert teams are ready to support financial institutions and their clients to properly respond to the clarified requirements, including: 

• Operational and tax support for client file reviews, monitoring and analysis of repatriated funds;
  
  
• Internal audit missions to identify weaknesses and concrete recommendations as input for Management’s action towards the regulator;
  
  
• Advice to private clients on the fiscal regularisations.  

Now is the time to get ready for compliance. Do not hesitate to reach out to your EY contacts if you have any questions.

Links to the Dutch and French version of the Circular.

NL: SPRTTA02C21060814450 (nbb.be)

FR:SPRTTA02C21060814451 (nbb.be)