Ban on trust offices in the Netherlands will be investigated

Trust office

Since the rules for trust offices have become stricter, some started to operate illegally. The approach to combat illegal trust offices may lead to a total ban on trust services, according to the letter that Minister Hoekstra of Finance sent to the House of Representatives. 

Services of trust offices

Trust offices manage companies and provide several financial services. They can perform administrative services and/or provide an address to international companies (letterbox companies). In this way these offices can contribute to tax benefits for the companies it provides these services to.  

Some of the trust offices operate illegally

A license from the Dutch Central Bank (DNB) is required for trust offices who operate legally in the Netherlands. Since the rules for trust offices became stricter from 2013 onwards, more offices started to operate illegally. An analysis performed by SEO Economic Research showed that approximately 45 percent of all trust directors with a market share of about 15 percent operate without a license.

These estimates show that the possible share of illegality in the trust sector is substantial. As a response to this research, Hoekstra announces that he identifies this as worrying and highly

undesirable. As these parties actively try to avoid supervision, the integrity risks for the financial system increase and as a result unfair competition occurs for parties that do have a license and are supervised. 

Due to experiences from the past and the recently published analysis from SEO Economic Research, the question arises whether the integrity of trust services can be sufficiently guaranteed. The economic pros and cons for a ban on trust services will be explored in a broader context. 

Action points to combat illegal trust offices

In the letter that Minister Hoekstra of Finance sent to the House of Representatives, he mentioned a number of action points, one of which is tightening up the legislation. Furthermore, he proposes an intensification of supervision and more cooperation between various supervisors. Also, he aims for a joint criminal or administrative law approach to illegal trust services. 

Currently, the cabinet is searching for possibilities on further tightening the rules. Hoekstra is also examining whether the current penalty for illegal trust services is effective or whether it should be increased.

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