Administrative Fine for Infringement of the Law of 11 January 1993

Sanction Committee
NON-NOMINATIVE VERSION
DECISION
OF THE SANCTION COMMITTEE OF THE NATIONAL BANK OF BELGIUM OF 21 JANUARY 2015 IN THE CASE OF X

1 Procedure

1 By letter of 13 May 2011 (ref. 1.2 of the Auditor's report), the King's Prosecutor at (...) informs the National Bank of Belgium (hereinafter: the NBB) that on 10 May 2010 he requested a judicial investigation against, inter alia, the managers of (...) nv for forgery of documents, misuse of trust, breaches of the Income Tax Code and the VAT Code, and money laundering. The letter further indicates that during this investigation, indications emerged that several office directors of Belgian financial institutions (including (...)) may have committed money laundering practices as accomplices or accessories. The letter points out cash deposits of very large sums at a (...) branch in (...) without reporting to the compliance department.

2 On 19 July 2011, the Management Committee of the NBB (hereinafter: the Management Committee) considers that it has serious indications of the existence of a practice by X (hereinafter the credit institution) that may lead to the imposition of an administrative fine. These indications relate to cash deposits made during the period from October 2007 to November 2009 on private accounts of (...).

3 By letter of 19 July 2011, the Management Committee, in accordance with Article 36/9, § 1, of the Law of 22 February 1998 establishing the organic statute of the National Bank of Belgium (hereinafter the Law of 22 February 1998), orders the Auditor to conduct an investigation in the interest and against the credit institution (ref. 1 of the Auditor's report). For his investigation, the Auditor relies on Dirk De Moor as the reporter (ref. 3 of the Auditor's report).

4 The Auditor, in accordance with Article 36/9, § 2, of the Law of 22 February 1998, submits his report no. 20110719/002 of 5 December 2012 to the Management Committee on 5 December 2012. The Auditor was of the opinion that the investigation conducted has demonstrated that:

• the credit institution has undoubtedly failed in its duty of ongoing vigilance, both in its first-line supervision and its second-line supervision regarding cash deposits on the accounts of (...), namely the investment account (...) during the period October 2007 – November 2008, the savings account (...) during the period February 2009 – November 2009, and the current account (...) during the period April 2008 – February 2009, and that this failure constitutes an infringement of Articles 4, § 2, and 8 of the Law of 11 January 1993 and of Articles 36 and 37 of the Regulation of 27 July 2004;
• the credit institution did not report the cash deposits on these accounts in advance or immediately after the transactions to the Financial Information Processing Cell (hereinafter: CFI), which constitutes an infringement of the information obligation prescribed in Articles 12 and 13 of the Law of 11 January 1993.

5 The Management Committee takes note of the Auditor's report on 11 December 2012 and is of the opinion that:

• it has been demonstrated that the credit institution has failed in its duty of ongoing vigilance, both in its first-line supervision and its second-line supervision regarding cash deposits on the account of (...), namely on the investment account (...) during the period October 2007 – November 2008, on the savings account (...) during the period February 2009 – November 2009, and on the current account (...) during the period April 2008 – February 2009;
• it has been demonstrated that the credit institution did not report the cash deposits on the aforementioned accounts in advance or immediately after the transactions to the CFI;
• the facts described in the report each individually and in their coherence constitute a serious infringement respectively of the vigilance obligation prescribed by Articles 4, § 2, and 8 of the Law of 11 January 1993 to prevent the use of the financial system for money laundering and terrorist financing and by Articles 36 and 37 of the Regulation of 27 July 2004, and of the information obligation prescribed by Articles 12 and 13 of the Law of 11 January 1993, as applicable at the time of the facts, and that they may lead to the imposition of an administrative fine.

6 The Management Committee decides, on the basis of Article 36/10, § 1, of the Law of 22 February 1998, to convene the Sanction Committee of the NBB (hereinafter the Sanction Committee). The President of the Sanction Committee (hereinafter: the President) receives, in accordance with Article 36/10, § 4, of the Law of 22 February 1998, a notification of the grievances, together with the investigation report, as well as a copy of the letter of 26 March 2014 mentioned below from the Governor of the NBB (hereinafter the Governor) to the credit institution.

7 By letter of 26 March 2014, the Governor informs the credit institution and provides a copy of the Auditor's report as well as an inventory of the case files, stating that a copy can be obtained from these documents. He points out to the credit institution the possibility to submit written comments to the President within a period of two months.

8 The credit institution submits its written comments by letter of 10 June 2014, i.e., within the period determined by the President, in accordance with Article 36/11, § 1, of the Law of 22 February 1998.

9 The President, in accordance with Article 9 of the internal regulations of the Sanction Committee of 13 December 2013 (hereinafter: the internal regulations), forwards the written comments of the credit institution to the Governor and to the Auditor. The Auditor submits by letter of 25 July 2014 a reply to those written comments.

10 The President, in accordance with Articles 10, 11, and 13 of the internal regulations, informs the credit institution, the Governor, and the Auditor of the date of the hearing and the composition of the Sanction Committee.

11 On 29 October 2014, the hearing provided for by Article 36/11, § 3, of the Law of 22 February 1998 takes place at the registered office of the NBB. The Sanction Committee, in its full composition, heard:

• Ann Dirkx, Auditor, assisted by the reporter Dirk De Moor, who explained the report;
• the Management Committee, represented by Deputy Director Koen Algoet, who agrees with the qualification of the facts made in the Auditor's report and requests that the Sanction Committee impose an administrative fine of 500,000 euros and order the nominative publication of the decision;
• the credit institution, represented by Mr. Johan Verbist, lawyer at the Court of Cassation, assisted by (...), corporate lawyer of the credit institution, who argued in the main that the Auditor's report was partially null and void and that the request for the imposition of an administrative fine was partially inadmissible due to lack of referral, subsidiarily that no infringements were proven, and further subsidiarily that there were no reasons to make the decision nominatively public.
  The attendees could reply. The credit institution had the last word.

2 Applicable Legislation

12 Relevant for the case to be assessed are the following provisions of the Law of 11 January 1993 to prevent the use of the financial system for money laundering (hereinafter Law of 11 January 1993), in their version as applicable at the time of the facts:

• Article 4, § 2:
  “Enterprises and persons referred to in Articles 2, 2bis, 1° to 4°, and 2ter, must display ongoing vigilance with regard to the business relationship and must ensure careful examination of the transactions carried out to ensure that they correspond to the knowledge they have of their client, of his commercial activities, of his risk profile, and, if necessary, of the origin of the funds.”
• Article 8, first and second paragraphs:
  “Enterprises and persons referred to in Articles 2, 2bis, 1° to 4°, and 2ter, must examine with special attention any transaction that they, by its nature or by its unusual character considering the client's activities, the accompanying circumstances, or the status of the persons involved, consider particularly susceptible to money laundering (...). The enterprises or persons referred to in Articles 2 and 2bis, 5°, draw up a written report on this examination; this report is sent to the persons referred to in Article 10 for safekeeping during the period prescribed by Article 7.”
• Article 12, § 1, first paragraph:
  “When the enterprises or persons referred to in Article 2 know or suspect that a transaction to be carried out is related to money laundering (...), they bring this to the attention of the Financial Information Processing Cell before carrying out the transactions and, where applicable, share the time limit within which that transaction must be executed. (...).”
• Article 13:
  “When the enterprises or persons referred to in Article 2 know or suspect that a transaction to be carried out is related to money laundering (...), but cannot bring this to the attention of the Financial Information Processing Cell before executing the transaction, either because it is not possible to delay the execution of the transaction given its nature, or because delaying it could prevent the prosecution of the beneficiaries of the alleged money laundering (...), the enterprises or persons immediately inform the Cell after executing the transaction. In that case, the reason why notification before executing the transaction was not possible is stated.”

13 The Law of 11 January 1993 was amended by the Law of 18 January 2010. The obligations described in Articles 4, § 2, 8, 12, and 13 of the Law of 11 January 1993 were, after the legislative amendment of 18 January 2010, incorporated into Articles 12, 13, and 14 of the Law of 11 January 1993.

14 The aforementioned provisions were further elaborated by Articles 35 to 37 of the CBFA Regulation of 27 July 2004 concerning the prevention of money laundering and terrorist financing, ratified by the Royal Decree of 8 October 2004. They were, after the regulatory amendment, incorporated into Articles 30, 31, and 32 of the CBFA Regulation of 23 February 2010.

15 From the foregoing, it follows that the obligations imposed on the credit institution by the aforementioned provisions still exist today and that the legislation dating after the facts does not impose less extensive obligations on the credit institution. In assessing the case, only the provisions applicable at the time of the facts are taken into account, with the understanding that it is established that those obligations have continued to exist after the facts and to date and could be sanctioned.

16 Any subsequent reference in this decision is to the legislation as applicable at the time of the facts, unless otherwise stated.

17 The sanctioning of the behaviors attributed to the credit institution is established in Article 22, first paragraph, of the Law of 11 January 1993, currently Article 40 of this Law:
“Without prejudice to the measures provided for by other laws or regulations, the competent control or supervisory authority, or the competent disciplinary authority, in the event of non-compliance with the provisions of Articles 4 to 19 or the decisions taken to implement them by an enterprise or person referred to in Articles 2, 2bis, and 2ter under its jurisdiction:
1° according to the rules it determines, make public the decisions and measures it takes; 2° impose an administrative fine, which may not be less than 250 euros and not more than 1,250,000 euros, after having heard the concerned enterprises or persons in their defense or at least duly summoned (...).”

3 Context of the Applicable Regulation

3.1 Vigilance Obligation: General

18 From the obligation imposed on the credit institution by Article 4, § 2, of the Law of 11 January 1993, it follows that the credit institution, after the initial identification of the client, remains bound to due diligence, taking into account the evolution of the client's situation and his transactions, and the possible emergence of new risks. The credit institution is obliged to keep its business relationships and their transactions permanently under observation and to ensure that those transactions present coherence with what the institution knows about the concerned client. This enhanced and permanent duty of vigilance, from the establishment of the business relationship, throughout its entire duration, and with persistent attention to potentially suspicious transactions, is the red thread throughout the system of money laundering prevention and combating, and is necessary to protect the solidity and integrity of the financial system and to contribute to the fight against money laundering.

19 Regarding the special vigilance obligation imposed by Article 8 of the Law of 11 January 1993, it should be noted that a transaction may be considered particularly susceptible to money laundering either by its nature or by its unusual character. Transactions can be considered particularly sensitive to links with money laundering by their nature if those transactions are themselves abnormal, or abnormal with respect to third parties. The concept of nature should not be interpreted too restrictively.

20 Article 1, 7° of the CBFA Regulation of 27 July 2004 defines an atypical transaction as a transaction that is particularly susceptible to money laundering within the meaning of Article 8, first paragraph, of the Law of 11 January 1993, considering its nature, the accompanying circumstances, the status of the persons involved, its unusual character considering the client's activities, or because it does not seem to correspond to the knowledge the credit institution has of its client, his professional activities, and risk profile, and, if this proves necessary, of the origin of the money.

3.2 First-Line Supervision

21 A credit institution is obliged to fulfill its duty of vigilance at two levels, namely first-line and second-line supervision. This double supervision system is further elaborated in the CBFA Regulation of 27 July 2004.

22 First-line supervision consists, according to Article 1, 8°, of the CBFA Regulation of 27 July 2004, in the detection of atypical transactions by the employees of the credit institution who are in direct contact with clients. According to Article 36 of the CBFA Regulation of 27 July 2004, these persons must devote specific attention to these atypical transactions and draw up a written report, with particular attention to the apparent economic basis and legitimacy of the transactions concerned.

23 According to Article 36 of the CBFA Regulation of 27 July 2004, the credit institution must provide in writing appropriate criteria to persons responsible for first-line supervision to detect atypical transactions. In point 9.2.1 of the coordinated circular of 12 July 2005, the CBFA clarifies that these criteria should align with the risk criteria used in the framework of the institution's acceptance policy, furthermore, they should relate to the transactions themselves, implying that attention must be paid to the apparent economic basis and the legitimacy of the transactions, and that employees should also be alerted to facts and circumstances strongly suggesting that a transaction is related to money laundering. The CBFA also pointed out in this circular that employees responsible for first-line supervision can only assume their responsibilities appropriately if necessary efforts are made in terms of training and awareness.

24 Regarding these criteria, reference can be made to the money laundering indicators resulting from serious and organized tax fraud established in the Royal Decree of 3 June 2007 implementing Article 28 of the Law of 11 January 1993 to prevent the use of the financial system for money laundering and terrorist financing.

3.3 Second-Line Supervision

25 According to Article 1, 9°, of the CBFA Regulation of 27 July 2004, first-line supervision must be supplemented by second-line supervision, using a supervision system to detect atypical transactions. In point 9.2.2 of the coordinated circular of the CBFA of 12 July 2005, it is indicated that the purpose of this system is to systematically detect transactions that, although atypical, could not be detected as such within the framework of first-line supervision or that escaped vigilance there.

26 According to Article 37 of the CBFA Regulation of 27 July 2004, this second-line supervision must cover all accounts and transactions, be based on accurate and pertinent criteria, enable rapid detection of atypical transactions, provide written reports describing the detected atypical transactions, and indicate on what grounds those transactions classified as atypical were automated and first subjected to a validation procedure.

27 Article 38 of the CBFA Regulation of 27 July 2004 imposes on the credit institution the obligation to use the necessary means to, under the responsibility of the AML responsible, proceed as soon as possible to the analysis of the written reports resulting from first- and second-line supervision. It is this analysis that must clearly indicate whether the transactions or facts should be brought to the attention of the CFI.

3.4 Reporting Obligation to the CFI

28 In point 9.2.3.2. of the coordinated circular of 12 July 2005, the CBFA indicated that the reporting obligation to the CFI relates not so much to one transaction as to a set of transactions. A set of transactions, viewed individually, may not have aroused suspicion, but a posteriori may reveal links with money laundering. Rapid analysis of the written reports drawn up following first- and second-line supervision is important in this regard.

3.5 Training and Awareness of Personnel

29 Article 9 of the Law of 11 January 1993 imposes on the credit institution the obligation to take appropriate measures so that their concerned employees and representatives participate in special training programs to learn to recognize transactions and facts that may be related to money laundering and to instruct them on how to act in such cases. This obligation is further specified in Article 40 of the CBFA Regulation of 27 July 2004.

4 Factual Data

4.1 General

30 The investigation conducted by the Auditor reveals the following data, the materiality of which was not contested by the credit institution. In the letter of 24 October 2012 from (...), corporate lawyer of the credit institution, no comments were formulated regarding the Auditor's report, except regarding the qualification of the facts (ref. 27 of the Auditor's report).

31 The credit institution is an institution listed on the list referred to in Article 13 of the Law of 22 March 1993 on the status and supervision of credit institutions. It is subject to the provisions of this Law by virtue of Article 2, 2°, of the Law of 11 January 1993.

32 (...), born on (...), has been a client of the credit institution since (...). He is known there as an industrialist, managing director of (...) nv, with a very large fortune. After his move to (...), he entered relationship management at office (1) in (...) and also carried out transactions at office (2).

33 (...) had the following profile at the credit institution: “Belgian (client without nationality with increased risk), who is not a PEP and was not identified at a distance, with Belgian residence where he banks close to his place of residence, and managing director/director of a company active in a non-risky sector (namely (...)). The client is not considered as a client with an increased risk profile” (ref. 6 of the Auditor's report).

4.2 Cash Deposits

34 (...) made on the three accounts opened in his name listed below, during the period from October 2007 to November 2009, a total amount of 1,451,250 euros in cash deposits. These are the following deposits, each indicating whether the transaction took place at office (1) or office (2), whether the transaction led to an alert report to the Compliance department of the credit institution, and how the Compliance department responded or did not respond.

Investment Account (...)
Opening 06/08/2007

Nr	Date	Amount	(1) or (2)	Remarks
1	26/10/2007	81,500	(2)	Alert<br>Request for explanation by Compliance on 29/10/2007<br>(2) provided on 31/10/2007 explanation: managing director of 3 firms; moving to (...); considerable fortune placed at (1); all funds centralized there; intended to be gradually invested<br>No further action
2	22/11/2007	112,000	(2)	Alert<br>Immediate handling by Compliance<br>No further action
3	20/12/2007	86,500	(2)	Idem
4	23/01/2008	22,000	(2)
5	11/03/2008	12,000	(2)
6	11/04/2008	28,500	(2)	Alert<br>Immediate handling by Compliance<br>No further action
7	19/05/2008	160,000	(1)	Alert<br>Request for explanation by Compliance on 16/06/2009<br>Answer (1): there are no supporting documents; transactions are considered appropriate within the client's economic profile; fortune min. 50 million euros; lives on large estate and does agriculture; no indication that he is engaged in illegal activities; cash deposits are not suspicious in themselves, unless the amount exceeds reasonable limits, which is not the case here<br>No further action
8	03/07/2008	25,000	(1)	Alert<br>No action by Compliance
9	10/07/2008	28,000	(1)	Alert<br>No action by Compliance
10	10/07/2008	76,500	(1)	Alert<br>No action by Compliance
11	17/09/2008	50,000	(1)	Alert<br>No action by Compliance

Sanctioning Committee
12 17/10/2008 76,000 (1) Alert
No action taken by Compliance
13 07/11/2008 100,000 (1) Alert
Request for explanation by Compliance on
16/06/2009
Answer: see above
No further action
14 24/11/2008 77,000 (1) Alert
Request for explanation by Compliance on
16/06/2009
Answer: see above
No further action
TOTAL 935,000
With these funds, mixed with other funds from (…) and from (….) nv, investments (time deposits and securities transactions) were made The deposited money was largely transferred to the current account mentioned below (…) and partially transferred abroad. Closure 03/12/2008 Savings account (…) Opening 13/03/2009 No. Date Amount (1) or (2) Comment 1 13/03/2009 47,000 (2) Alert No action taken by Compliance 2 03/04/2009 80,000 (2) Alert No action taken by Compliance 3 11/05/2009 85,000 (2) Alert No action taken by Compliance 4 08/06/2009 104,500 (2) Alert No action taken by Compliance 5 10/06/2009 12,000 (2) 6 02/07/2009 30,000 (2) 7 02/11/2009 28,500 (2) TOTAL 387,000 The deposited money was largely transferred at the end of June 2009 to the current account mentioned below (…) Closure 05/02/2010 Current account (…) Account used for current payment transactions On this account, the funds from the aforementioned investment and savings accounts were transferred Opening 30/12/1991 No. Date Amount (1) or (2) Comment 1 11/04/2008 61,500 (2) Alert Immediate processing by Compliance 9/20

Sanctioning Committee
No further action
2 19/05/2008 10,000 (1)
3 18/02/2009 57,750 (2)
TOTAL 129,250
On 29/06/2009, 1,281,565.35 euros were transferred from this account to an account of notary (…) 35 It should be noted that:

• no report was made to the compliance department of the credit institution or a report
  prepared for any of these transactions by the office itself ((1) or (2));
• the credit institution reported to the CFI on 26 August 2010 for deposits no. 4 to 14
  on the investment account (…) and deposit no. 2 on the current account (…) and on 7 September 2010 for deposits no. 1 to 7 on the savings account (…);
• no report was made for deposits no. 1 to 3 on the investment account (…) and deposits
  no. 1 and 3 on the current account (…).
  4.3 The instructions applicable within the credit institution
  36 The credit institution follows a step-by-step plan for determining possible indications of money laundering. For cash deposits, it must be checked whether they fit within the economic profile of the client and whether the transaction is suspicious in its nature. For an unusual transaction, being a transaction that does not fit within the economic profile of the client, the following instructions must be observed:
• proof regarding the origin of the funds for cash deposits of 100,000 euros or more
  must be requested;
• for transactions that do not fit within the economic profile but whose amount is lower
  than the threshold amount, an explanation must be requested from the client and must be supported by evidence to be provided by the client or via a checklist; if the client cannot provide a credible explanation, this must be reported to Compliance via an internal mailbox;
• in the event of an unusual transaction, the office must check whether there is one of
  thirteen indicators of serious and organized tax fraud and, if so, report this to Compliance via the standard reporting form.
  37 To determine whether there are indications of money laundering in the event of cash deposits, the instructions state that it must be investigated whether the transaction fits within the economic profile of the client and whether the transaction is suspicious in its nature. The offering by a very wealthy client of a large amount in cash is always suspicious by the nature of the transaction. 38 The credit institution also has a list of money laundering typologies that can be retrieved in situations where a suspicious transaction occurs. This includes, among other things, regarding cash deposits, the size of the deposited amounts, the splitting of deposits across different offices of the credit institution, and an incoherent economic justification for the transactions. 10/20

Sanctioning Committee
39 Regarding second-line monitoring, the following approach and instructions apply:

• second-line monitoring is exercised by Compliance, which uses the monitoring tool;
• there are various controls: daily (mandatory) control, monthly controls, quarterly controls,
  and thematic investigations;
• alarms are investigated daily if it concerns a so-called risk client, if the amount of the
  transaction is higher than 350,000 euros, and if it concerns a new client appearing on a risk list;
• there is a system for the creation and signaling of alarms, which is built up without
  different typologies of transactions.
  5 The nullity of the Auditor's report alleged by the credit institution 40 The credit institution argues that the Auditor had no saisine (mandate) with regard to the alleged breach of Articles 12 and 13 of the Law of 11 January 1993 because the letter from the Management Committee of 19 July 2011 did not refer in any way to the provisions regarding the reporting obligation, but solely to the provisions concerning the duty of vigilance. The investigation by the Auditor into the alleged violation of the reporting obligation would be null and void due to lack of saisine, and the request for the imposition of an administrative fine for the violation of the reporting obligation would be inadmissible. 41 By letter of 19 July 2011, after having judged that there were serious indications of the existence of a practice at the credit institution that could lead to the imposition of an administrative fine, the Management Committee ordered the Auditor to conduct an investigation on behalf of and for the benefit of the credit institution, and this due to facts that could constitute an infringement of Chapter II, Section 2 of the Law of 11 January 1993 on the prevention of the use of the financial system for money laundering and the financing of terrorism (mainly Articles 14 and 16) and Chapter 10 of the Regulation of 23 February 2010 concerning the prevention of money laundering and the financing of terrorism as approved by the Royal Decree of 16 March 2010 (mainly Articles 31 and 32) (Annex 1). 42 Article 36/9, § 1, first paragraph, of the Law of 22 February 1998 provides that if the NBB, in the exercise of its statutory duties under Article 12bis, finds that there are serious indications of the existence of a practice that could lead to the imposition of an administrative fine, or if it is informed of such a practice following a complaint, the Management Committee decides to set up an investigation and charges the Auditor with this investigation. 43 Pursuant to Article 36/9, § 1, first paragraph, of the Law of 22 February 1998, the Auditor conducts the investigation on behalf of and for the benefit of the credit institution. He is, pursuant to Article 36/9, § 1, second paragraph, of the Law of 22 February 1998, completely independent in the exercise of his duties as Auditor. He may, pursuant to
  Article 36/9, § 1, third paragraph, of the Law of 22 February 1998, exercise all investigative
  powers entrusted to the NBB by the statutory and regulatory provisions governing the matter concerned for the exercise of his duties. He draws up a report after the end of the investigation, which he forwards to the Management Committee, pursuant to Article 36/9, § 2, of the Law of 22 February 1998. 11/20

Sanctioning Committee
44 From these provisions and the nature of the Auditor's mandate, it follows that his saisine is determined by the facts that constitute a practice that could lead to the imposition of an administrative fine, for which the Management Committee believes it can establish serious indications or of which it was informed following a complaint. The saisine is therefore not determined by the qualification that the Management Committee believes it must give to that practice, but by the facts that constitute that practice. 45 The saisine of the Auditor is therefore determined by the facts included in the decision of the Management Committee charging the Auditor with setting up an investigation and the documents attached to that decision. 46 From the decision of the Management Committee of 19 July 2011 and the attached documents (Annex 1, 1.1 and 1.2 to the Auditor's report), it appears that the saisine of the Auditor relates to the cash deposits made during the period from October 2007 to December 2009 on the accounts held at the credit institution by (…). 47 The Auditor could therefore indeed investigate not only whether the credit institution had committed an infringement of Articles 4, § 2, and 8 of the Law of 11 January 1993 concerning the duty of vigilance, but also whether no infringement had been committed of Articles 12 and 13 of this law regarding the reporting obligation. 48 There is therefore no ground to declare the Auditor's report regarding the investigation into the reporting obligation null and void and to declare the request for the imposition of an administrative fine inadmissible. 6 Assessment of the infringements attributed to the credit institution
6.1 General
49 The credit institution argued that as a financial institution, it is caught between its obligations based on the Law of 11 January 1993 and its contractual obligations towards its client, and that during the investigation by the Auditor, abstraction was made of those contractual obligations. Referring to a judgment of the Commercial Court of Brussels of 27 February 2013, it was argued that an insufficiently justified report could have put the liability of the credit institution towards (…) in jeopardy if it had appeared that the deposited funds had a completely legal origin. 50 This defense of the credit institution cannot convince. Indeed:

• correct compliance with the obligations imposed by the Law of 11 January 1993
  cannot possibly put the contractual liability of the credit institution in jeopardy;
• the reference to the judgment of 27 February 2013 is not relevant: the factual
  circumstances in the present case cannot be compared to those that led to this judgment (it concerned a one-time transfer to an account at another financial institution). Moreover, it appears that an appeal was lodged against this judgment; 12/20

Sanctioning Committee

• the credit institution did not have to report directly to the CFI: it could, within the
  framework of first-line monitoring, have requested supporting documents from the client regarding the origin of the numerous deposits for not insignificant amounts across three different accounts, and in this way could have formed an image of the legal or illegal origin of the deposits; however, no question was asked about the legal origin of the deposited funds. 51 The credit institution further argues that further verification shows that a significant amount was included on the asset side of the annual account of (…) nv under the heading other claims, namely normally the current account of the directors (balance 1,302,648 euros in 2009, 625,412 euros in 2008 and 832,930 in 2007). This would have given rise to the suspicion at the credit institution that the directors had received advances from the company. 52 This fact is not relevant in assessing whether the credit institution has observed the duty of vigilance resting on it. Indeed:
• this fact was raised for the first time in the written comments of the credit institution
  on the Auditor's report; it was not mentioned in the letter from the credit institution of 24 October 2012 in response to the findings of the Auditor (Annex 27 to the Auditor's report); it was not mentioned in the statements made by the staff of the credit institution; it is therefore not plausible that this fact had any influence on the attitude of those responsible for first- and second-line monitoring at the credit institution;
• from the mere fact that a significant amount is listed under the heading other claims,
  it cannot be deduced that exclusively current account claims of directors were listed;
• the annual report mentions several directors;
• there is no demonstrable link between the evolution of the heading other claims and
  the cash deposits;
• there is no indication whatsoever of the actual withdrawal in cash via the current account
  of (…) at (…) nv and the subsequent deposit on the private accounts of (…). The proof of this was never provided to the credit institution. Moreover, it is not the custom for such important "advances" to be paid in cash.
  6.2 First-line monitoring
  53 The investigation conducted by the Auditor shows that regarding first-line monitoring, the employees of the two branches of the credit institution concerned did identify and profile the client, but that in further monitoring, particularly regarding the apparent economic basis and legitimacy of the transactions, they did not display sufficient vigilance. This judgment is supported by the statements of the employees of branch (1) of the credit institution:
• the teller states that it was the task of the relationship manager to check whether the
  cash deposit fit within the client profile and that the relationship manager confirmed that there was no problem (Annex 21 to the Auditor's report), while the relationship manager stated he was not aware of the cash deposits (Annex 22 to the Auditor's report);
• the then branch manager declared that the back office certainly needed to contact the
  relationship manager for amounts above 100,000 euros (Annex 23 to the Auditor's report), while the relationship manager stated that the back office only reported in general terms that the account was provisioned (Annex 22 to the Auditor's report);
• the teller declared that "few cash deposits" occurred (Annex 21 to the Auditor's report),
  the branch manager stated that cash deposits are rather exceptional and certainly not common (Annex 23 to the Auditor's report);
• the relationship manager stated that cash deposits were accepted, but always within
  the wealth profile of the customer (Annex 22 to the Auditor's report);
• the branch manager stated that cash transactions were not reported to him and that
  he did not notice the transactions that should have appeared on the so-called irregularity list (Annex 23 to the Auditor's report);
• when asked whether a cash transaction was suspicious, the teller referred to the
  relationship manager (Annex 21 to the Auditor's report) and the branch manager and relationship manager stated that the cash transactions were not suspicious at the time (Annex 22 and 23 to the Auditor's report);
• no proof of the origin of the funds was requested;
• the risk profile of the client was never adjusted to take into account and explain the
  volume and periodic nature of the cash deposits;
• the branches concerned did not contact Compliance.
  54 The first-line employees could and should have known that cash transactions on private accounts must always be considered as atypical transactions and must be justified as such. Cash deposits are included in the list of money laundering typologies in the internal procedures, with reference to the size of the deposited amounts, the splitting of deposits across different branches, and incoherent economic justification. The first deposit for an amount of 81,500 euros indeed gave rise to an alert and a request for information by Compliance on 26 October 2007, where it was pointed out that such a transaction did not fit the client profile. The head of the anti-money laundering cell of the credit institution also stated that cash is always risky in any context (Annex 24 to the Auditor's report). 55 From the statements of branch manager (2) of 19 May 2010 and 24 August 2010 to the Federal Judicial Police (Annex 16.5), it can be questioned whether he runs an institution that responds to the spirit of the provisions of the anti-money laundering law, specifically regarding the duty of vigilance. The branch manager was reprimanded by Compliance via email of 1 September 2010, which pointed out that some of his statements were directly contrary to the statutory obligations of the credit institution to prevent money laundering (Annex 16.5). 56 With the Auditor, the Sanctioning Committee therefore concludes that:
• the cash transactions, given their very large amounts and the regular deposit on
  different accounts (over a period of just under two years, 24 cash deposits totaling 1,451,250 euros on three different accounts in two different branches), have an unusual character within the meaning of Article 8 of the Law of 11 January 1993;
• the first-line employees of the credit institution did not pay special attention to these
  unusual transactions; they did not conduct a careful investigation to determine whether the amounts of the cash deposits and their sequence fit within the profile of the client- natural person, his activities, and his risk profile; pertinent questions regarding the application of the money laundering regulations were not asked; the client profile was not updated by taking into account the frequent cash deposits;
• the mere fact that the client was very wealthy and that he went into relationship
  management is not sufficient to refrain from asking further questions;
• the turnover on the balance sheet of (…) nv is not relevant for assessing cash deposits
  by (…) on his private accounts;
• the first-line employees failed to ensure the origin of the funds by obtaining supporting
  documents;
• due to a lack of appropriate vigilance and consequently a careful investigation by the
  first-line employees regarding the transactions, no report was prepared for the central anti-money laundering cell of the credit institution (compliance); 57 An infringement of Articles 4, § 2, and 8 of the Law of 11 January 1993 on the part of the credit institution is therefore established.
  6.3 Second-line monitoring
  58 From the factual data presented above, it appears that the monitoring tool generated alarms multiple times based on the set parameters. From the information provided by the credit institution to the Auditor, it appears that following the first cash deposit for an amount of 81,500 euros on 26 October 2007 in branch (2), Compliance sent an email to the branch manager stating that the transaction did not initially fit the known client profile. A branch employee provided clarification regarding the client on 31 October 2007, namely an industrialist who had come to live near (…) and who was introduced to branch (1) of the credit institution with a favorable result. The client would want to centralize his assets which would gradually be invested (Annex 10.4 to the Auditor's report). 59 This fairly general information provided by the branch employee apparently sufficed for Compliance to note that this transaction fit within the (…) profile and to set the alarm to ok. The five subsequent alarms for cash deposits until 20 May 2008 were also set to ok by Compliance based on this information. While this may be plausible for the first deposit given its apparently one-off nature, this does not apply to the subsequent deposits. Cash deposits are indeed included in the list of money laundering typologies that the credit institution itself uses if no information on the origin and supporting documents is obtained. 60 From July 2008, the alerts generated by (…) were no longer processed immediately. The head of the anti-money laundering cell of the credit institution stated that the credit institution had operational problems and, given the influx of alerts linked to the number of available staff, choices had to be made. Only cash deposits from an amount of 350,000 euros were investigated daily (Annex 24 of the Auditor's report). 15/20

Sanctioning Committee
61 It follows that second-line oversight failed to promptly detect the cash deposits made to the accounts of (...) and consequently did not prepare a written report on these atypical transactions. The fact that the credit institution still carried out daily mandatory controls as well as monthly, quarterly, or thematic investigations during that period, as argued by the credit institution, or the information provided regarding the staff of the credit institution's anti-money laundering unit during the 2007-2009 period, does not alter this finding. 62 On 16 June 2009, Compliance, as part of a thematic investigation into deposits by managers following credits from cash deposits on the aforementioned investor account amounting to 655,000 euros in 2008, requested that the office (1) fax the supporting documents proving the origin of the funds, as well as explaining their economic origin, regarding the largest deposits (160,000 euros on 19 May 2008, 100,000 euros on 7 November 2008, and 77,000 euros on 24 November 2008) (Annex 6.7, p. 20 of the Auditor's report). The office director declared on 18 June 2009 that there were no supporting documents, that the transactions were considered appropriate within the client's economic profile (wealth of at least 50 million euros, no indication of involvement in "unauthorized matters," in relationship management). According to the office director, no questions had been asked about these cash transactions up to that point given the client's very substantial wealth and very good reputation with the credit institution. This investigation was closed with the qualification of "not further to be followed" (Annex 6.7, p. 24 of the Auditor's report). 63 Regarding the reference to searches conducted by the credit institution in public sources, it should be noted that these searches are difficult to accept as justification for the cash transactions carried out by (...) and their origin, and are certainly of little relevance insofar as they concern one of its companies. 64 Every credit institution must not only abstractly but also concretely and without delay strictly fulfill its legal obligations regarding money laundering prevention, which the credit institution failed to do here. 65 Given the shortcomings in second-line oversight, the Sanctioning Committee must therefore find that the credit institution has committed an infringement of Articles 4, § 2, and 8 of the Act of 11 January 1993.

6.4 Reports to the CFI
66 After indications of money laundering regarding (...) nv became apparent, the credit institution reported on 12 May 2010 regarding (...) nv to the CFI. The cash deposits on the accounts of (...) were not mentioned in that report. Given the links that appear to exist between (...) nv and (...) and (...), being the spouse of (...), the credit institution decided that an additional report must be made for (...). The report concerning the cash deposits on the accounts (...) and (...) of (...) in 2008 amounting to 665,000 euros was made on 26 August 2010. On 7 September 2010, the credit institution electronically reported the cash deposits in 2009 on the account (...) of (...) for a total amount of 387,000 euros to the CFI (Annex 6.7, p. 37 of the Auditor's report). 67 The Sanctioning Committee must find that the cash deposits mentioned above were not immediately reported to the CFI, whereas given their number, size, and accompanying circumstances, they should have been reported. These were not isolated transactions. Furthermore, it must be established that although it was already apparent from the investigation conducted on 12 May 2010 regarding (...) nv that there were links between (...) nv and (...) for some deposits by (...), reporting only occurred on 26 August 2010 and 7 September 2010. For the deposits on 26 October 2007 (81,500 euros), 22 November 2007 (112,000 euros), 20 December 2007 (86,500 euros), 11 April 2008 (61,500 euros), and 18 February 2009 (57,750 euros), no reporting appears to have occurred. The credit institution therefore did not act diligently at the time a problem became apparent. It took some time before reporting occurred, and even then, only partially. 68 It is therefore clear to the Sanctioning Committee that the credit institution committed an infringement of Articles 12 and 13 of the Act of 11 January 1993 by failing to report or by reporting late to the CFI.

7 The administrative fine to be imposed
69 The representative of the Management Board requested the imposition of an administrative fine of 500,000 euros. He referred to the objective seriousness of the infringements, the signaling function of a sanction for those directly involved, others in the financial sector, and public opinion, and finally the financial capacity of the credit institution. 70 In determining the amount of the administrative fine to be imposed on the credit institution, the Sanctioning Committee must, in accordance with Article 36/11, § 4, of the Act of 22 February 1998, take into account the seriousness of the infringements and the benefits or profits derived from these infringements. 71 In determining the amount of the administrative fine to be imposed, the Sanctioning Committee takes the following elements into account:

• the fact that the vigilance duty prescribed by the Act of 11 January 1993 is considered necessary to protect the solidity and integrity of the financial system and contribute to the fight against money laundering;
• the control by employees of a credit institution or an executed transaction whether it is a normal or unusual transaction is essential for every method of money laundering prevention;
• the shortcomings in the vigilance duty occurred both at the level of first-line oversight and second-line oversight, resulting in non-reporting to the CFI;
• the shortcomings concern a significant number of transactions, for substantial amounts, and over a longer period;
• the credit institution must ensure that it has systems allowing it to test prima facie the unusual nature of transactions and to compensate for any shortcomings of its employees and to act quickly and thoroughly in case of proven abnormalities;
• the amount of the fine must be sufficiently deterrent to make it sufficiently clear to the credit institution itself, its staff, and similar institutions and their staff that shortcomings in the vigilance duty and reporting duty to the CFI cannot be tolerated;
• the financial capacity of the credit institution;
• the benefits or profits the credit institution derived from the established infringements (retention of a client, cost savings by not performing actions that should have been performed within a performant first- and second-line oversight) appear rather limited;
• the credit institution has tightened its procedures regarding money laundering prevention after the facts (mandatory reporting to the office director of the managing office of cash deposits on private accounts from 10,000 euros in a period of one month in one or more transactions in one or more offices, via the counter or ATM; listing of cash transactions of more than 10,000 euros with reporting to the office director who has the obligation to investigate them) as evidenced by the statement of the head of the anti-money laundering unit (Annex 24 of the Auditor's report).
  72 Given these elements, the Sanctioning Committee considers an administrative fine of 50,000 euros appropriate.

8 Publication of the decision
73 Article 36/11, § 6, of the Act of 22 February 1998, in its current version, stipulates that the decisions of the Sanctioning Committee are published nominally on the NBB website for a duration of at least five years, unless this publication threatens financial stability or an ongoing criminal investigation or criminal procedure, or threatens to cause disproportionate harm to the persons involved or to the institutions to which they belong. In that case, the decision is published non-nominally on the NBB website. 74 The credit institution requested that the decision not be published nominally. A nominal publication of the decision imposing an administrative fine would, in its view, cause disproportionate harm in the current market conditions. 75 At the hearing, the credit institution further argued that any publication, and thus also a non-nominal publication, would cause it disproportionate harm because despite the procedures prescribed by law to ensure the non-nominal character, the identity of the credit institution would still become known. 76 The Sanctioning Committee must find that the publication of the decision on the NBB website is mandatory under Article 36/11, § 6, of the Act of 22 February 1998. It cannot be stated that this method of publicity prescribed by the legislator contradicts provisions of international law with direct effect. Thus, it is difficult to argue that such publicity contradicts Article 3 ECHR prohibiting degrading treatment or punishments, Article 8 ECHR guaranteeing the right to privacy, or Article 1 of the First Additional Protocol ECHR guaranteeing the right to property. The Sanctioning Committee must therefore order the publication of its decision. 77 The credit institution correctly argued that a nominal publication would cause it disproportionate harm, taking into account among other things the interests the credit institution has abroad. This decision must therefore only be published non-nominally on the NBB website.

DECISION
The Sanctioning Committee of the National Bank of Belgium, after deliberation in its full composition,

• finds that X has committed an infringement of Articles 4, § 2, and 8 of the Act of 11 January 1993 by failing to exercise due vigilance in first- and second-line oversight, and of Articles 12 and 13 of the Act of 11 January 1993 by failing to report or reporting late to the CFI, provisions as applicable at the time of the facts;
• imposes a total administrative fine of 50,000 euros on X for all these infringements;
• states that this decision will be published non-nominally on the website of the National Bank of Belgium;
• states that this decision will be served on X by registered letter in accordance with Article 36/11, § 5, of the Act of 22 February 1998, and that this notification letter will mention the data specified in that provision;
• states that this decision will be communicated to the Management Board of the National Bank of Belgium in accordance with Article 36/11, § 6, of the Act of 22 February 1998.
  Brussels, 21 January 2015.
  ROBERT ANDERSEN,
  CHAIRMAN
  FILIP VAN VOLSEM, PAUL CATRICE,
  MEMBER MEMBER
  DIRK SCHOETERS, JEAN-MARIE NELISSEN GRADE,
  MEMBER MEMBER
  HENRI BARTHOLOMEEUSEN
  MEMBER