AFM Annual Report 2024

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AFM
VERANTWOORDING JAARVERSLAG
Jaarverslag 2024
In het kort In 2024, financial markets were influenced by shifting geopolitical relations. Within Europe, supervisors are increasingly seeking cooperation. Almost all regulation in the financial sector already comes from Europe; the AFM strives to achieve supervision at the same level as in the Netherlands. For example, we advocate for the centralization of capital market data. In line with European sustainability regulation, we developed an integrated strategy for sustainability supervision. Furthermore, we focused on preparing for the supervision of crypto service providers and clarified what we expect from larger financial enterprises regarding cybersecurity.

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Inhoudsopgave

1. Ontwikkelingen en strategie 7
2. Toezicht op financiële dienstverlening 14
3. Toezicht op kapitaalmarkten 28
4. Toezicht op assetmanagement 39
5. Toezicht op accountancy en verslaggeving 46
6. Aanpak crimineel gedrag, maatregelen en personentoetsingen 54
7. Stakeholderdialoog 62
8. De AFM als professionele organisatie 67
9. Organisatie en besturing 71
10. Verslag raad van toezicht 83
11. Jaarrekening 89
    Controleverklaring van de onafhankelijke accountant 114 Bijlage 1: Externe KPI’s 2024 120

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1. Ontwikkelingen en strategie
   Ontwikkelingen
   In 2024, the European macroeconomic environment was characterized by a cautious recovery following the economic challenges of recent years. Inflation gradually decreased but remained above the European Central Bank (ECB) target of 2%. At the same time, the Dutch and European economies grew slightly in 2024, causing concerns about a recession to recede further into the background. On capital markets, this positive sentiment contributed to historically high stock prices worldwide. In particular, the valuations of AI-related companies increased more than expected, with the risk of bubble formation. The financial position of households remained relatively stable but remains vulnerable to (unexpected) economic disappointments. Dutch households proved resilient to rising inflation and interest rates. This is due, among other things, to the government support provided immediately after the outbreak of the coronavirus pandemic and energy crisis, (collective labor agreement) wage growth, the tight labor market, and the fact that many Dutch households have their mortgage loans with a longer fixed-rate period outstanding. At the same time, attention to the financial health of vulnerable households remained necessary, among other things due to the long-term effects of higher interest rates on household debt and the increasing cost of living. Digitalisering The rapid development of Artificial Intelligence (AI) presents opportunities and risks for the financial sector. With the EU AI Act, the European Commission has set rules for the use of AI. With the AI Act in mind, we published a report together with De Nederlandsche Bank (DNB) on the impact of AI in the financial sector and the supervision thereof. We consider it positive that AI is used for fraud prevention and detection, combating money laundering and terrorist financing, and cybercrime, low-threshold information provision, speeding up and making more efficient, among other things, the credit assessment process and identity verification. AI also helps employees work more efficiently. However, we see risks regarding data security, excluding people based on algorithms, and the power of a few large tech parties. Digitalization will continue to shape the financial sector in the coming period. With European legislation aimed at (the effects of) technological developments, the financial sector is also reaching a new plateau of maturity. The implementation of legislative processes such as the Digital Operational Resilience Act (DORA), Markets in Crypto Assets Regulation (MiCAR), and the AI Act impose new requirements on the sector. The year 2024 was largely about preparing the market and ourselves for this new regulation. Regarding digitalization, we are concerned about vulnerabilities such as digital crime, targeting both enterprises and consumers, concentration risks, and dependencies on a limited number of third parties in the chain. There are also risks in using large amounts of data with a negative impact
   on consumers (hyper-personalization). Duurzaamheid Sustainability regulation largely comes from Europe. In 2024, new rules in this area came into effect. The Corporate Sustainability Reporting Directive (CSRD) requires certain enterprises to report from the 2024 financial year onwards according to certain standards for sustainability reporting, the European Sustainability Reporting Standards (ESRS). Most European countries have transposed the CSRD into national measures. The implementation of this European directive has been delayed in the Netherlands and is not yet completed. We have held discussions with the sector on this.

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In 2025, it is intended that larger issuers submit their first sustainability reports for the 2024 financial year, based on the CSRD.
To strengthen the reliability of green bonds and make them more accessible and uniform, the European Green Bond Standard has been introduced. Issuers can choose to follow this standard from the end of December 2024, under strict conditions, in order to demonstrate the reliability of the green character of the bonds.
Following the publication in 2023 of, among other things, our report on the financial risks of climate damage, the need grew in politics and among other stakeholders to raise awareness among citizens about flooding and water overload risks. Information on foundation risks within the (pre)sale process of housing should also be better accessible. For example, the Ministry of Infrastructure and Water Management is investigating the (im)possibilities and desirability of introducing a water label, and several ministries are working together on a national approach to foundation problems. This is done in collaboration with other governments and private parties. By informing consumers about these risks, they become more aware of the consequences, and these risks can, among other things, be taken into account in the valuation of house prices. AFM-duurzaamheidsstrategie The AFM developed an integrated strategy for sustainability supervision in 2024. This strategy outlines in broad terms both our vision and our supervisory approach to the subject of sustainability for the period 2024-2028. Our goal is to enable (financial) enterprises and consumers to weigh sustainability risks and sustainability impacts in their decisions, through transparency supervision and the protection of consumers in the development, offering, and advising of financial products and services. Our supervisory strategy describes the intended approach and depth of supervision and the breadth of the theme, and the data and expertise required for this. We also ensure consistency of our intervention methodology with this strategy, in line with the AFM enforcement policy. Internationale context The year 2024 was already announced as the big election year, with the European elections and the elections in the United States. With the election of Donald Trump as president, the United States will certainly take a different course on the themes of crypto assets and sustainability. The US and the EU were more or less aligned in recent years: relatively critical regarding crypto assets and the risks associated with the crypto sector. And for the theme of sustainability, we saw a positive attitude from the US at the global level, in line with the EU. On December 1, 2024, a new European Commission started under the leadership of Ursula von der Leyen. In addition to the general goal of the European Commission to reduce regulatory burden, there is much attention for the so-called Savings & Investments Union, where there must be room for both banks and capital markets. Around the summer period, stimulated by several reports such as those by Letta, Noyer & Draghi, there was much discussion about intensifying the capital markets union. In these discussions, the joint position paper of the AFM and DNB on this subject and the paper on more effective supervision through the centralization of financial supervision data in Europe were mentioned several times. In 2024, there was also much attention for the
strategic autonomy of the European Union, and for the role that third countries, such as the United Kingdom, play in the international financial sector. Much attention also went to setting up the new European supervisor in the field of anti-money laundering (AMLA).

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AFM-strategie
Figuur 1. Strategiehuis AFM
The goals we have set in the Agenda 2024 and the associated activities stem from our 'AFM Strategy 2023-2026'. Digitalization, internationalization, and greening are the trends that are decisive for the financial sector and our supervision. These form the red thread in the strategy. In the strategy, we have formulated four multi-year supervisory goals, one for each supervisory area. A solid foundation in the form of a professional organization is of great importance here. In addition to the mission and strategy, the risk analysis in 'Trendzicht 2024' has also been an important basis for determining our supervisory choices in 2024. This figure depicts the AFM Strategy 2023-2026. At the top is the mission: the AFM stands up for fair and transparent financial markets. As an independent conduct supervisor, we contribute to sustainable financial well-being in the Netherlands. Below that is our working method: we work risk-based, data-driven, and result-oriented. The three trends of digitalization, internationalization, and greening give direction to our work. We give shape to our mission with supervisory goals in the four supervisory areas of the AFM: financial services, capital markets, asset management, and accounting. The supervisory goals are: customer interest central in times of transition (financial services), honest trading behavior and robust and transparent markets (capital markets), a robust and agile asset management sector (asset management), and reliable and relevant (non-)financial information provision (accounting). The professional organization is the foundation for this: an agile and learning organization, an attractive employer, with well-functioning IT. Risicogestuurd Risk-based supervision focuses on the efficient and effective use of our resources to address problems in the market with the most risks. It means that we focus on matters where the most damage can occur for consumers, investors, and other market parties. We want to see developments, behaviors, and outcomes in time that can cause damage to our mission and goals. We do this, among other things, by publishing our central risk analysis Trendzicht 2024. In addition to the central risk analysis, we also conduct risk analyses per supervisory area, on which the priorities in supervision are determined.

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Datagedreven
Data-driven supervision means that we systematically use data and data analysis to supervise more effectively.
For example, we used data to monitor the most important trends and developments in the pension sector and to conduct risk-based supervision. With the entry into force of the new Pension Act on July 1, 2023, the transition to the new pension system started, and the annual information request to pension executors was changed. In 2024, we took major steps to give shape to this risk-based supervision in data-driven processes. By developing a scalable and responsible methodology, we can now quickly obtain the necessary insights. This includes themes such as information provision, choice guidance, governance, and complaints. In 2024, we conducted an exploration together with De Nederlandsche Bank to shape our vision on the application of generative AI. During this exploration, we looked for ways to increase internal productivity and improve the quality of our work with the safe and responsible use of generative AI. We investigated applications that meet these criteria, safeguards, and so-called guardrails, and will deploy these possibilities more broadly in 2025 for the objectives of the AFM. An example of a qualitative approach is that we are investigating whether we can use the possibilities offered by generative AI and Large Language Models for the supervision of reporting to effectively process and analyze information from annual reports. This example of an innovative data-driven application offers great potential and is surrounded by a high degree of care. This exploration therefore focuses primarily on the question of whether and how we could use such techniques within the AFM in the future within the set frameworks. In 2024, we began developing a new data-driven supervision strategy, which we will complete next year. In this strategy, we elaborate how we respond to the increasing digitalization of the financial sector, how we can optimally use data-driven supervision to strengthen our risk-based supervision, and what the further development of data-driven supervision requires in terms of data, data applications, and expertise. In addition, this year a milestone was started with the preparation of a data office, which is expected to be further established next year. Resultaatgericht Result-oriented means that we pursue a sustainable positive impact on the behavior of institutions. For this, we use a formal (enforcement) and informal intervention approach that is aimed at the underlying causes and incentives for that behavior. We use our scarce capacity to prevent, limit, and/or address important risks, and we want to achieve as much result as possible with our supervision. An example of this is our signals regarding the risks of delayed payment (Buy Now, Pay Later) by consumers. Although this phenomenon is not yet under our supervision, we have taken important steps in cooperation with the sector to ensure that minors do not get into trouble as a result of it. Publicaties in 2024 Rapporten

• Agenda 2024: Versnelling noodzakelijk in duurzaamheidstransitie financiële sector (januari)
• De impact van AI in de financiële sector en het toezicht (april)
• AFM Jaarverslag 2023: digitale verleidingen meest riskant voor jongeren (april)
• Trendzicht 2025: Europees risicodragend kapitaal stroomt nu vooral naar VS (november)
  Consultaties
• Consultatiereactie klimaatmaatregelen financiële sector: haak aan bij Europese initiatieven (april)
• Consultatie implementatiebesluit DORA (mei)
• Consultatiereactie op de Wet toezichtondersteunende rapportage AFM (juni)

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Andere publicaties • FD-column Laura van Geest: Er is maar heel weinig simpel aan simpel beleid (februari)

• DORA-update 3: Stel kader op voor ICT-risicobeheer (maart) • FD-column Laura van Geest: ‘Barbertje moet hangen’ is een verleidelijke uitweg (maart)
• FD-column Laura van Geest: ‘Weerbaarheid weegt zwaarder dan autonomie’ (april)
• Voor ingrijpende ontwikkelingen is aanpassing wetgeving gewenst (mei)
• FD-column Laura van Geest: ‘Dreigt trias politica dramadriehoek te worden?’ (mei)
• Europese toezichthouders publiceren greenwashing-rapporten (juni) • DORA-update 4: beheer, classificatie en rapportage van ICT-gerelateerde incidenten (juni) • FD-column Laura van Geest: ‘Waardevol toezicht lukt alleen met scherpe keuzes’ (juni)
• Klaar voor DORA? AFM publiceert checklist voor ondernemingen (juli)
• FD-column Laura van Geest over nepnieuws (juli) • FD-column Laura van Geest: ‘Laat deelnemer meer baas zijn over groen pensioen’ (augustus)
• DORA-update 5: Aan de slag met DORA: AFM licht testen van de digitale operationele weerbaarheid toe (september)
• FD-column Laura van Geest: ‘In de wereld van AI ben je nergens zonder Europa’ (september)
• Nieuwe ESMA-richtsnoeren voor ESG-of duurzaamheidstermen in fondsnamen (oktober)
• Opinieartikel AFM-bestuurslid Jos Heuvelman: Voor modern financieel toezicht zijn data onontbeerlijk (november)
• Speech Laura van Geest op CSRD Day (november) • FD-column Laura van Geest: ‘Graag meer betutteling en minder gebruiksgemak’ (november)
• DORA: AFM vraagt in februari informatieregister op (december) • FD-column Laura van Geest: Hardlopers zijn doodlopers bij veranderen (december)

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2. Toezicht op financiële dienstverlening
Drie transities zijn in 2024 van grote invloed geweest op de samenleving, de financiële sector en daarmee de consument. Digitalisering en daarmee samenhangend de internationalisering, de transitie naar een duurzame economie en tot slot de pensioentransitie. Deze transities hadden ook in 2024 impact op de producten en diensten die de financiële sector aanbiedt, op welke manier dit gebeurt en ten slotte op ons toezicht.
The AFM always adheres to the starting point that customer interest must remain central during such transitions. This means, among other things, that consumers are well informed about the financial products and services they wish to take out and that they are treated carefully during the term of the product. Our supervision in 2024 therefore focused mainly on this.
Finally, we paid much attention to the new legislation and its effect on the sector and consumer. For example, we prepared for our new supervisory tasks under the Markets in Crypto-Assets Regulation (MiCAR) and issued the first three MiCAR licenses in 2024.
This is what we achieved in 2024:

• Nationally and internationally, we stimulated financial service providers to keep customer interest central during digitalization. For example, in the area of delayed payment.
• We ensured that market parties supported consumers in making responsible choices for a healthy financial future. Where this did not happen, we intervened. We published two fines for over-indebtedness of customers, and three fines for finfluencers.
• We facilitated market parties to comply well with sustainability legislation such as the SFDR, among other things by providing them with handles to implement improvements.
• In dialogue with the pension sector, we shared our concerns about the possibly unrealistic expectations of participants based on the transition communication. As a result, the sector takes its responsibility and will clarify communication through layered information and personal explanations.
  Digitalisering in het belang van klanten
  We believe it is important that financial service providers use digitalization in the interest of their customers. This means, for example, that distribution and sales environments are clear and customer-oriented, and that financial service providers offer products and services that match the needs of consumers. Moreover, digitalization must not lead to exclusion.
  Consumenten beter beschermd tegen overkreditering Because the number of incident reports to the AFM increased, we conducted an exploratory study in 2024 on the change management processes of credit providers, and specifically on the failure to test or insufficiently test software changes, which could lead to errors resulting in over-indebtedness. By sharing principles and good practices, we provided the sector with handles to sharpen their change management processes and credit acceptance processes. This ensures that consumers are better protected against over-indebtedness. Grensoverstijgende dienstverlening vraagt om grensoverstijgend toezicht Dutch consumers are increasingly being served by foreign financial enterprises. In 2024, we closely monitored this cross-border service provision for signals of unwanted products and services. We also worked to strengthen cross-border supervision of parties in the insurance and investment sectors. Because harmonization of legislation and processes is crucial for this, we contributed to the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA) in drafting common principles and procedures for conduct supervision. In addition, we shared knowledge and information with other European supervisors and aligned our supervision with parties operating across borders. This led in specific cases to a strong decrease in complaints from Dutch insured persons after intervention by the AFM. Conversely, there are also parties with a Dutch license that offer services abroad via a European passport. As 'home' supervisor, we pointed out to a number of brokers the need to strengthen their service provision to retail investors, so that it is more in the interest of the investor, and to consistently comply with information provision standards for communication about service provision in other European member states. To stimulate investor protection, we participated at the European level in various working groups and standing committees. For example, we provided input for topics such as digitalization, best execution, cost transparency, and marketing. We participated in various working groups within IAIS, the international standard-setting organization for insurance supervision. From 2024, the AFM has taken on the chairmanship of the Market Conduct Working Group of IAIS, the part of IAIS that primarily deals with conduct supervision. Achteraf betalen baart ons zorgen In 2024, we further prepared for the supervision of Buy Now Pay Later (BNPL) parties. Following a data request, we expressed our concerns about the use of this service by minors. We also voiced our concerns several times about the use of BNPL in physical stores. We received much support for this. In the cabinet Schoof program (September 2024), it states that age verification will become mandatory for BNPL. We held several market talks with, for example, large tech companies and online shopping platforms
  that may come under our supervision in 2026. We participated in the Klarna College of Su

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