Explanatory Notes for Trust Office License Application Form

Explanatory Notes for the application form for a license for a trust office

Explanatory Notes for the application form for a license for a trust office In these explanatory notes, you will read what DNB pays attention to when assessing your license application, and we try to explain all questions as clearly as possible. In addition to these explanatory notes, we have also listed all relevant legal articles for you. See the PDF 'Relevant legal articles for trust office license application' on Open Boek Toezicht on the page 'Apply for a license'. We kindly ask you to keep this at hand and carefully check whether you meet all the requirements set out in these articles. This leads to a more complete and higher quality application. 10 June 2022

Explanatory Notes for the application form for a license for a trust office 1 General Data 4 2 Business Case 6 3 Honest and Controlled Business Operations 11 4 Reliability, Suitability and Reputation (Co-)Policy Makers and Ultimate Beneficial Owners 23 5 At Least Two Daily Policy Makers Working from the Netherlands 25 6 Actual Ownership Structure 26 Contents

4 Company Data
We would like to receive some general data about your company. We also ask you to send along a number of attachments, including a certified copy of the company's articles of association.
Please note that the description of the purpose in the articles of association must align with the trust services actually to be provided. The description of the purpose must therefore also align with the services you indicate in this form that you will perform (or are already performing). The description of the purpose may not include activities for which another license is required, unless you already have a license for that. For example, a trust office is not allowed to perform banking activities without having a license for this. We will look into this when assessing your application. We also want to know how you will operate in the Netherlands. Do you have your (head) office in the Netherlands, or does the application concern a branch office in the Netherlands of a trust office established in another country? Or are you established in another country and will you provide trust services to the Netherlands? These different forms are permitted provided you have a license from DNB.

Company Contact Person Data
In addition to the data about the company itself, we would also like to receive the data of your contact person. This way we know who we can contact regarding the license application.
Please note that you provide us with a business telephone number and email address (email address linked to your company). Email addresses from, for example, Hotmail, Gmail, Yahoo, etc. are not business and cannot be used. We may not send emails to such email addresses, because email traffic with such email addresses is not secure enough. We want to protect confidential information at all times.

Relevant Persons within the Company
Finally, we also ask you for some additional data. So we ask you, under 'relevant persons within the company', to provide the data of the persons who will perform an integrity-sensitive function.
In addition to the function of director or member of the body responsible for supervision, other functions can also influence the honest exercise of the business. These are 'integrity-sensitive functions'. It is important for us to get a complete picture of all persons who will perform an integrity-sensitive function. We therefore ask you to indicate who these persons are, what function they perform, and to provide their contact details. An integrity-sensitive function can be, for example:

• Director
• Supervisor (if the company has a supervisory board)
• Manager directly under the (co-)policy makers
• Compliance officer
• Auditor
• Any other function to which a competence is attached that entails a significant risk for the honest exercise of the business.
  1 General Data

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Explanatory Notes for the application form for a license for a trust office You must determine yourself which functions you qualify as integrity-sensitive. This also applies to temporary employees.

Position of the Company
Because we want to know whether your company will function within a group, we ask about the possible position of your company within a group of trust offices.
Companies that form a group must each have a license and therefore submit a license application for each trust office. If the trust offices submit their license applications simultaneously, we will of course process these license applications as efficiently as possible.
If the license of a trust office is revoked and that trust office belongs to a group of trust offices, this revocation has no influence on the licenses of the other trust offices within the group. The revocation of a license can take place separately for each trust office.

External Advisor
We advise you to be assisted by an expert advisor during the license application. In practice, we see that the submitted application is often much more complete and of significantly better quality if the applicant is assisted by an expert, for example a (legal) advisor specialized in the Trust Offices Supervision Act 2018 (Wtt 2018). A complete and well-founded license application can be assessed faster and better by us. If you are assisted by an external advisor, we would also like to receive the data of this advisor.

6 For the assessment of the various parts of your license application, it is important for us to get a good and complete picture of exactly what your company is going to do. Perhaps you are already active with your company and are going to expand your activities such that you will provide trust services. That is also relevant information for us. In this part, we therefore ask you to indicate a number of things that relate to your (intended) activities.
2.1 Current Service Provision
It is possible that your company is already active. We assume that you have ensured that you are not currently providing license-required trust services. If you indicate that your company is already active, we ask you to explain your activities. If you believe that you qualify for an exemption under the Trust Offices Supervision Decree 2018 or that your activities are otherwise not subject to a license requirement, we ask you to substantiate this legally. Should we, after receiving your license application, establish that your company is already providing license-required trust services, this will be taken into account in the assessment of your license application. This may mean that your application is ultimately rejected. This also applies if we establish that you are performing illegal activities that are subject to a license requirement based on (other) supervisory legislation. Trust Offices Supervision Decree 2018 Certain categories of trust offices may be exempt from the license requirement. Think, for example, of trust offices that provide administrative services for pension funds, or lawyers and persons who professionally collect claims. The different categories are listed in the Trust Offices Supervision Decree 2018 (https://zoek.officielebekendmakingen.nl/stcrt-2018-68147.html). Professional and Business A company is subject to a license requirement if the trust services it provides are performed professionally or on a business basis. If it concerns the one-time or very incidental delivery or provision of trust services, a company (or person) does not qualify as a trust office. There is in any case a license-required trust service if you actively offer this service, for example by advertising. Offering services to different customers is an indication that the services are offered professionally or on a business basis.
2.2 Intended Service Provision After License Grant
For the assessment of your application, it is important that we know which trust services you are going to provide. Therefore, we ask you to indicate which trust service(s) you are going to provide.
2 Business Case

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Explanatory Notes for the application form for a license for a trust office Service 1: Being a director/partner of a legal entity/partnership It frequently happens that the ultimate beneficial owner of an international structure has its Dutch-based target company (co-)managed by a trust office. If your company, for example, acts as a director of a target company, this constitutes this service. Service 2: Providing the address or postal address to a target company while simultaneously providing 'ancillary activities' such as keeping accounts or handling tax returns (domicile plus) 'Providing an address or postal address to a legal entity or partnership' qualifies as a trust service ('domicile plus') if your trust office also offers 'ancillary activities' such as keeping accounts or handling tax returns. When, besides providing the address or postal address, no ancillary activities are performed or the ancillary activities only consist of 'reception activities' – forwarding telephone calls and forwarding unopened mail – this service qualifies as 'domicile sec'. The sole provision of an address or postal address to a target company is not a trust service. Note: Under the Wtt 2018, it is no longer permitted to provide both trust services and tax advice to the same client. Tax advice is understood to mean advice on the design, structure, and operation of structures of legal entities and partnerships aimed at the application of tax law. Service 3: Selling or mediating in the sale of legal entities Mediation is understood to mean that your trust office acts as an intermediary in the conclusion of one or more agreements between the client and third parties. It must involve more than just bringing parties into contact; the mediator performs activities to bring supply and demand together. A simple referral will therefore in principle not count as mediation. Service 4: Acting as a trustee The fourth service concerns acting as a trustee. Based on the trust deed, the trust office can act as the administrator (trustee) of, for example, a package of shares. Service 5: Offering a conduit company A conduit company (also called 'in-house company') is a company that belongs to the same group as the trust office and which is used by the trust office for the benefit of one or more clients. Conduit companies are used, among other things, for:

• The exploitation of intellectual property, for example image rights, royalties, and licenses
• Consultancy services
• Trade
• Issuing loans

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Trustoffice
Conduit
Company
€ € €
Client
Client
Ownership
Non-trust services
If you also plan to perform other activities that do not qualify as a trust service, we ask you to describe them. We will explain the options to be checked in the form here.
Providing tax advice
Tax advice is understood to mean advice on the design, structure, and operation of structures of legal entities and partnerships aimed at the application of tax law. Under the Wtt 2018, it is no longer permitted to provide tax advice to a client alongside the provision of trust services.
Domicile sec
If you provide your address or postal address to a legal entity or partnership, this is a trust service if you also offer 'ancillary activities'. Think here of keeping accounts or providing tax advice. This is also called 'domicile plus'. If you do not provide ancillary activities or if it only concerns reception activities (such as forwarding the phone or forwarding unopened mail), this is not a trust service. This is also called 'domicile sec'. Acting as custodian of an alternative investment fund (AIFMD Directive) A trust office can, in certain cases, fulfill the role of custodian of an alternative investment fund1. This is not a trust service. The function of the AIFMD custodian includes, among other things, holding the investments of the investment fund and supporting and controlling the manager in parts. The AIFM Directive2 determines who may fulfill the role of custodian of an investment fund and what that party must comply with. Although not specifically mentioned in the directive, trust offices in certain – excepted – cases may act for investment funds that do not invest in financial instruments but in 'other assets' (for example, real estate). We cannot determine whether you may or may not act as an AIFMD custodian. For this, we refer you to the AFM. The buying and selling of cash box companies A trust office can be involved in, or itself be a party to, the purchase or sale of (foreign) cash box companies. These are companies

1 See also http://www.toezicht.dnb.nl/2/50-201982.jsp 2 The AIFM Directive (Alternative Investment Fund Managers Directive) is a European Directive concerning managers of alternative investment funds

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Explanatory Notes for the application form for a license for a trust office whose business activities (mostly) have been terminated, and whose assets largely consist of investments. And where the tax authority still has a tax claim that disappears or is strongly reduced by the sale of the shares.
2.3 Strategy and Vision of the Company
If you obtain a license, you will enter the market of trust offices as a new player. It is important that you have thought well about what you – as a new trust office – can add to this market. Where do you see opportunities? What is your approach? Who are you targeting? How are you going to grow? We therefore would like to hear what your strategy and vision is for the next three years. In that strategy and vision, we expect from you, among other things, the following elements:

• Strength-weakness analysis
• Type and number of target companies/clients to be served
• Regions
• Sectors
• Products / activities
• Type of structures
• Feeders
• Financial substantiation of the business strategy
  Strength-weakness analysis
  We ask you for a strength-weakness analysis, also known as SWOT analysis. This is an analysis of the strong and weak points of your company so that it becomes clear in an overview (via a matrix) whether the services you intend to provide have the potential to be successful. S = Strengths, W = Weaknesses, O = Opportunities, T = Threats. Based on a SWOT analysis, you can set a goal and then determine a strategy to achieve the goal. Type and number of target companies/clients to be served Here you indicate the number of target companies and/or clients you intend to serve, as well as a forecast for the coming year. Also indicate here what type of activity the target companies to be served perform: for example, target companies directly related to real estate or operational target companies for trade, production, and/or consultancy. Regions Here you indicate which countries you are going to target with your service provision. Think here of the countries of origin of the target companies to be served towards Ultimate Beneficial Owners (UBOs), Political Exposed Persons (PEPs), participations of a target company, and/or foreign branches of a target company. Sectors Here you indicate the acceptance of sectors within the structure of which the target company/client is a part. Think, for example, of the oil and gas industry, gambling industry, chemical industry, pharmaceutical industry, charitable (non-profit) institutions.

10 Products / activities
Here you indicate the acceptance of the type of products / activities within the structure of which the target company / client is a part. Think of the type of activities of the target company such as holding, financing, or operational activity, operational activities such as trade (purchase and sale of goods or services), consultancy, and production (of goods), or activities related to real estate such as project development, conducting real estate transactions, and exploitation of real estate. Feeders Under 'feeders' are understood (foreign) parties such as trust offices, law firms, and tax advisors, who bring clients or target companies to a trust office. To gain insight into where your customers are expected to come from, we would like to know if you plan to use feeders in the coming period. If so, please provide relevant background information here, such as the (business) name and type of feeder, and their possible role in the service provision of your trust office in providing services to a brought-in client. Think here, for example, of the tax advisor who brings a client to you, and who also takes care of the fiscal advice for that client. Financial substantiation of the business strategy Here you provide a financial substantiation of your business strategy and explain how your company is provided with sufficient capital to execute the business strategy.

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Explanatory Notes for the application form for a license for a trust office 3 Honest and Controlled Business Operations
3.1 Procedure Manual
Your trust office must have a procedure manual. The purpose of a procedure manual is that all employees of the trust office, including the management, have insight into the processes and guidelines of the trust office. In addition to insight into the various processes and the division of tasks and roles within the organization, the procedure manual ensures a uniform working method within the organization. It also gives DNB the insight necessary for the assessment of the license application, and subsequently, in the supervisory execution. The procedures and (control) measures on relevant topics and the way in which the trust office complies with them are, for example:

• The separation between executive and controlling tasks (separation of functions)
• Procedures regarding compliance with legal rules in the Wtt 2018, the Anti-Money Laundering and Counter-Terrorist Financing Act (WWFT), and the Sanctions Act 1977 (SW)
• Procedures relating to the compliance function and the audit function
• Recording of tasks, responsibilities, and competences of management and staff
• Reporting of shortcomings or defects
• Procedures regarding the handling of and requirements for persons in an integrity-sensitive function
• Procedures regarding the handling of incidents
• An up-to-date organizational chart
  You can also send along procedures and measures you have formulated in other areas.
  3.2 Management Duty of Trust Office
  Your trust office is responsible for having honest business operations. This means that you must identify the risks your trust office faces with providing trust services.
  For example, the risk that your trust office (whether or not via the director of a target company) is unintentionally and unconsciously used for activities that damage the reputation of your trust office. This also affects the integrity of the entire financial sector. This can, for example, concern money laundering, financing of terrorism, insider trading, or the detriment of third parties. As a director, you are responsible for ensuring that your trust office takes measures to control such risks. This is essential. A reference to the limitation of contractual liability customary in practice towards a client, the target company, or third parties, is therefore not sufficient. Integrity risks are separate from civil liability. As a director, you must set concrete and clear norms towards your clients, whereby you ensure honest business operations in the acceptance of these clients and the continuation of service provision to the clients. The description we ask of you must provide insight into the way in which you, as a director, have ensured that your trust office has honest business operations to which it will adhere.

12 3.3 Systematic Analysis of Integrity Risks (SIRA) To ensure honest business operations, it is essential that you know exactly which integrity risks are associated with the business operations of your trust office. You can identify these risks with a systematic integrity risk analysis (SIRA) and subsequently take appropriate mitigating measures. It is important that the measures align with the specific risks that apply to your trust office. The different integrity risks inherent to the nature of the service provision of your trust office, which involves serving mostly complex internationally stacked structures, include, among others:

• Money laundering
• Terrorism financing
• Circumvention of sanctions legislation
• Corruption (bribery)
• Conflict of interest
• Internal and external fraud
• Evasion or avoidance of fiscal legislation
• Market manipulation
• Cybercrime
• Socially unacceptable behavior
  The outcome of the SIRA must live within your entire organization and also be found in the risk analyses at the client level. We point out to you that the SIRA and the risk analyses at the client level, although connected, are different types of risk analyses.
  As the director of your trust office, you are responsible for drawing up the SIRA. You must ensure that all relevant employees of your trust office, including those performing a controlling function, are involved

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Explanatory Notes for the application form for a license for a trust office in drawing up the SIRA. The SIRA must be read and understood by every employee.
We ask you to record the SIRA in a separate document. When drawing up the SIRA, you can use our

Image step plan risk analysis
Countries
Clients and delivery channels
Products, services, transactions
Revision of risk analysis
Compliance and audit programs
Probability of a risk occurring
Impact: costs or damage when a risk has occurred Policy and procedures Systems and controls Risk identification Risk monitoring and revision Risk analysis Risk control