What is the definition of “trust company”?
On the Investopedia website, the following definition for trust company is given: “A trust company is a legal entity that acts as a fiduciary, agent, or trustee on behalf of an individual or business for the purpose of administration, directorship and the eventual transfer of assets to a beneficial party. The trust office acts as a caretaker for trusts, estates, custodial arrangements, asset management, share transfer, beneficial ownership registration, and other similar arrangements.”
According to ABiLiTieS Trust, this definition fits more or less to trust companies from the Netherlands. The word trust might be confusing, as the common law trust is not commonly used in the Netherlands. Instead of the word trust also refers to the trust-based relationship between the trust company and its clients.
What is the definition of “trust services”?
Under the Dutch Act on Supervision of Trust Companies, trust services are defined as the provision of management and registered address in combination with any other service. Additional services that are commonly provided by trust companies are tax compliance, legal counseling, secretarial assistance, bookkeeping, and accounting. The provision of tax advisory services by trust companies is forbidden.
The core business of trust companies exists of business support to Dutch holding, finance and royalty companies. It is also common to offer structured finance, fund administration, family estate planning, and private client services.
How did the trust industry develop in the Netherlands?
The trust business in the Netherlands has been vested on a history of international trade, a central geographical location, a good infrastructure, a strong financial sector and a business-friendly fiscal and regulatory setting. Political, legal and economic stability are being considered to be contributive to the trust business. The Netherlands is a stable, proven and internationally valued jurisdiction with a well-developed legal system, renowned for integrity and transparency.
The initial development of the Dutch trust sector, at the start of the 1980s, was mostly the result of ties with the Netherlands Antilles, in particular, Curacao. The fiscal regime, still a key factor, is less crucial for the trust industry nowadays. Legal security, quality of professional and financial infrastructure and understanding of local regulations have increased in importance as key factors for attracting clients.
Most of the Dutch trust companies are located in Amsterdam, mainly clustered at its legal and financial center on the Southside. The majority of staff within the trust business has a legal or accounting education. As language is essential in international oriented business, also many employees have a vocational education.
Which legal regulations apply to Dutch trust companies?
In the Netherlands, a trust company can only initiate activities after obtaining a trust license from the Dutch Central Bank. This regulator is responsible for the supervision of the trust branch. The supervisor visits trust companies in the Netherlands for regular inspections on the follow up of anti-money laundering, anti-terrorism, and sanction legislation.
Nowadays trust companies in the Netherlands are required to have at least two Dutch resident directors involved in the daily business and an internal compliance officer. On a yearly basis, a compliance audit shall be concluded by an auditor. The compliance audit will focus on the trust company’s procedures, such as client acceptance and transaction monitoring, recorded in the procedures manual. Also, the effectiveness of the Systematic Integrity Risk Analysis that the trust office regularly updates is a point of attention.