#33: Settlements and individual accountability

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On 3 September 2018, ING Bank (further: ING) accepted and paid a settlement of € 775 million offered by the Dutch Public Prosecution Service (PPS) for violation of the Anti-Money Laundering and Counter Terrorism Financing Act and for culpable money laundering (Article 420quater of the Dutch Criminal Code. The largest transaction in history for the Netherlands. Not only the amount of the transaction makes this transaction memorable. Another remarkable fact is that no individual employees or managers will be prosecuted by the Dutch public prosecution service. What is the reason for this?

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#32: Tax fraud ≠ forgery

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Dutch law distinguishes so called ‘ordinary’ criminal law and criminal offences described in other laws than the Dutch Criminal Code. In case an offense is specifically punishable under the General Code on Government taxes (GCGT) this provision might be a lex specialis and therefore prevail over applicable provisions from the Dutch Criminal Code. Prevail in such a way that the public prosecutor is obliged to prosecute on the basis of the lex specialis. If a suspect is prosecuted for the provision in the Dutch Criminal Code the prosecution service should be declared inadmissible. A recent verdict of the regional court of Amsterdam, which was published on 10 August 2018, sheds more light on this issue.

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#31: Supplements on VAT tax returns and the right not to incriminate yourself

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Since 1 January 2012 Dutch tax payers are obliged to report inaccuracies or omissions in tax returns to the Dutch tax authorities as soon as they are aware of this. This obligation is prescribed in article 10a of the Dutch State Taxes Act (AWR). Which inaccuracies or omissions have to be reported to the tax authority is provided by Orders in Council i. One example is the VAT tax returns. If an omission is detected a supplementation of the VAT tax return has to be filed as soon as possible. If this supplementation has not been filed, or has not been filed in time or not in the prescribed way, this act is punishable with a fine. However, public prosecutors have also used this article to hold people criminally liable for not filing a supplementation of one’s VAT tax return. However, a recent judgement stated that someone cannot be held criminally liable for this act and moreover it conflicts with the European nemo tenetur principle. Can you be punished for not filing a supplementation for your VAT tax return?

Someone can be held criminally liable if he is, under the Tax Legislation, obliged to provide information, data, or indications, and fails to provide them, or provides them incompletely. This criminal liability is found in article 69, subsection 1, jo. article 68, subsection 1, sub a, AWR. Based on these articles, criminal liability for article 10a AWR is construed. There are several judgements in which the public prosecutor summons a suspect for filing a wrongful Tax return and also for failing to file a supplementation of this tax return.

We believe however that you cannot be held criminally liable for not filing a supplementation of your VAT tax return. For one, because the parliamentary history does not speak a word of the possibility to hold someone criminally liable based on article 10a AWR. Secondly, article 10a AWR states that the violation of this article is a foul and not a crime. The AWR holds very specific rules for the criminalization of fouls.

Moreover, it would be very strange if someone willfully files an incorrect tax return and is then obliged to report this the second after he files this tax return. This would be a direct infringement of your right not to incriminate yourself. This would possibly be different if the first VAT tax return was not willfully incorrect but someone finds out later that this tax return was incorrect. However it would be strange if the obligation to file a supplementation of the VAT return only counts when someone thought he filed the first tax return correct but finds out later that it is was incorrect.

On 10 July 2018 a higher Court in the Netherlands ruled for the first time that a breach of article 10a AWR is not a criminal act. The Court judges that the parliamentary history does not refer to this possibility. Furthermore the Court gives an extra argument into consideration. Which is that the obligation to file a supplementation on your VAT tax return would infringe the right not to incriminate oneself.

The privilege against self-incrimination is not specifically mentioned in the ECHR. However, today, the existence of such a privilege is be considered to be part of a right to a fair trial ex article 6 ECHR. As article 10a AWR gives an obligation to give information about mistakes in the past we believe that one cannot be held criminally liable nor can be punished for this fact. It seems therefore that article 10a AWR creates an infringement on article 6 ECHR, the right to a fair trial.

We therefore believe that one cannot be held criminally liable for article 10a AWR but also no fine can be imposed.

 

Do you have any questions about this subject, are you struggling with a related issue or would you like to discuss this with us? Please feel free to contact us via boezelman@hertoghsadvocaten.nl and boer@hertoghsadvocaten.nl.

#30: The end does (not) justify the means

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A well-known and truthful saying is that ‘power corrupts’. Even though the public prosecution fights this phenomenon, the same can happen to a public prosecutor. The public prosecution service has a lot of power against civilians. As soon as a suspicion of a criminal act arises, the law provides a wide range of possibilities to investigate. Everyone would agree that misuse of these powers is unacceptable. This unfortunately does not mean that the prosecution service always uses these powers with prudence. A recent case in the Netherlands sows that the prosecution services went far beyond what is acceptable in order to ‘help’ the tax department to receive information. The Court of Appeal declared the prosecution service inadmissible because of this misuse of powers.

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#29: The proceeds of tax fraud

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Fighting corporate fraud and other misconduct is a top priority of the Department of Justice. One of the main goals is to confiscate illegally obtained profits. One important legal exception is that the Public Prosecutor cannot confiscate profits gained through tax fraud. Article 74 of the State Taxes Act holds this prohibitions since these proceeds should be recovered by the tax inspector by imposing a(n additional) tax assessment. But what if the tax authorities do not have the means to impose a tax assessment? For instance because the recovery period elapsed?READ MORE

#28: Big brothers have responsibilities

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The digitalization of our life leads to an enormous amount of data: e-mails, documents and exchange of information like SMS and WhatsApp. Digital data leaves its footprint. This footprint can be of great interest to, for instance, investigation or prosecutions services as they might lead to evidence of criminal offences. Consequently, in practice, large amounts of data are seized under criminal law. And the question is whether it is possible to communicate anonymously in a digital way. It seems Big Brother is always watching you. But Big Brothers have responsibilities. Dealing with this data in a careful manner is a responsibility of the investigating services in our opinion which comes along with this development. In an increasing amount of criminal investigations the seized data is of such an amount that the criminal defense can no longer see the forest for the trees. In our opinion a lot of progress can be made in data-structuring and transparency of the data investigation in the investigation process.

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#27: AIJA seminar on anti-corruption in Brazil

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On 23 and 24 March we attended the AIJA seminar on the challenges of Anti-Corruption in Brazil. The seminar presented a general overview and discussions on current topics of the anti-corruption legislation and compliance programs in different jurisdictions all over the world. Brazil was the perfect place to host this seminar, as Brazil has one of the largest ongoing anti-corruption investigations, also known as Operation Carwash as explained in Lawlunch #26. The ongoing criminal investigation is of such a scope that it is even ‘rewarded’ with a Netflix series called ‘The Mechanism’.

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#26: Exotic settlement agreements

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A relatively new phenomenon in fraud cases is the multi-jurisdictional settlement agreement. Various of these agreements – in which a suspect settles prosecution with multiple countries – have been subject of media attention and therefore it is unlikely that they escaped the attention of professionals in this field. Also in the Netherlands the phenomenon of multi-jurisdictional settlement agreement has set foot on the ground. A settlement with a Dutch company and the US authorities resulted in a transaction of USD 795 million of which the Dutch authorities got their fair share (USD 397,5 million). A profitable deal for the Dutch as this deal – according to a letter of the Dutch Minister of Justice to the government  – made it possible for the Dutch authorities to reach their financial goals in the fight against fraud. In principle, these agreements however do not lead to the result that all parties involved are ‘off the hook’. Various entities and private persons are still under criminal investigation by the Dutch authorities. In our opinion it is wise to guarantee their rights of defense in an early stage of the investigation, as every party involved has an interest that possible future issues deriving from such an investigation and settlement agreement land on their feet. Time to take a closer look into this phenomenon.

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#25: Taking notice of opinions

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#25: Taking notice of opinions

An infringement to your private life is easily made by the authorities, especially in criminal cases. Whether it is a telephone tap or a house search, both qualify in principle as an infringement to your right to privacy. This can only be qualified as rightful when this interference is in accordance with the law. It has to have a legitimate aim and it has to be necessary in a democratic society. A lot of jurisprudence on these criteria has been produced over the years. Two years ago we addressed this topic in Lawlunch #01. A fairly recent case – Dragos Ioan Rusu v. Romania – gives reason to address this topic again, especially the relationship between the right to privacy of article 8 of the European Convention for Human Rights (ECHR) and the right to a fair trial of article 6 (1) ECHR.

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#24: See you in 2018

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Only two days left until 2017 comes to an end.

What a year it has been. It has been a year of interesting, frustrating and wonderful developments in our legal field. It is also safe to say that 2017 has been an exciting year for us. Our firm Hertoghs advocaten has started a new office in Amsterdam. And we are able to say we made an amazing start.

The year 2017 was a good year in which the various legal development highs and lows have passed in review. One thing is certain; these developments provide opportunities which we can and should share and use. We hope to have given you inspiration to do so.

For now; happy holidays and see you in 2018!