85: Mission (im)possible: The Certificate of Good Conduct

A criminal (fraud) investigation often has a major impact on those involved. This applies in the event of a conviction, but also if the case ends in a dismissal or an acquittal. A criminal investigation brings a lot of uncertainty and worry from start to finish. The most acute problem of a criminal investigation for companies is usually the relationship with the bank, which will be under pressure. But an investigation can also have an impact on the relationship with for instance a companies insurer. Problems with licenses (in the Netherlands for instance based on the BIBOB Act) or with the regulator of a specific profession, such as accountants, also occur. But perhaps the most well-known problem of a conviction is the more limited possibility of obtaining a Certificate of Good Conduct (CGC). But does a conviction guarantee the inability to obtain a CGC? Or is there still something in between?

In practice, the CGC is needed for several situations. A common situation is that a CGC must be presented as part of a job application procedure with an employer. However, that is not the only situation in which a CGC may be required. For instance, a supervisory authority may require a CGC from a (co)policy-making employee of a company in specific situations such as the context of a reliability assessment. When assessing the application to issue a CGC, the judicial documentation system is consulted, also referred to as the ‘criminal record’. That system shows whether an investigation into a particular suspicion is registered or whether it has resulted in an acquittal, a conviction or an alternative disposal such as a dismissal or a transaction. This information remains visible in the judicial documentation system for a certain amount of years.

Based on the June 2022 Dutch policy rules, a request for a CGC will be rejected if the objective criterion is met. The objective criterion involves assessing whether the judicial data found in respect of the applicant, if repeated, given the risk to society, constitutes an obstacle to the proper performance of the function/task/occupation for which the CGC has been applied for. The subjective criterion is then used to test whether the applicant’s interest in issuing the CGC outweighs the interest of society protected by the objective criterion. Circumstances of the case that are always included in the assessment are the disposal of the criminal case, the time course and the amount of antecedents.

It is notable that it does not include the circumstances under which an offence was committed. After all, these are also circumstances of the case. Paragraph 3.1.4.1. of the policy rules states: “In the event that COVOG [the decision making organ], after weighing the circumstances of the case, cannot reach a proper judgement and has doubts about whether a VOG [CGC] can be issued, the circumstances under which the offence took place will be included in the assessment”. In that context, the ruling by the Administrative Law Division of the Council of State on 29 March 2023 is interesting. The Division ruled on a case in which the Minister for Legal Protection took the position that, according to its own policy rules, it must consider the circumstances under which a criminal offence took place when deciding on a CGC, but only if there is doubt as to whether or not the CGC should be issued. Although the Division followed this position in the past, the Division is now changing its position. The Division is now considering that the proportionality test of article 4:84 of the General Administrative Code requires that all the circumstances of the case be taken into account to determine whether the policy rules should be deviated from and a CGC should be granted.

In our opinion this is the appropriate outcome. The decision to (not) grant a CGC in the case of convictions should be “tailor-made” and certain circumstances cannot be categorically excluded. Although this new jurisprudence is no guarantee that a CGC will be issued in the case of a conviction, it does offer more possibilities for customization fit for the specific situation.

Do you have any questions about the above or would you like to exchange views? Please contact boezelman@hertoghsadvocaten.nl or boer@hertoghsadvocaten.nl.

#84: Do you have a moment for me?

How it all started?

The Dutch version of Lawlunch exists this month 10 years. A wonderful milestone, which we celebrated with a book full of interviews. Our conversations with Laura Peters, Martin Lambregts, Vanessa Liem, Thomas Bosch, Margot Oenema and Robert Jan Koopman are bundled in “Do you have a moment for me?”. Because as it turns out, making some time for each other sometimes makes all the difference. Although the book is in Dutch, you can find a link here. And just let us know if you would like to discuss any point of view. We are happy to share our insights with our international colleagues.

Legal blogs are now indispensable in our profession, but ten years ago this was different. Ideas about the opportunities and possibilities of new case law and developments were mainly discussed within the walls of a firm or professional association. But exchanging views with all parties leads to new insights that is beneficial to everybody.

We wanted to share knowledge in an accessible way and to discuss it with each other in a way that keeps up with current events. So on Wednesday, February 13, 2013, the first Vaklunch fell into the inbox of lawyers, tax advisors, prosecutors, FIOD officials, tax inspectors, judges, teachers and students. From the many responses we received and the fact that we were awarded the Magna Charta public award in 2020, we infer that we made a contribution to the legal discussions. And that gives us every reason to continue to share our ideas with you in the future via Vaklunch and the international version Lawlunch.

Over the past ten years, many judgments have been considered with our reflections on them. Some readers agreed wholeheartedly, others found it refreshing or “also a way of looking at it.” And some experienced it stimulating or provocative. Vaklunch and Lawlunch provide food for discussion and opinion forming. Online, but fortunately also offline. In the corridors, in the lawyers’ chambers, in the courtroom. No matter how it was reviewed, it always led to a conversation. And therefore ultimately to a greater understanding of each other’s points of view.

To celebrate this anniversary we gave those conversations a stage. We entered into conversations with professionals with the aim of finding the connection between the various disciplines. The central question in those conversations is how we can jointly take the tax and criminal process a step further. And how can the connection between parties contribute to that?

#83: What a year

The Christmas break is a great time to relax, reflect and look ahead.

Lawlunch focussed this year on the legal developments in the Netherlands regarding trial agreements, cybercrime and legal privilege. Topics that have created lots of discussion amongst the professionals involved. In 2023 these topics will probably remain important as case law develops fast.Wonderful new challenges for the year 2023 are thus on the horizon!

For now, we wish everyone happy holidays and a spectacular new year! We hope to see you all in 2023. We will be back in January with a new Lawlunch.

#82: Is your data in safe hands?

Investigative authorities all over the world collect a great deal of criminal data. The Netherlands is no exception. It can include seizures or hacks of large data carriers in the interest of a criminal investigation based on a suspicion of criminal acts. Examples are the cracked messages of Ennetcom, Encrochat or Sky ECC. But also, full sets of administration of companies can for instance be seized. All this data is of course relevant for a specific investigation but is this data “in safe hands” afterwards? Will it be destroyed? Or may this data also be used for other purposes?

This is the subject of the Dutch WODC study “Processing of criminal data” published on 25 October of this year. This study offers an exploratory study into the standardization of the processing of personal data for criminal justice purposes. What does this research teach us?

The WODC notes that rules regarding the acquisition of data is included in the Dutch Code of Criminal Procedure, but that this code says nothing about the retention or use of data. This is relevant because investigative agencies today are also paying close attention to advanced technologies, which increasingly combine and analyze data. This means that seized data may not only be used for a specific investigation but also for data analysis, for example. How seized data should be kept and for what purposes it may subsequently be used is not in the Code of Criminal Procedure, but in the Dutch Police Data Act. It is unclear how the rules in this law relate to the rules in the Code of Criminal Procedure. The WODC notes that this makes the regulations insufficiently clear. For example, the law does not answer the question of whether and when seized data may be used for data analysis at a later time. The research team recommends that data processing will be more explicitly and clearly defined in the Code of Criminal Procedure.

Another important aspect is the use and processing of bulk data. The report shows that nothing is actually stipulated about this in current and/or forthcoming regulations. While legal regulation is necessary for the processing thereof to be in accordance with European law. So here too, according to the WODC, Dutch regulations are insufficient.

But one of the most important observations in the report is that current supervision is inadequate. The criminal courts, for example, test only briefly against the Police Data Act because a violation often does not lead to any legal consequence in a specific case against a specific suspect. The research team therefor recommends the creation of an oversight committee that can monitor investigations and also control the processing of the data.

As these recommendations are to be acted upon in the future, we believe that the criminal courts should take this role more seriously as long as there is no effective oversight body. Personal data should be “in safe hands” once it has been used for the purpose it has been collected for: a criminal investigation. We believe that violations of the law regarding the processing of personal data should be subject to judicial review, even if this often ‘only’ results in a perceived violation of the right to privacy which does not lead to serious impact on the decision of that court. The fact that such a violation is recorded in the decisions, provides more insight on what is happening with the data. We should not forget that protection of personal privacy is an important pillar in a democratic constitutional state. It is imminent that the judiciary monitors whether the executive power abides the law to safeguard that our principles of the rule of law are met. So (obviously) this also applies to the processing and use of criminal records.

Do you have any questions about the above or would you like to exchange views? Please contact boezelman@hertoghsadvocaten.nl or boer@hertoghsadvocaten.nl.

#81: I force you to cooperate

No one can be forced to cooperate with their own conviction. This principle is known in criminal law as the nemo tenetur principle. An important rationale behind this principle is that a certain amount of force might affect the reliability of a statement, but also that undue coercion on a suspect is not desirable. A suspect’s right to remain silent is perhaps the most absolute and well-known right that has its origins in the nemo tenetur principle. But the principle encompasses more aspects. For example, discussions exist on how much physical pressure may be put on a suspect to cooperate with an investigation, think about giving fingerprints. In financial or tax cases the question is mostly whether you can be obliged to hand over incriminating documents to the authorities and whether these documents may be used to impose a fine? The latter question was at stake in a case before the European Court of Human Rights (ECtHR) against the Netherlands.

In criminal investigations this question hardly ever arises since documents are seldom asked from a suspect. Investigative agencies have ample opportunities to seize documents such as bank statements. In administrative penal procedures the authorities have less far-reaching powers to seize documents in the Netherlands. Take for example the tax authorities, who have the possibility to request documents for tax purposes but are not able to conduct house searches for instance. Thus, for the most part – apart from third-party examinations – the tax authorities depend on information provided by the taxpayer himself. However, if the tax authorities want to impose a tax penalty, the right to a fair trial as laid down in article 6 from EHRC applies. This means that the nemo tenetur principle applies the moment the tax authorities suspect that, for example, an incorrect tax return was filed intentionally.

The question before the ECtHR was whether enforced information may be used for the proof of a fine. A taxpayer is in principle obliged to hand over tax-relevant information and documents pursuant to Article 47 of the ‘Algemene Wet Rijksbelastingen’, the general state tax law. If someone fails to do so or does so incorrectly or incompletely, this constitutes a punishable offense. The tax authorities can also enforce bank statements through summary proceedings by means of a penalty payment. The question is whether the evidence that has been gathered through coercion is admissible as proof for a fine or whether this is contrary to the nemo tenetur principle.

A Dutch taxpayer filed a complaint with the ECHR. The facts were as follows: the tax authorities requested bank statements from Mr. Lege. At the same time a suspicion existed that he had failed to declare assets regarding a foreign bank account in his income tax returns. The requested documents were eventually enforced through penalty proceedings in civil court and then used to impose a fine. The question for the ECtHR is whether this practice and use of evidence violates the nemo tenetur principle.

In the present case, the Court recognizes that coercion was used to obtain documents that were then used to impose a fine. However, the question is whether this situation is also protected by the nemo tenetur principle. To this end, the Court considers that the documents existed independently of the defendant’s will and that the authorities knew in advance about the existence of these documents. To that extent, therefore, there was no fishing expedition. Furthermore, the degree of coercion is not such that one can speak of a violation of Article 3 of the ECHR, the article prohibiting torture, inhuman or degrading treatment. The Court thus concluded that there was no violation of the nemo tenetur principle.

This ruling offers the Netherlands an important lesson. Yes, it is possible to enforce documents through a penalty procedure and use them for a fine, but only if the documents have a pre-existence before the request and there must be no fishing expedition! This means the authorities need to know about the existence of the documents that they are requesting. The Court refers to two other ECtHR cases in this regard where the requests were formulated far too broadly and generally. Thus, the requests must be concrete and specific and the tax authorities must have concrete evidence of the existence of the documents before they can be used in the present situation to prove a fine.  We believe that many requests from the tax authorities can be qualified as fishing expeditions.

Do you have any questions about the above or would you like to exchange views? Please contact boezelman@hertoghsadvocaten.nl or boer@hertoghsadvocaten.nl.

#80: Getting your right

Being right and getting your right are different things. Especially in law. In criminal investigations, the defendant who is convinced of his innocence obviously wants to get his right. And that makes sense in society nowadays, in which a wrongful accusation impacts so many other factors in life. A criminal investigation or prosecution has quite some consequences for which “collateral damage” is a euphemism. Of course there is an interest in not being wrongly convicted by a court, but there is also an interest in getting your right in case of an out of court dismissal. In the Netherlands, this often results in a discussion for dismissal code “01” – unjustified suspicion – and dismissal code “02” – insufficient evidence. This usually is the final battle to fight.

In practice in the Netherlands the accused who is convinced of his innocence cannot or will not simply accept dismissal code “02,” which implies insufficient evidence. Dismissal code “01” means that there is an unjustified suspicion and in a lot of cases does more justice to the situation. For some suspects, this has (mainly) to do with a sense of honor and justice. From a negative approach, the label “insufficient evidence” might imply that the evidence of a criminal act should be there, but that the evidence was not discovered. For others, the main issue is the effect of the wrongful decision. This is especially relevant for the suspect who is repeatedly facing problems with various institutions to be granted financial credit or, for instance, a statement of good conduct (“VOG”).

If a former suspect disagrees with the dismissal code, a complaint can be filed with the chief public prosecutor via the route of Chapter 9 of the General Administrative Law (Awb). And if the former suspect disagrees with the chief officer’s judgment, a complaint can be filed with the National Ombudsman. If the case prosecutor appears unwilling – after substantiated request – to adjust the dismissal code from “02” to “01”, experience shows that chances are that the chief prosecutor is also unwilling to do so. Going to the National Ombudsman is then the last resort.

This route however usually takes a lot of time. And practice shows that there are various other – creative – ways to getting your right. For instance there are examples of persons starting a procedure after a dismissal with code “02”, to request the court to order the prosecutors office to prosecute. The goal then is to receive an acquittal from the criminal court judge. Other examples are those of persons who try to obtain to get their right through the cost reimbursement procedure and request this judge to grant a reimbursement of costs as if the case would be dismissed with code “01″.

This discussion is also taking place in the Caribbean parts of the Dutch Kingdom, such as Curaçao. The administrative route to file a complaint at the chief prosecutors office against a specific dismissal code does not apply there. The Code of Criminal Procedure, however, does provide there the entrance to summary criminal proceedings. Article 43 of the Code of Criminal Procedure offers the following possibility: “In all cases, in which the interest of the proper administration of criminal justice makes a remedy urgently necessary and the Code itself does not contain any regulation in this regard, a request for such a remedy may be made by the accused or the person who has a direct interest therein that directly affects him specifically.”

If the dismissal decision was made during the preliminary investigation then, according to article 43, paragraph 3, Code of Criminal Procedure on the islands, the investigating judge is authorized to decide on the request to change the dismissal code from “02” to ” 01″. Based on (unpublished) rulings, it appears that this route can successfully solve the problem. In a specific case, a former suspect whose case was dismissed with a tremendous amount of determination got his right in the end. And that is what counts.

Do you have any questions about the above or would you like to exchange views with us? Please contact boezelman@hertoghsadvocaten.nl or boer@hertoghsadvocaten.nl.

#78: There is (no) smoke without fire

When the tax inspector was given the legal means in 2009 to impose tax fines on co-perpetrators, this caused quite the commotion among tax advisors. Initially the professional literature reassured them it would not be such a big deal. After all, according to the prevailing case-law, the required proof of (conditional) intent was not easily met. Besides, the right to impose a fine came with a safeguard: prior permission by the ministry is mandatory (section 2.6 BBBB). Until then, however, case law also showed all too often that the minimum rules of evidence for conditional intent were not justly applied by investigative authorities and the tax authorities. More than a decade has now passed. Were the soothing words (un)justified?

The case law that has now appeared shows that fines for tax advisors are mainly an issue in disputes on whether a foreign located company actually has its place of effective management (POEM) in the Netherlands and therefore is subject to Dutch corporate income tax. Whether this is the case is not always clear; these types of cases are very casuistic. It is remarkable that the inspector often concludes in one go that if the company is subject to Dutch corporate income tax, it probably has acted in bad faith and should be fined, besides the management or shareholder(s) of the company. The idea seems to be that where there is smoke (taxation), there is also fire (conduct liable to penalty).

But this is all too short sighted.

Recently, the Amsterdam Court of Appeal ruled that the tax inspector had correctly concluded that the effective management of the Malta-based company was in the Netherlands. However, the Court of Appeal considers this does not automatically mean that the tax advisor was also aware of this. On the contrary, the Court of Appeal assumes the good intentions of the tax consultant: “The Court of Appeal rather considers it plausible that if the interested party had realized this, she would have pointed out to the other parties involved that the required substance was threatened and that another course of action was required.” The Court of Appeal ruled that the proof of intent was not convincingly demonstrated by the tax inspector. This also applies to the claim that the tax advisor would have acted grossly negligent. It is also not up to the tax advisor to prove his innocence. That burden of proof lies with the inspector.

The Court of Appeal ruled that the advisor could have been expected to take action with respect to the domicile of the company. The Court of Appeal considered: “The failure of the interested party is culpable. More adequate action could have been expected from her.” However, according to the Court of Appeal, this failure to act does not justify the conclusion that there is serious fault: “This culpability, the failure to intervene or distance oneself where this could have been expected of her, is not so serious that it borders on intent in reprehensibility. There is therefore no question of gross negligence either.” The court adds that in this case, even if intent or gross negligence could be assumed, the required complicity could still not be proven. The contribution of the tax advisor was simply of insufficient weight.

In our opinion an entirely correct decision.

The judgment provides lessons to both tax advisors and the tax administration. For potential new cases it would be wise to assume the good intentions of the involved consultant, as the Court of Appeal does in this case, while analyzing whether there is proof of (conditional) intent. In our opinion only cases in which there is concrete evidence that the tax advisor realized that the effective management of a company was in the Netherlands but nevertheless the advisor consciously took no action, should be eligible for a penalty. If there is no such evidence during the request for permission, then imposing a penalty is disproportionate.

And to answer the question from the introduction: although this case may not be over yet, the soothing words for advisers so fare have proven to be correct. However, it is a long-term procedure with a lot of negative effects for both the personal as the professional life of the tax advisor involved.

If you would like to know more about the case-law we refer to, please reach out to us at boezelman@hertoghsadvocaten.nl or boer@hertoghsadvocaten.nl. We are happy to share an English translation and discuss any questions you might have on the topic.

#77: Bank relationships

The pressure on banks has increased tremendously by various regulators. These days banks are taking their anti-money laundering controls very seriously. After being firmly reprimanded a number of times by the Public Prosecutor’s Office and having paid their dues by high transactions, banks have set up extensive departments to carry out checks on the origin of transactions. These departments conduct numerous and intensive checks by asking customers a variety of questions based on extensive Know Your Customer (KYC) checklists. If the answers to those questions show that the customer is not complying with all the rules and requirements or if not all the questions are being answered, termination of the customer relationship can follow. And additional stricter legislation for banks is already forthcoming. This way of working is not only criticized by the bank’s customers, the banking world itself is also critical. Is the method overshooting its goal?

An example in which we believe the banks’ KYC controls are beyond the legal requirements is a case of a dermatologist who had been banking with ING Bank for over 40 years, both privately and professionally. During a Know Your Customer (KYC) investigation it was established that over a period of seven years more than € 200.000 of cash had been withdrawn from the private account and almost € 500.000 of cash from the business account. It is also important to mention that the dermatologist in question had been linked several times in the media to an infamous criminal in the Netherlands. Partly for this reason, the doctor was asked how he spent the cash money he withdrew.

His answer is clear. He used the cash payments in particular for the restoration of a building in France. He no longer has the invoices or receipts. The ING response is that the bank cannot verify the cash expenditure and for this reason the banking relationship will be terminated. The discussion in these proceedings was whether the bank may terminate the relationship if the purpose for which the cash was spent remains unclear while it is certain that the money was legitimately earned. According to us, the fact that the money was earned legally means that the money cannot be laundered. Money laundering is about concealing or disguising the criminal nature of the money, trying to bring ‘black’ money back into the white economy. Whereas in this case the suspicion is about the opposite situation, namely that ‘white’ money is supposedly used for criminal activities. According to us in this situation the bank is overachieving in its KYC controls, but it also shows that cash money is viewed as something criminal in general. Also the Court decided that the bank could terminate the relationship given the fact that the dermatologist could not proof where he spent his cash money on.

With new legislation coming up banks can even go a step further in which highly sensitive information about private life can be monitored through (PIN) transactions. This means that the bank takes an intrusive look into someone’s life. Examples include paying a therapist’s bill or pinning a drink at a specific bar. According to the Dutch Personal Data Authority (AP), the current proposals do not make it sufficiently clear which of the highly sensitive data may be used. Incidentally, the AP is not the only one concerned. The rest of the European privacy regulators, united in the European Data Protection Board (EDPB) also support the criticism.

In our practice we also see the effects of the anti-money laundering measures at banks. In some cases, the bank’s investigation is the starting point for other investigations by the Public Prosecutor’s Office and sometimes the Tax Authorities. Even in cases where there are no indications that criminal money laundering might be lurking, a discussion about money laundering can surface with far-reaching consequences. And that is unnecessarily harmful as far as we are concerned. It is good that more and more parties recognize that the controls cause a lot of unnecessary ‘collateral damage’, while there is no serious risk of money laundering. Preventing the possibility of certain data being involved in these investigations would be step forward.

What are your experiences in the rest of Europe?

If you would like to know more about the case-law we refer to, please reach out to us at boezelman@hertoghsadvocaten.nl or boer@hertoghsadvocaten.nl. We are happy to share an English translation and discuss any questions you might have on the topic.

#76: Trial agreements in the Netherlands

The desire for criminal proceedings to be more efficient is present among all those involved. Enforcement of criminal offences is more effective for society if proceedings do not take too long. In addition, suspects do not benefit from a long period of uncertainty and nor does the Prosecutor’s Office in terms of capacity. In February 2019, the Prosecutor’s Office in the Netherlands already expressed its desire to make trial agreements with the defense more often. The outlines of the possibilities and impossibilities slowly begin to unfold.

The desire to come to such agreements can be explained by the fact that once a case has gone to court, the Prosecutor’s Office cannot withdraw the case anymore. It is then up to the court to take a decision. Various developments in time could cause the Prosecutor’s Office to request a certain outcome of the case, however the court is not obliged to follow the Prosecutor’s Office. In this respect the Prosecutor’s Office expressed in 2019 that it wanted to start experimenting with trial agreements with the purpose of saving time and capacity. This would involve, for example, the public prosecutor limiting the scope of the investigation, followed by limited investigation requests  by the defense. There is no legal basis needed for trial agreements, but a draft instruction is being prepared by the Prosecutor’s Office that spells out the guidelines  under which trial agreements can be made.

The first experiences with trial agreements show that it depends on the court involved whether the Prosecutor’s Office and the suspect can count on support for their agreement. In addition, trial agreements seem to have the best chance of success if they help to “unclog” the criminal justice system. It is therefore preferable to make agreements with all parties and not, for example, with only some of the defendants.

In 2019 the Prosecutor’s Office also expressed a desire to come to agreements regarding a potential sanction, such as the duration of imprisonment: “A sentencing agreement is a joint request from the prosecutor and the lawyer of a confessing defendant to the judge.” The initial findings are a mix of positives and negatives. For example, also in 2019 agreements between the prosecution and the defense on the sentence in the so-called Cymbal case were submitted to the court. The court, however, disregarded these agreements and ordered a (much) higher duration of the imprisonment. In a recent case, the Arnhem-Leeuwarden Court of Appeal also did not follow the agreements made between the Prosecutor’s Office and the defense. The suspects in this case were accused of having defrauded the parties by promising them that they would be able to safely achieve high returns from investing in real estate in Poland. However, that money was lent to a Polish company without any security being obtained. The court emphasizes that a large number of victims are still experiencing the negative financial consequences of the defendants’ actions. The fact that the trial agreements would not lead to any certainty for the injured parties within a “very short period of time” played, among other things, a role in not accepting the trial agreements, as the defense indicated to be able to file an appeal at the supreme court with respect to the decision on the compensation of the victims.  

However there are also positive experiences. In another case, during a pre-trial hearing, it was the Rotterdam District Court who encouraged the Prosecutor’s Office and the defense to make agreements about the trial and the sentence. So they did and the court went along with their agreement after it had tested whether the trial agreements are fair, whether the suspect understands the trial agreements and whether they have been entered into voluntarily. This resulted in substantial save of time and money.

If you would like to know more about the case-law we refer to, please reach out to us at boezelman@hertoghsadvocaten.nl or boer@hertoghsadvocaten.nl. We are happy to share an English translation and discuss any questions you might have on the topic.