Unclear $1 million trade leads to suspicion of fraud, ABN Amro allowed to end relationship

Despite the extensive email exchange between the accountant and ABN Amro, the merchant’s business model in perfumes, cosmetics, and phones remained unclear to the bank. Millions were transferred, but ABN Amro, in its own words, strongly suspects the company of being involved in VAT fraud. The First Relief Judge ruled in the initial relief proceedings that the bank was allowed to terminate the relationship with the customer because sufficient information was not provided about the activities and payment flows.

The cosmetic trader used to mainly do electronics and also has a beauty salon. Various companies introduced the entrepreneur to banks in ABN Amro. In October last year, as part of a customer survey, the bank requested information about its business activities and several million transactions. RA from Wesselman Accountants | Consultants sent answers on behalf of the client, but even after more questions and new answers from the accountant, there is still a lot of mystery, according to ABN Amro. So the bank sent letters to the companies in March of this year, as the banking relationship was terminated as of May.

Briefs

The businessman and his companies instituted summary proceedings against the bank on this matter. ABN AMRO argues in an initial relief judge that the cosmetics business has made the payments it receives through the Bol.com account transparent enough that it appears legitimate, but that this only concerns 5% of the trading volume in its checking account. The company was unable to provide an explanation for the remaining 95% of its sales, which come from the sale of communications equipment. From January 1, 2019 to May 27, 2021, a total amount of €9,986,299.66 was deposited into the company’s current account and €9,832,602.25 was debited. Remarkably, the balances in her account are constantly followed by debits, which means that the balance on the checking account remains low. It appears that the Cosmetics Trading Payment Account is primarily used as a suspense account to transfer large amounts of money between parties that cannot be verified or can only be verified for a brief period. It is difficult to find Phonetje Netherlands, JRA Products & Services, Snel Logistics and Management, APR Trading, AK Trading, Dutchstone Projectontwikkeling (Parties Involved in Key Transactions, editor) in public sources. None of these parties has a working website or physical store. ABN AMRO also noted that these parties were often established after 2017 and were immediately able to trade millions of euros. Snel Logistics and JRA Products are located in a notorious building in Herhogovard. This building was closed down by the mayor of Herhogovard after the discovery of many forms of criminal activity, including money laundering, tax evasion and many forms of fraud. Furthermore, ABN AMRO has established that the VAT number for all these parties was withdrawn or found to be invalid shortly after trading with the cosmetic trade. Therefore ABN AMRO strongly suspects that the company is involved in VAT fraud. The alleged multi-million dollar cosmetic trade cannot be verified. There are no purchase, transfer and insurance agreements and no loan agreements between group entities. It appears that no guarantee was ever provided for large payments and it remains unclear with which and initial capital the cosmetics business started its alleged multi-million dollar business. There is no evidence that the merchandise has actually been purchased, resold and actually delivered by the cosmetic trade. Corporate accountants only submitted invoices. There is nothing else on paper. The revenue model of the cosmetics business remained unclear and the reason for the company’s existence as an obvious link in the longest B2B chain is unclear to ABN AMRO.

The beauty salon is already funded by the cosmetic trade. Financing a legitimate, labor-intensive and capital-poor business such as a beauty salon with supposedly illicit money is a common form of money laundering. This poses an unacceptable risk to ABN AMRO.

Judgment in the first instance judge

The Director of Cosmetics Trading, a holding company, made a point when he stated that ABN AMRO had generally formulated the reason for ending the banking relationship. ABN AMRO is expected to state in the cancellation letter and prove the concrete facts that led to the cancellation. This is in the interest of the party with whom the banking relationship is terminated, so that he knows what he is defending. It is also expected that ABN AMRO will be more accessible during the information process. The Holding Company (Director, Editor) stated at the hearing that it was nearly impossible to get someone from ABN AMRO on the phone and that it took three days before he finally spoke to an employee who entered it.

All this does not change the fact that it should be clear to a cosmetic trader on the basis of requests for information that ABN AMRO had to gain insight into its business model.

ABN AMRO’s questions, which were intended to gain insight into the cosmetic trade, have remained largely unanswered. The cosmetics business has not adequately enabled ABN AMRO to control its revenue model. The company does not trade with distributors at the beginning of the chain or with telecom stores where the chain ends, but is a link in a longer chain of intermediaries. The relationship between the various links is that of supplier and customer, but also the opposite. It provided no idea how to explain the profitability or added value of the company. In the absence of value added in the supply chain, cosmetics trading activities are very similar to pumping money back and forth, which is an indication of money laundering and/or VAT fraud. The company has traded nearly €10 million in telecommunications equipment in a relatively short period of time. It is not yet clear how it obtained the initial trading capital in the millions of euros. There is no documentation about where the products come from and that they were actually delivered. There are also no base agreements, because each time the procedure was based on oral agreements. The conclusion is that at the time of termination, ABN AMRO did not have sufficient visibility into the activities and payment flows of the cosmetic trade. Thus, the termination of the banking relationship with that company is not inadmissible in terms of reasonableness and fairness, nor does it conflict with ABN AMRO’s duty of care.

Balancing interests does not change this. ABN AMRO’s interests in reducing the risk of money laundering and in particular not being associated with criminal offenses outweigh the interests of the cosmetic trade in maintaining the bank account with ABN AMRO. It also takes into account that the company now has a bank account with another bank.

ABN AMRO rightly pointed out that the beauty salon poses an unacceptable risk of being involved in money laundering, because this company is already funded by BV Cosmetics. This means that the termination of the banking relationship with the beauty salon in itself is not acceptable according to the standards of reasonableness and fairness. However, since the beauty salon has not yet found another bank, unlike the cosmetic trade, and employs five employees, its interest in the short and temporary continuation of the banking relationship is greater than that of ABN AMRO in its immediate termination. ABN AMRO will therefore be required to continue the banking relationship for another three months in the manner provided in the Resolution. No penalty will be imposed for this conviction, as it is assumed that ABN AMRO will comply with this ruling.

ABN AMRO also terminated its relationship with the entrepreneur in the private sector, because he lost all confidence in him, due to the way in which he, as a (indirect) director of companies, fulfilled his obligation to provide information, or even failed to do so. Indeed, it was the Director (Holding Company, editor) who could and should have provided ABN AMRO with the required clarity, but did not.
Under certain circumstances, termination of the relationship with the principal is also inadmissible under the criteria of reasonableness and fairness or in conflict with the duty of care. Moreover, as a result of this termination, the manager will not be interrupted by economic activity, having managed to open a bank account in another place.

Although no questions were asked of the manager in the context of a customer survey by ABN AMRO, she does keep track of the fate of the group to which she belongs. Therefore ABN AMRO was also allowed to terminate the banking relationship with the principal.

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