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IPE special report May 2018

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Pension funds insufficiently alert to fraud, corruption, says DNB

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Dutch pension funds should improve their assessment procedure for potential breaches of integrity, such as corruption, conflicts of interest and fraud, watchdog De Nederlandsche Bank (DNB) has suggested. 

After assessing a number of risk analyses submitted by pension funds, DNB concluded that much was “open to improvement”, according to financial daily Het Financieele Dagblad (FD).

“It is obvious that risk analyses are largely limited to a small number of integrity risks and are lacking depth,” the DNB said.

The FD further quoted a DNB spokesman as saying that the findings were serious, as “integrity should not depend on documents, but should be embedded in an organisation”.

“If a pension fund even can’t write down what the risks are, the chances of everything being under control are smaller.”

According to the spokesman, DNB’s assessment was merely based on risk analyses of 25 pension fund which already had such assessments available during an earlier probe into conflicts of interest by the regulator.

He added that the supervisor had subsequently requested all other pension funds to submit such a risk analysis before 1 August.

The spokesman further made clear that DNB was fully aware that pension funds differed from financial institution such as banks and insurers, and that for example money laundering risks were smaller.

“However, pension funds have invested billions for their participants, and therefore they should be aware that such matters pose a potential risk for their integrity,” the FD quoted him as saying.

He further underlined that the DNB framework for integrity standards was fully based on legislation. DNB announced that it would present guidelines for addressing integrity risk later this year.

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