Duty of care for financial institutions

What is meant by the duty of care?

The duty of care puts the consumer (more) at the centre and ensures that they are better protected when purchasing financial products and services. After all, financial decisions can have major consequences for a person’s situation. When financial service providers act inaccurately, think of an incorrect risk assessment, this can result in (financial) damage for the consumer. For example, a bank must check whether a customer can meet his obligations before granting a loan.

Two laws regarding the duty of care

The duty of care is included in two different laws. The different laws regulate the legal relationship between the different parties:

• The Financial Supervision Act (FSA)

The FSA is a public law act that regulates the relationship between the financial service provider and the government. The government imposes, for example, course requirements, requirements for advice and the duty of care.

• The civil code

The civil code regulates the relationship between consumers and organisations. Thus also the relationship between financial service providers and their clients.

Measures taken by the AFM to fulfil the duty of care

If a financial service provider violates a customer’s interest and thus fails to comply with its duty of care, he may be subject to one of the sanctions imposed by the AFM. The AFM can take severe and less severe measures. Before taking any measure, they will always conduct a thorough investigation to determine which measure is appropriate.

This is because this conduct is harmful to the integrity of the market and confidence in the financial services. As an independent conduct supervisor, the AFM is designated to contribute to sustainable financial welfare in the Netherlands. Violating the interest of a customer can have the following measures:

• Normative conversation/letter
• Warning letter
• Public warning
• Designation
• Order under penalty
• Penalty
• Designation of a silent curator
• Licence withdrawal
• Undertaking

The importance of employment screening to comply with the duty of care

Employees in the financial sector have a great influence on the performance of the duty of care. It is therefore important that you are sure of the integrity of your staff. One of the ways organisations fulfil the legal obligation is by screening their employees.

Employment screening in the financial sector

As a financial institution, you need to take into account several matters regarding your personnel, including a check of the identity document, relevant diplomas, applying for the certificate of conduct (VOG) and conducting the integrity statement. Validata is well aware of the laws and regulations in the financial sector and the need for organisations to comply with them. We would like to think along with your organisation for a suitable screening solution. Want to know more about screening in the financial sector?

Screening in the financial sector