New Luxembourg rules on dormant accounts now voted

On 17 March 2022, the Luxembourg Parliament approved the Bill of Law No. 7348 on inactive accounts, inactive safes and unclaimed insurance contracts (the "Law"). Please see here our complete article on the draft law for more information.

The Law creates a new legal framework, in view of strengthening the protection of clients by imposing professional obligations on banks as well as contributing to the fight against money laundering and the financing of terrorism.

In general terms, the Law sets out measures which impose an obligation on banks to consign unclaimed assets registered in the account to Luxembourg's Consignment office (the "Caisse de Consignation") after prolonged inactivity, as well as measures which provide for the subsequent restitution of the assets to any person with a right to them. The Law also aims to prevent the proliferation of inactive accounts altogether and will thus complement the Law of March 2020 establishing a central data retrieval system for bank, payment accounts and safe-deposit boxes, also known as the Central Register Law.

The following sets out in more detail the new rules which will be set out under the Law.

Scope

The Law will apply to, among others, any credit institution authorised in Luxembourg and any Luxembourg branch of a foreign credit institution. The Law gives a broad definition to the term "account" which encompasses any current account, savings account, term deposit account or deposit account repayable with notice, securities account, fiduciary deposits, as well as all other accounts opened with a bank in which the assets are individualised on behalf of account holders.

Electronic money account within the meaning of the law of 10 November 2009 on payment services are not in the scope of the Law and will remain subject to CSSF Circular 15/631 on dormant or inactive accounts.

Prevention

In order to prevent the proliferation of inactive accounts, according to the Law, banks are required to maintain regular contact with clients and closely monitor relations with the them in view of avoiding that their accounts become inactive. In this regard, banks should have detailed internal procedures in place to identify accounts susceptible of becoming inactive and to ensure these accounts are monitored. Furthermore, precise rules for gathering information on account holders, as well as rules to follow when trying to make contact with account holders or failing that, their heirs, should be in place.

Inactivity

Under the Law, the starting point for inactivity of accounts is the day from which the account holder has not carried out any transactions in respect of the account and when there has been no communication whatsoever, of any kind, on behalf of the account holder with the bank. Starting from then, if after a total of 6 (six) years no activity has been recorded, the account will be considered inactive. In determining whether there has been any communication with the bank on behalf of the account holder, automatic transactions not initiated by the account holder will not be taken into consideration. In the case of a joint account, transactions initiated by one of the account holders will suffice for the account to continue to be considered active. Once an account is considered inactive, banks must continue to diligently monitor the account.

When, dating from the starting point for inactivity of accounts, an account has persistently been inactive for 3 (three) years, the relevant bank, notwithstanding any contractual provision to the contrary, must try to re-establish contact with the account holder to inform him, or otherwise, his known heirs, of the consequences under the Law attached to inactivity of the account.

If the inactivity persists and in the absence of a response on the part of the account holder, the bank must engage in supplemental searches to try and contact the account holder or to identify, or if they have already been identified, to contact the heirs of the account holder. The bank may debit from the client's account costs resulting from these searches in accordance with the principle of proportionality. Banks can resort to the assistance of third parties for the supplemental searches, as long as they are subject to a statutory professional secrecy obligation.

Consignment and restitution

If the searches are not fruitful and the inactivity persists beyond the delay foreseen by the Law, the bank will be required to request the consignment of the unclaimed assets registered in the account at the Caisse de Consignation. Notwithstanding any contrary contractual provision and despite the fact that the contractual relationship between the account holder and the bank was still in effect on the day of the consignment, the consignment will bring about the closing of the inactive account in accordance with the procedures set out in the Law.

The Caisse de Consignation will conserve the assets for 30 (thirty) years (the authors of the Law propose to include the 6 (six) years establishing inactivity of the account within this period). If no restitution has been requested after this delay has elapsed, the assets will be transferred to the State of Luxembourg in accordance with the 29 April 1999 Law on consignments to the State  (La Loi du 29 Avril 1999 sur les consignations auprès de l'Etat). The Law also proposes that 50% (fifty percent) of the assets consigned be transferred to Luxembourg's Intergenerational Sovereign Fund (Le Fonds souverain intergénérationnel du Luxembourg, FSIL).

Any person with a right to the consigned assets may submit to the Caisse de Consignation, by electronic or postal means, a request for restitution. The relevant bank will in that case be required to cooperate with the Caisse de Consignation to enable the latter to identify and analyse the rights of the claimant for restitution.

In an effort to facilitate the restitution process for account holders, beneficiaries or heirs, the Law provides for the implementation of a centralised electronic register containing pertinent information regarding consignments made under the Law. In this regard, any person with a right to the consigned assets will be able to request information held on the register relating to such assets.

Identification and disclosure of inactive accounts

Banks will also be required to identify inactive accounts. This information will need to be provided on an annual basis to the CSSF or the Insurance Commissioner (Commissariat aux Assurances, CAA), as well as to the tax administration.

For further information, please do not hesitate to reach out to the Banking, Capital Market and Regulatory team of our Luxembourg office.