The Luxembourg banker’s liability with regard to anti-money laundering and anti-terrorism financing requirements.
Anti-money laundering and anti-terrorism financing rules existed in Luxembourg, as in the rest of Europe, for several decades. These rules are still discussed on an everyday basis and force most players of the financial place, especially the banks, to set up measures for proper identification of their clients and verification of their integrity.
The rules in Luxembourg are mainly dictated by the modified law of 12 November 2004 on the fight against money laundering and the financing of terrorism (the « Law of 2004 ») and in its implementing regulations.
The issue that arose at a certain point, throughout Europe and in Luxembourg, since these rules came into force (among others, the Directive No 2001/97/EC of 4 December 2001, implemented by the 2004 Law) was if a breach of said rules could imply a civil claim for non-compliance.
Indeed, during the last years, fraud mechanisms or scams have multiplied and have become more sophisticated, leaving their victims frequently to discover, months or even years later, that their former “business partners” were, in fact, fraudsters.
After the hoax has been revealed, the fraudsters have often long left the country, taking with them the funds of the victim.
This often leaves the victim with no other choice than trying to turn against the financial institution, which received the funds on behalf of the fraudsters and which allowed them to either withdraw cash or make wire transfers of the victim’s funds to other banking institutions worldwide.
Since the victim is not a party to the contractual relationship between the financial institution and the fraudster, the liability of the bank can be only in tort.
Traditionally, in Luxembourg, the provisions for the fight against money laundering were considered as rules of conduct, designed in a general way and not constituting a legal basis allowing individuals to take direct action in court based on a violation of these provisions.
More particularly, regarding financial institutions, a principle of “non-interference” (principe de non-ingérence) was admitted which provides that the bank should not intervene in the business of its clients, therefore placing banks in a neutral position.
The same question arose, however, whether banks could incur civil liability for non-compliance with rules of conduct prescribed by the modified law of 5 April 1993 on the financial sector (the “Law of 1993”). In this regard, Luxembourg Case law is not unanimous, admitting from time to time a contractual liability of the bank towards its client.
The rationale behind is that, while these conduct rules are not source of bank’s obligations in relation to his client, who cannot rely on them to issue a claim based on contractual liability of the bank, their compliance would still allow the judge to assess whether the bank has complied with rules generally accepted by the financial sector and hence the degree of diligence of the bank (Court of Appeal 29 October 2014).
A liability in tort of the bank towards a person other than the bank’s clients in case of violation of rules of conduct prescribed by the Law of 1993, however, seemed excluded (e.g.: Court of Appeal November 8, 2012 , Court of Appeal 21 July 2009).
With regard to the rules for the fight against money laundering, the question of the liability of the bank for non-compliance is far from having a unanimous solution in the various jurisdictions which prevail, according to their priority, interests of the banks or those of the victims.
In France, the Supreme Court (Cour de Cassation) confirmed the liability of the bank in such cases (although based on the duty of care and not for violation of rules on the fight against money laundering (Cass.com 22 November 2011, No. 10-30101 , F + P B).
In Luxembourg, a recent decision of the Supreme Court of 26 March 2015 (No. 24 /15) provides clarity that could bring hope to the victims.
The High Court has indeed decided that “the fact that a rule is enacted for the protection of the public interest does not exclude that it could, also, protect private interests and give rise to compensation to parties that suffered damage by the violation of these rules”.
Therefore, a victim might consider issuing a claim against a bank based on liability in tort if it can be proven that said bank did not comply with the rules in the fight against money laundering and against the financing of terrorism.
A first hurdle is therefore overcome for victims. Remains the issue of the calculation of the damages.
Indeed, the victim still has the difficult task to prove that the damage he suffered (as well as the amount), is a direct result of the violation by the bank of the compliance rules.
Loading...