The Luxembourg financial sector regulator (CSSF) has issued Circular 15/631, which provides guidance on the definition and treatment of dormant accounts. The circular entered into force on December 28 2015.
The circular applies to credit institutions and all other financial sector professionals subject to the prudential supervision of the CSSF that keep or manage third-party assets on accounts opened for that purpose. All types of account are covered by the circular (eg, cash accounts, securities accounts and e-money accounts). Safe deposit boxes are assimilated with accounts for the purpose of the circular.
Professionals should maintain regular contact (at least annually) with their clients and monitor client relationships with vigilance. They must also set out rules to determine clearly when a relationship has become inactive and when an account has become dormant, in order to meet quickly their restitution obligations – in particular, where the deposited assets are claimed by heirs.
According to the CSSF, a relationship with a client should be considered inactive – and the client's account should be considered dormant – if:
- during the past six years, there has been no communication from the client or its authorised representative; and
- during the past three years, the client or its authorised representative has initiated no transaction (eg, transfer instructions, cash withdrawal or deposit, sale or purchase orders) on any of the accounts held by the professional.
Once an account has been declared dormant, the professional should:
- set up adequate internal procedures to identify and monitor such accounts;
- restore contact with the inactive client or its heirs by all appropriate means in accordance with the proportionality principle;
- pay particular attention to dormant accounts that become active again and apply specific diligence to ensure that such awakening does not present a suspicious transaction; and
- continue to administer the client's assets in compliance with the contractual obligations (professionals may charge justifiable and transparent administrative expenses; if such expenses become higher than the value of the deposit, they may close the account).
The circular expressly provides that the professional is not authorised to appropriate the assets in its custody (regardless of the amount held) or to use the assets for purposes other than their restitution to the entitled beneficiaries.
For further information on this topic please contact Josée Weydert or Diana Konrad at NautaDutilh Avocats Luxembourg Sàrl by telephone (+352 26 12 29 1) or email (email@example.com or firstname.lastname@example.org). The NautaDutilh Avocats Luxembourg Sàrl website can be accessed at www.nautadutilh.com.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.