Bill seeks to clarify Luxembourg’s dormant-account policy

Legislation expected to provide Luxembourg-based banks with uniform approach on how to deal with dormant accounts.

A bill is being drafted by Luxembourg’s Finance Ministry that would seek to clarify how banks in Luxembourg should deal with dormant accounts.

The ministry told the Luxembourg Times preliminary text was being drafted for a bill concerning dormant accounts, although it said it was unable to disclose any specific details.

Unlike other EU countries such as Belgium and the UK, Luxembourg has no legal framework for managing dormant accounts.

As a result, many banks set their own rules and procedures, including the definition of a ‘dormant account’ or the time that must elapse before unclaimed assets are lodged with the state treasury.

The Luxembourg Bankers’ Association (ABBL) defines an account as being dormant when “no movements take place and no instructions, communications or declarations are given by the account-holder, or [their] authorised representatives”, although it does not specify a time frame, saying only that banks may determine their own internal procedures.

Luxembourg’s regulator, the CSSF, issued a circular in 2015 proposing that an account be considered dormant only once six years have passed with no communication from the account holder, and at least three years of inactivity have elapsed.

However, the CSSF’s circular was not binding, and many banks have continued to enforce their own rules.

Catherine Bourin, an executive committee member at the ABBL, said the lack of a legal framework for dormant accounts presented challenges.

“Dormant accounts may be reported to the state when banks don’t know, or cannot reach, the heir to the assets,” she said. “But the banks are not obliged to do this.”

Bourin said she hoped the new bill would provide a clear legal definition for dormant accounts.

“Every bank has its own definition of dormant, whether it be an account that is inactive for six, seven, 10 years or more – there’s no uniformity,” she said.

“Banks are also unsure when to do what. A legal framework would provide greater certainty over the obligations banks must meet with respect to dormant accounts.”

The accumulation of dormant accounts at banks is not uncommon and often arises following the death of a customer who has omitted to pass on information to the rightful heir, or when a beneficiary moves address and forgets to inform their bank.

Unique Luxembourg

According to ABBL, Luxembourg’s experience is somewhat unique due to its international clientele, with “many customers located some distance from the Grand Duchy”.

The banking association said, very often, arrangements are in place for customers’ mail to be delivered to their bank, and that this can lead to a “proliferation of accounts”.

When an account is considered dormant and a bank is unable to locate the beneficiary, it may decide to lodge the account with the Caisse de Consignation, a department within the state treasury.

After 30 years have elapsed, if still left unclaimed, the government then takes formal ownership of the assets.

But Bourin called for greater clarity as to what assets were accepted by the state.

“It’s not easy for banks to deal with the consignment of dormant accounts,” she said.

“The criteria for acceptance and refusal of assets by the state is not clear. In some cases, assets are sent to the state and are subsequently rejected.”