Wiesbaden Regional Court: Payment obligation for banks after the three-day period following a suspicious activity report under money laundering law has expired without result

Banks are increasingly reporting suspicious transactions in accordance with the German Money Laundering Act (GwG). They have a legal obligation to report suspicious transactions if they assume that they are being used for money laundering or terrorist financing. This often concerns cases with a foreign connection. While the Central Office for Financial Transaction Investigations, also known as the Financial Intelligence Unit (FIU), recorded 15,496 suspicious transaction reports in 2012, this figure had already risen to 337,186 in 2022[1]. The reasons for this trend can be found in part in the law. While the bank is only liable for damages in the case of unlawfully submitted suspicious activity reports if the report was submitted intentionally or due to gross negligence, the statutory fine for failure to report serious, repeated or systematic violations can amount to up to ten percent of the total turnover, or up to EUR 150,000 per violation in individual cases. In individual cases, the bank's money laundering officer can also be held personally liable for non-reporting.[2] The requirements for a suspicious activity report are not high, meaning that banks tend to act over-cautiously and submit a suspicious activity report due to this legal situation. Since such a report leads to a temporary blocking of the account, this results in potential risks for the account holder. In a ruling by the Regional Court of Wiesbaden on January 11, 2024 (Ref.: 3 O 238/23), the legitimacy of a bank's refusal to pay out after a suspicious activity report has been submitted without result was called into question. The ruling shows that banks may not refuse payment following a suspicious activity report after a three-day period has expired if the FIU or the public prosecutor's office does not prohibit payment within this period.

Facts of the case

The plaintiff, a private individual, has held a current account with the defendant bank since 2008. When opening the account, she informed the bank about possible high incoming payments from an inheritance, which could be in the six-figure range. Until July 12, 2023, the account mainly showed regular incoming payments from gainful employment, which amounted to around EUR 2,000 per month.
On July 12 and 17, 2023, the plaintiff's account recorded two incoming payments that first increased the balance by EUR 388,367.77 and then by a further EUR 683,569.29. These transactions prompted the defendant bank to send a suspicious activity report under money laundering law to the FIU and to temporarily block the plaintiff's account. There was no reaction from the FIU or the public prosecutor's office. Despite the plaintiff's efforts to explain the origin of the funds, the bank refused to pay them out.

Account freeze unlawful when facts are clear

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The court found that the defendant was not entitled to withhold the plaintiff's funds for weeks without further ado. Even the suspicious activity report was not lawful, as the facts of the case had been clarified. The plaintiff had already stated when opening the account that larger amounts could be transferred to her account in the future. The fact that smaller sums were received into the account in the meantime could not automatically lead to the facts of the case being considered suspicious.

Payment obligation after expiry of the three-day period

Even assuming that the suspicious activity report was legitimate, the bank should have made the payout after a three-day period had expired. Banks must report suspicious circumstances to the FIU in accordance with Section 43 (1) GwG. According to Section 46 para. 1 no. 2 GwG, a transaction may only be carried out after such a suspicious activity report if it is not prohibited by the FIU or the public prosecutor's office within three working days of the suspicious activity report. Such a prohibition was indisputably not issued in this case. The court then clarified that although the wording of the standard itself does not imply an obligation to carry out the transaction after the deadline has expired, the meaning of the standard cannot imply otherwise, meaning that the banking institution is obliged to carry out the commissioned transaction after the deadline has expired.

Practical considerations and conclusion

The facts underlying the ruling make it clear that a suspicious activity report cannot be ruled out even if the bank was informed of the origin of the funds before they were received. In such a case, it is problematic that the account holder concerned cannot find out the reasons for blocking the account due to the prohibition on disclosing information set out in Section 47 AMLA. They can only guess that a transaction ban was issued due to a previous transaction classified as suspicious. After unsuccessful requests from the bank, the account holder concerned is urgently recommended to seek legal advice promptly and, if necessary, to file a lawsuit. In emergency cases where there is otherwise a threat to the bank's existence, it may be advisable to consider filing an injunction. If the transaction freeze leads to continued insolvency for more than three weeks, the representative body of a company is also obliged to file for insolvency. Due to the seriousness of the intervention, it is still strongly recommended, despite the ruling, to notify the bank in advance of any pending unusual transactions, especially those with a foreign connection, by means of a prior announcement and declaration. If the account is subsequently blocked, legal advice must be obtained quickly in order to avert damage. We will be happy to assist you in effectively asserting your rights.

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[1] Financial Intelligence Unit Jahresbericht 2022, S. 14.

[2] Oberlandesgericht Frankfurt am Main, Beschluss vom 10. April 2018, Az.: 2 Ss-OWi 1059/17.

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