This post is also available in:
Opinion piece by one of this site’s authors, published in the newspaper L’Echo on 1 June 2022. A more detailed analysis is available on this site.
On 1 May 2022, L’Echo published an analysis of de-risking, the term used for the banker’s reduction of its exposure to money laundering and the resulting unilateral termination, by a bank, of its contractual relationship with a client. That analysis set out the respective views of bank clients harmed by their banker’s decision and of banks subject to ever heavier anti-money-laundering obligations.
The principle: closing bank accounts is a right
In this field, the bank’s decision is in principle hard to criticise. The law expressly permits the consequence of de-risking: the termination of the commercial relationship with a client and the resulting closure of accounts. Exceptions may exist, which we will address in a forthcoming article.
The fact remains that every business whose banking relationship is terminated then faces great difficulty opening an account with another bank. The new bank is understandably wary. Beyond applying an internal AML risk policy that has, in line with the law, been tightened, it will inevitably question the reasons that led a prospective client to move all its assets from one bank to another. If the previous banker considered the client a risk, why would that risk have vanished with the change of bank?
The consequences of having no bank account
These difficulties, or this impossibility, can quickly put a business in distress. Without a bank account, it becomes impossible to pay salaries, taxes, social contributions, suppliers or rent. Without a bank account, an economic activity cannot continue, unless the manager uses his personal account through a current-account arrangement, with all the risks that entails. Must a business, sometimes a thriving one, leave the country? Must it be pushed towards platforms allowing more opaque financial operations, in cash or in cryptocurrencies, which is precisely what the State seeks to avoid by strengthening AML rules?
The Belgian State bears a heavy responsibility towards these businesses excluded from the banking system.
How did we get here?
The public authorities chose to place on private economic actors, the banks, prerogatives that oblige them to monitor the financial movements on their clients’ accounts. The State thus forces the banker to act as investigator, controller, even informer. The only counterpart: any breach of these obligations is heavily sanctioned, economically and publicly. A bank’s reputation is clearly at stake. Yet it is materially, technically and economically impossible for a bank to check every transaction of every client. To reduce their exposure to sanctions, banks therefore prefer to end relationships with certain clients and close their accounts.
It quickly becomes clear that the Belgian State pushed open the door to de-risking on the one hand, while on the other requiring every business to hold a bank account to carry on its activities. But the State has no public bank providing a public banking service; businesses depend on private actors. That is the paradox of the whole issue.
The State tries to catch up, rather clumsily
Aware, after the fact, of the ouroboros it had created, and at the initiative of the Antwerp N-VA, the State devised the Act of 8 November 2020 on the basic banking service for businesses. It should allow any business to compel a bank to open an account after several refusals. Eighteen months after its adoption, the Act remains unworkable: the royal decree meant to set out its implementing rules has still not been published. The draft exists, but it was rejected by the Council of State.
The Belgian State’s responsibility in this matter earned it a stinging judgment at the end of 2021. In a case between a bank and a business renting properties to sex workers, the Dutch-speaking Brussels enterprise court held that the bank had acted within its rights, but that the Belgian State had been negligent in its capacity to help businesses open and keep a bank account and to safeguard freedom of trade. A decision that will inevitably be followed by others, given the rise in similar cases in our banking litigation practice. It is time for the State to act.
This article is a translation. Only the French version is authoritative. It is provided for information purposes and does not constitute legal advice.
Leave a Reply