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A bank had suspended payment operations for the benefit of a company whose name, “Persian”, evoked Iran, a country under an international sanctions regime that banks must imperatively take into account.
Embargoes, money laundering and terrorist financing: heavy sanctions and obligations that override others
Banks increasingly face the risk of heavy fines under anti-money-laundering and counter-terrorist-financing rules, whether national or international, including embargoes and asset freezes. Their compliance departments do not always have the means to analyse every client file and every operation, so they exercise heightened caution and sometimes apply the precautionary principle with much, perhaps too much, zeal. These public-policy rules can lead to breaches of certain obligations in Book VII of the Code of Economic Law, notably Article VII.53, which requires the payer’s payment service provider to ensure that the amount is credited to the beneficiary’s provider’s account at the latest on the next business day.
A Dutch company whose name is associated with Iran no longer receives payment of its invoices
A Dutch trader carried on business in Belgium in luxury goods under a name including “Persian”, selling sturgeon eggs (caviar). Some clients paid their invoices from accounts held with a Belgian bank. The trader found that these payments were regularly blocked by the payers’ bank on the compliance department’s instruction, some being released only after nearly a month, affecting its cash flow. At each block, the bank asked the client for supporting documents before any release: the economic purpose of the operation, a copy of the underlying sales invoice, the context including a description of the goods, their origin and destination, and the identification of the beneficiary. The bank was checking that the operations were not linked to an embargoed country or a sanctioned entity.
The trader sues its clients’ bank
The trader sued the clients’ bank before the Dutch-speaking Brussels Enterprise Court, partly under Book VII of the Code of Economic Law, claiming damages as it had in reality no link with Iran. The bank explained that the blocks were linked to the name “Persian”, under its policy of complying with EU, US and UN economic and financial sanctions, which target Iran, Syria and certain individuals.
The court found no fault on the bank’s part, given the circumstances imposed on it: the drastic US sanctions regime against Iran, which can have consequences for banks worldwide; the bank’s obligation to follow the National Bank of Belgium’s instructions (notably the circular of 6 December 2016) requiring automated monitoring of client operations (the bank also carried out manual checks); its obligation, under Article 35 of the Act of 25 April 2014 on the status and supervision of credit institutions, to maintain an independent compliance function; the claimant’s trade name containing the word “Persian”, its website also referring to Iranian fishermen; and the bank’s communication, via its website, of the possible interference of its control procedures with payment operations. Despite the trader’s inconvenience, the bank had acted diligently and prudently.
This article is a translation. Only the French version is authoritative. It is provided for information purposes and does not constitute legal advice.
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