Can an EU bank refuse a basic bank account because of an OFAC listing?

In Jenec (Case C-81/24), the Court of Justice of the European Union (CJEU) held that a bank must first carry out an individual assessment of the money-laundering and terrorist-financing risk associated with the proposed relationship. An OFAC listing may justify enhanced scrutiny. It is not an automatic ground for refusal. The judgment matters to banks, payment institutions, compliance teams and consumers affected by non-EU sanctions screening. It draws a line between legitimate financial-crime risk management and automatic exclusion from essential banking services. Below, we will discuss how this case came about and why it matters for EU operators and banks. 

Why OFAC listings matter to EU banks in general

An OFAC listing can therefore trigger extensive scrutiny and may lead a bank to terminate a customer relationship, or refuse to enter into one, even where the customer is not subject to UN, EU or national restrictive measures. 

EU banks must follow strict rules on sanctions, money laundering, and terrorist financing. To comply, they carry out customer due diligence to check who their customers are, compare customers against official sanctions lists, and identify and verify the real owners of company accounts. 

These controls have a significant impact on both individuals and businesses. New customers struggle to open accounts at EU banks. Existing customers must justify everyday transactions to their banks. Entire industries find it hard to access banking services. Banks can freeze accounts, subject them to more intensive monitoring, or close them entirely if they believe the relationship poses too much risk. 

More and more banks are terminating banking relationships or refusing to enter into new ones as a way to reduce their risk. However, this raises a critical question: do the actual, concrete risks that banks identify truly justify taking such a drastic step? The answer must always be measured fairly by looking at all the circumstances of each individual case. Very often, when you examine the full picture, there are valid reasons to object to account closure or refusal of service. 

Customers on US sanctions lists face similar treatment, particularly those listed by the US Office of Foreign Assets Control (OFAC). While EU banks are not technically subject to US law, they often comply with US sanctions anyway because they operate in the United States or have faced heavy penalties for violations in the past. For instance, ING and ABN Amro in the Netherlands paid hundreds of millions or even billions in fines. As a result, even if a customer is not on UN, EU, or national sanctions lists, an OFAC listing alone can cause a bank to close the relationship or refuse to open one, despite the customer facing no other legal restrictions.

The EU right to a basic payment account

Whereas EU banks are often forced to comply with strict sanctions and AML TF legislation, they must, at the same time, comply with the EU Payment Accounts Directive, Directive 2014/92/EU. Article 16 requires Member States to ensure that consumers legally resident in the European Union can access a payment account with basic features. The Directive also makes clear that anti-money laundering rules must not be used as a pretext for refusing consumers who are considered commercially less attractive.  

Against that background, it was only a matter of time before the tension between (US) sanctions exposure, AML compliance and the EU right to a basic payment account reached the CJEU. Can an EU bank deny a customer access to a basic payment account solely because that customer appears on an OFAC list? In Jenec (Case C-81/24), the Court was asked to address precisely that question. 

The facts of the Jenec case

The case began in October 2017 at a petrol station in Ljubljana. A Slovenian national by the name of “LH” sought to pay an invoice issued in his wife’s name using funds from her account with OTP banka, formerly known as ‘Nova Kreditna Banka Maribor’. Once LH’s personal details had been entered into the payment system, the bank blocked the payment. The bank stated that the block formed part of stricter anti-money laundering measures, including internal compliance with sanctions – an asset freeze – imposed by OFAC.  

LH brought proceedings against the bank. On 23 March 2022, he separately applied to OTP banka for a payment account with basic features in his own name. Although he presented an identity card, he was told that the banking system did not allow such an account to be opened. The bank did not provide the written decision he requested. LH then amended his claim and asked the Slovenian court to order the bank to open a basic payment account.  

LH appeared on an OFAC list. The referring Slovenian court stated that he had not been convicted anywhere in the world of the offence for which he had been listed. The relevant Slovenian criminal proceedings had been closed and archived in 2015. The United Nations, the European Union and Slovenia had imposed no restrictive measures on him.  

The Slovenian court asked whether an OFAC listing could, by itself, require a bank to refuse access to a payment account with basic features under the Payment Accounts Directive and the EU AML framework.  

What did the CJEU decide in Jenec?

The Court started with the basic rule: consumers legally resident in the EU have the right to open and use a payment account with basic features.  

That right is subject to an important exception. A bank must refuse an application where opening the account would result in an infringement of the EU AML Directive (EU) 2015/849.  

The Court then examined when the AML Directive actually requires a bank to refuse a business relationship. Under Article 14(4) of Directive 2015/849, the obligation to refuse a business relationship arises where the bank cannot comply with core customer due diligence requirements, including identifying the customer, identifying the beneficial owner, or understanding the purpose and intended nature of the relationship. 

Those circumstances did not appear to arise in LH’s case, according to the court. LH had been identified, and OTP banka had refused the account because he was included on the OFAC list. The Court therefore made clear that Directive 2015/849 does not provide that an OFAC listing, or a comparable third-country list, automatically prohibits a bank from establishing a business relationship with the person concerned.  

An OFAC listing may nevertheless be a relevant risk factor. The bank must assess what it means in light of the individual customer, the intended account and the other relevant risk factors. Where appropriate, the response is enhanced customer due diligence after an individual assessment. An automatic refusal is not.  

The Court also stressed the special nature of a basic payment account. Its limited functionality reduces the associated money-laundering and terrorist-financing risk. A bank may refuse such an account where, after an individual assessment, it concludes that it cannot effectively manage the identified risk through measures proportionate to its nature and size.  

The Court furthermore held that Article 16(4) of the Payment Accounts Directive, read together with the EU AML Directive, does not permit Member States to require banks to refuse a basic payment account solely because the applicant appears on a third-country restrictive-measures list, unless the bank has carried out an individual assessment of the AML and terrorist-financing risk associated with the proposed relationship.

What does Jenec mean for banks and non-EU listed customers? 

An non-EU listing matters, but does not decide the outcome

The Court did not suggest that banks should ignore OFAC listings. A listing can be a relevant risk factor in a bank’s AML assessment. A match against a non-EU sanctions list may justify further questions, documentary checks, enhanced due diligence and closer monitoring. 

Its significance depends on the individual customer, the proposed relationship and the other relevant risk factors. A listing cannot, on its own, justify refusing an application for a basic payment account. 

De-risking has legal limits 

The Jenec-case is a reminder that financial-crime controls must remain risk-based. Directive 2015/849 does not establish an automatic rule under which a third-country listing makes every customer relationship unacceptable. The Payment Accounts Directive also prevents the use of AML rules as a pretext for excluding commercially less attractive consumers. 

For banks, this makes decision-making records important. A decision to refuse or end a relationship should be linked to an assessment of the concrete risks in that relationship and to the measures considered to manage them. 

This applies even more so in relation to basic payment accounts, which gives consumers access to essential payment services.  

What should banks, consumers and operators do after Jenec? 

Banks should not treat an OFAC match as a substitute for their own AML risk assessment. They should document the relevant individual risk factors, apply enhanced due diligence where appropriate, and consider whether proportionate controls can manage the identified risk. 

For consumers and operators, the judgment confirms an important point: a third-country sanctions listing does not automatically remove the EU right to a basic payment account.  

Contact us 

Are you experiencing issues with your bank account, receiving endless questionnaires from the bank or does the bank threaten to terminate a relationship, or refuse to onboard you as a client, please reach out to us via e-mail at info@agorax.com or via telephone at +31 (0)20 225 0098.