The Supreme Court ruled that a bank may not open an account if there are “reasonable suspicions” regarding the client
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To refuse to serve a corporate client, it is sufficient for the bank to have “reasonable suspicions” of a possible violation of the anti-money laundering law; it is not necessary to prove the existence of the purpose of legalizing criminal proceeds. This conclusion was reached by the Supreme Court of the Russian Federation (SC), having studied the case of Promsvyazbank and LLC “Union of Author’s Research +”. To refute suspicions, you can request almost any additional documents from the enterprise – there is no exhaustive list of them. Lawyers say that now it will be easier for banks to refuse clients to open accounts and deposits, and it will be very difficult for businesses to challenge such refusals in court.
The Supreme Court considered the issue of the bank’s right to refuse to open an account for a corporate client with reference to law “On counteracting the legalization (laundering) of proceeds from crime and the financing of terrorism” (anti-money laundering law 115-FZ) (.pdf).
The history of the dispute began in January 2022, when Unity of Copyright Research + (EAI +) LLC decided to open a current account with Promsvyazbank (PSB). The Society has submitted an application and submitted a basic set of documents. The bank requested additional information about the financial and economic activities of the company. Part of the company provided, but refused to attach extended statements for the last six months from all banks where its accounts are opened.
PSB refused to service EAI+, citing “other circumstances that give reason to believe that the purpose of concluding an agreement is to carry out operations for the purpose of legalization (laundering) of income or financing of terrorism.” The company disputed this in court.
The Moscow Arbitration Court in April 2022 declared the bank’s refusal illegal (.pdf), indicating that “the conclusion of a bank account agreement on standard terms is mandatory for the bank”, except for the cases provided for by law.
The court decided that 115-FZ allows the bank to refuse to conclude an agreement “only if there is evidence of reasonable suspicion” that the account is being opened for the purpose of legalizing criminal proceeds, but the bank did not prove and “do not documentary substantiate” that the future banking operations of the company “ may serve illegal purposes.
From unconfirmed suspicions, according to the court, it is impossible to conclude that “the company plans to violate the requirements” of 115-FZ, and refuse to serve it. Appeal added (.pdf) that the “arbitrary classification” by the bank of the future financial transactions of a potential client as suspicious without evidence is an “abuse of the right”. Cassation supported this decision (.pdf).
PSB appealed to the Supreme Court, believing that to refuse to conclude an agreement “a reasonable suspicion” of money laundering was sufficient, and the provision of the Central Bank of the Russian Federation of March 2, 2022 on banking internal control rules allows it to “independently determine the factors that affect the decision to open an account . Such factors were established, and EAI+’s refusal to provide account statements “did not allow us to refute the suspicions that had arisen,” the complaint says. The case was referred to the Economic Board of the Armed Forces, which supported the arguments of the bank and sent the dispute for a new consideration.
According to the Supreme Court, in order to refuse service, a bank is not required to prove and document that “the purpose of opening an account is to legalize illegal income.”
It is enough for the bank to have “reasonable suspicions that this has arisen as a result of an audit carried out according to the criteria established for these purposes,” the board explained. The validity of the suspicions must be checked by the courts.
The bank considered “the nature of the potential relationship with the plaintiff as having a high degree of risk”, in support of which it referred not only to EAI+’s refusal to submit documents on its business activities, but also to the company’s unfavorable history of relations with other banks. So, according to the PSB, there is information from the Central Bank that some banks terminated bank account agreements with EAI + and suspected the company of laundering criminal proceeds. But the lower courts did not check and evaluate these arguments.
VS also did not consider the request for extended statements of accounts of the company to be excessive, considering that the bank has the right to require such documents to clarify the sources of receipt of money, the nature of business relations, the number and amount of transactions, including cash withdrawals. The bank’s internal control rules allow requesting additional documentation to analyze the risks of violating 115-FZ, the Supreme Court decree says. Kommersant’s requests to banks from the top 20 in terms of assets on June 22 remained unanswered.
Denis Danilov, senior lawyer at the Arbitrazh.ru law firm, admits that the practice is ambiguous and earlier the courts “often satisfied the requirements of clients.” Now, lawyers say, the Supreme Court is “fixing a lower standard of proof for banks.” It turns out that the bank “suffices to explain why it has suspicions,” says Aleksey Kostovarov, partner at Liniya Prava. In general, this position legalizes the right of the bank “if there are reasonable suspicions, to ask for almost any documents, referring to its internal rules.”
Lawyer Olga Elagina clarifies that the bank is requesting documents “not at its own discretion,” but to comply with the requirements of the regulator and the law, which oblige it to “check and record transactions that seem suspicious.” The requirement for additional documents, including on the movement of funds on accounts, is “quite common,” she notes. However, “in an effort to protect themselves from risks as much as possible,” banks “often commit the so-called overcompliance, trying to exceed all conceivable requirements for verifying client data,” objected Sahak Sahakyan, a lawyer at the Smolenka 33 Bar Association.
According to Aleksey Kostovarov, information from the Central Bank often serves as one of the factors for the validity of suspicions.
But in general, Olga Elagina notes, “there are no objective criteria for suspicion”, its assessment is based on the “subjective vision of a bank employee”, which “generates confusion and lack of a unified approach”.
Therefore, she adds, the SC pointed out “the need for more scrutiny of the bank’s arguments.”
According to Denis Danilov, in a normal situation, the requirement to provide extended statements for all accounts for six months looks excessive. But specifically to EAI +, the request may be justified, Mr. Sahakyan clarifies: the company has repeatedly sued over the refusal to open an account, including with Gazprombank, MKB, Avangard and Rosselkhozbank.
The range of documents requested by the bank “depends on the specific situation based on the information provided by the client” to decide “whether they are sufficient to refute suspicions,” says Alexey Kostovarov. At the same time, there is no exhaustive list of documents, as well as a list of grounds on which a bank may refuse service under 115-FZ, Sahak Sahakyan explains. Mr. Kostovarov believes that “taking into account the approach of the Supreme Court, it is highly likely that the courts will take the side of the bank in a new consideration of the case,” and it will “be more difficult for businesses” to challenge the denial of service.
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