Decision narrows the legal grounds on which EU banks may decline basic payment accounts to US-sanctioned clients

The EU's top court has ruled that designation on the US Treasury's Office of Foreign Assets Control (OFAC) sanctions list cannot, by itself, justify a bank in the European Union refusing a customer a basic payment account.

The decision, reported by INSIGHT EU MONITORING, addresses a routine practice across the European banking sector: closing or declining accounts held by OFAC-listed persons to avoid exposure to US secondary sanctions.

What the court decided

The court held that an OFAC listing, standing alone, does not constitute a lawful ground under EU law to refuse a basic bank account. The judgment signals that US sanctions designation, by itself, is insufficient legal justification for account denial within the Union.

EU banks have long wrestled with the extraterritorial reach of US sanctions. Dollar correspondent relationships and other links to the US financial system have historically pushed lenders toward "de-risking" — terminating or refusing business with sanctioned clients, often absent an EU legal mandate.

The ruling narrows that discretion in the basic-account context. It places the burden on banks to ground any refusal in EU law, not in a foreign listing.

What does the ruling change for practitioners?

For compliance officers and in-house counsel, the takeaway is direct. A bare OFAC entry will not, by itself, supply the legal basis for refusing a basic payment account. Banks that wish to refuse must point to an independent, EU-law ground — typically a documented anti-money-laundering or counter-terrorist-financing risk, or a specific national-law exception.

Practical steps for affected institutions include:

• Review account-refusal templates to ensure decisions cite a recognized EU or national ground, not a foreign listing alone.
• Record the substantive risk identified, separate from any OFAC status, in file notes.
• Brief frontline staff so that an OFAC match triggers enhanced checks, not an automatic refusal for a basic account.
• Map refusal decisions to the limited grounds set out in the Payment Accounts Directive.

The decision also raises the documentation bar where a refusal is later challenged before a national supervisor or court. Compliance files that rely solely on US sanctions listings will now face scrutiny.

Why basic accounts carry special protection

The EU's Payment Accounts Directive (Directive 2014/92/EU) gives every consumer legally resident in the Union the right to open a basic payment account, subject to a narrow set of permissible refusal grounds set out in the text.

The directive reflects a policy choice that payment-account access is a precondition for participation in the modern economy — paying wages, receiving benefits, settling utility bills. Member states implemented the right to address documented cases of financial exclusion.

The court appears to have rejected the implicit claim that US sanctions automatically translate into a recognized EU refusal ground. The result is to insulate the basic-account guarantee from the gravitational pull of US secondary sanctions.

What comes next

European banks, particularly those with significant dollar-clearing exposure, will likely review their refusal policies in light of the ruling. National supervisors may need to update guidance to align with the court's reasoning, and in-house teams should expect questions from boards on residual US-risk exposure.

Follow-on disputes are likely. Future litigation will test whether specific risk assessments, rather than the OFAC listing itself, can carry the weight the ruling now requires.

The judgment does not strip banks of the ability to refuse OFAC-listed customers. It does raise the legal and evidentiary threshold for doing so within the basic-account framework — and, by extension, narrows the practical reach of unilateral US sanctions enforcement through EU bank relationships.