Luxembourg law of 30 March 2022 on inactive accounts

Luxembourg recently passed a new law on inactive accounts, safe-deposit boxes as well as on insurance contracts which was published in the official journal of the Grand Duchy of Luxembourg on 1 April 2022 (the "Inactive Accounts Law"). The overall objective of the Inactive Accounts Law is to improve the protection of holders of accounts and safe deposit boxes as well as of beneficiaries of insurance policies by making it easier for them to recover access to their assets in situations of prolonged inactivity.

Who is concerned?

The Inactive Accounts Law applies to any entity that (i) has individual accounts open on its books in the name of its clients (such as current accounts, savings accounts, securities accounts or fiduciary deposits as well as holding accounts that have been closed while the entity remains in possession of the assets deposited with it), (ii) holds safe-deposit boxes in the name of its clients or (iii) is an insurance provider making available to its clients contracts within the scope of annex II to the Luxembourg law of 7 December 2015 on the insurance sector (life insurance contracts).

It is important to note that services relating to electronic money accounts as defined under the Luxembourg law of 10 November 2009 on payment services, on the activity of electronic money institution and settlement finality in payment and security settlement systems are excluded from the scope of the Inactive Accounts Law.

What is the applicable procedure?

Under the general rules of the Luxembourg civil code, any entity that holds assets on behalf of other persons cannot automatically acquire property by prescription and therefore the Inactive Accounts Law introduces certain prevention obligations as well as procedures for consignment of assets with the Caisse de Consignation and establishes rules with respect to the restitution of such assets to the persons holding rights thereto. In order to facilitate restitution of assets, a centralised electronic register containing information on consignments effected will be implemented.

To prevent the proliferation of inactive accounts banks are required to maintain regular contact with their clients and to closely monitor relations with them in order to avoid that accounts become inactive. After a specific period of inactivity has elapsed – 10 years for accounts and safe-deposit boxes and 6 years for insurance contracts - from the date considered the starting point of inactivity a credit institution or insurance provider will be required to proceed to the consignment of the unclaimed assets registered in the account at the Caisse de Consignation. Notwithstanding any contrary contractual provisions and despite the fact that the contractual relationship between the account holder and the bank would usually still be in effect on the day of the consignment, the consignment will cause the closing of the inactive account in accordance with the procedures set out in the law.

An account may be considered inactive pursuant to the Inactive Accounts Law starting from the date on which the account holder has not carried out any transactions in respect of the account and provided there has been no communication of any kind on behalf of the account holder with the credit institution. In case of insurance contracts a contract will be considered inactive as from the date an insurance undertaking becomes aware that the claims under an insurance contract have become payable but no beneficiary has requested payment thereof.

Moreover, insurance contracts will be considered abandoned ("contrats d'assurance en déshérence"), when inactivity in respect of such contract has persisted for two years.

Why is it important?

The entities falling within the scope of the Inactive Accounts Law are required to maintain appropriate internal procedures in order to identify accounts susceptible of becoming inactive and to implement rules for the search for information of beneficiaries of such accounts whilst insurance undertakings are under an obligation to monitor the payability of insurance benefits.

In addition to the ongoing monitoring measures important additional reporting requirements have been introduced by the Inactive Accounts Law. The entities holding accounts in the name of their clients are required to inform the CSSF of (1) the total number of holders of inactive accounts and of the holders of safe-deposit boxes and of (2) the overall balance of the inactive accounts as of 31 December of each year. Such information is to be transmitted to the CSSF by electronic means at the latest on 28 February of the following year. Similarly, the insurance undertakings are under an obligation to deliver to the Commissariat aux Assurances information on (1) the number of insurance contracts considered abandoned, and (2) their global value.

For more information on the obligations introduced by the Inactive Accounts Law please contact Isabelle Lentz, Fabien Debroise and Anna Kozakiewicz.