Luxembourg has recently adopted 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 April 1, 2022 (the “Dormant Accounts Act“). in case of prolonged inactivity.

Who is concerned ?

The Dormant Accounts Act applies to any entity that (i) has individual accounts opened on its books in the name of its customers (such as checking accounts, savings accounts, securities accounts or escrow accounts as well as deposit accounts that have been closed while the entity remains in possession of the assets deposited with it), (ii) holds safe deposit boxes on behalf of its customers or (iii) is an insurer providing the provision to its customers of contracts falling within the scope of appendix II of the Luxembourg law of 7 December 2015 relating to the insurance sector (life insurance contracts).

It is important to note that services relating to electronic money accounts as defined by the Luxembourg law of 10 November 2009 relating to payment services, the activity of electronic money institution and the finality of settlement in systems payment and settlement of securities are excluded from the scope of Inactive Account 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 assets by prescription and, therefore, the law on dormant accounts introduces certain prevention obligations as well as asset consignment procedures with the Deposit box and establishes rules relating to the return of such property to persons entitled thereto. In order to facilitate the return of assets, a centralized electronic register containing information on the shipments made will be set up.

To prevent the proliferation of inactive accounts, banks are required to maintain regular contact with their customers and closely monitor relationships with them to prevent accounts from becoming inactive. After a certain period of inactivity – 10 years for accounts and safes and 6 years for insurance contracts – from the date considered as the starting point of inactivity, a credit institution or an insurer will be required proceed with the consignment of unclaimed assets recorded in the account at the Deposit boxnm Notwithstanding any contractual provisions to the contrary and despite the fact that the contractual relationship between the account holder and the bank would normally still be in force on the day of the consignment, the consignment will lead to the closure of the inactive account according to the procedures provided for by law.

An account may be considered dormant under the Dormant Accounts Act from the date on which the account holder has not performed any transaction relating to the account and provided that there has been no communication of of any kind in the name of the account holder with the credit institution. In the case of insurance contracts, a contract will be considered inactive from the date on which an insurance company learns that the claims under an insurance contract have become due but that no beneficiary demanded payment.

In addition, the insurance contracts will be considered abandoned (“dormant insurance contracts“), when the inactivity with respect to this contract lasted two years.

Why is this important?

Entities falling within the scope of the Dormant Accounts Act are required to maintain appropriate internal procedures to identify accounts that may become dormant and to implement rules for seeking information on the beneficiaries of such accounts. accounts while insurance companies are required to monitor the payment of insurance benefits.

In addition to ongoing control measures, significant additional reporting requirements have been introduced by the Dormant Accounts Act. Entities holding accounts in the name of their clients are required to communicate to the CSSF (1) the total number of inactive account holders and safe deposit box holders and (2) the overall balance of inactive accounts as of 31 December of each year. This information must be sent to the CSSF electronically by 28 February of the following year at the latest. Similarly, insurance companies are required to deliver to the Insurance Commissioner information on (1) the number of insurance contracts considered abandoned, and (2) their aggregate value.