THE BOTTOM LINE
- AML obligations are not a blank check for termination. A bank’s mandatory duty to terminate under anti-money laundering laws (Wwft) only applies if a client actively prevents due diligence. A lack of perfect documentation for plausible explanations is not sufficient grounds.
- Contractual termination rights are limited by fairness. Even with a contractual right to terminate, a bank must weigh its interests against the customer’s. Terminating a relationship, especially one involving a mortgage, can be deemed legally unacceptable if the consequences for the client are severe and the bank’s risks are not substantial.
- Proportionality is key in client relationships. This ruling underscores that banks cannot unilaterally terminate relationships based on a subjective lack of “comfort.” The reasons for termination must be concrete, and the decision must be proportionate to the actual risks identified, particularly when a client’s housing is at stake.
THE DETAILS
This case involved a long-standing client of Rabobank who held both personal accounts and a mortgage for his family home. The bank initiated a client due diligence investigation, questioning a series of small cash deposits made over seven years and the client’s employment status at the time of his mortgage application. Despite the client providing explanations—attributing the cash to family gifts and the sale of personal items—the bank deemed the evidence insufficient. Citing an inability to complete its anti-money laundering (AML) checks, Rabobank terminated the entire relationship, demanding full repayment of the mortgage and threatening the client’s home.
The Amsterdam District Court decisively rejected the bank’s primary justification: that it was legally obligated to terminate the relationship under the Dutch Anti-Money Laundering Act (Wwft). The court clarified that this mandatory termination rule is reserved for situations where a client obstructs the investigation or makes it impossible for the bank to assess risk. In this instance, the court found the client had been cooperative, answered all questions, and provided credible, albeit not perfectly documented, explanations for the funds. The court emphasized that a bank’s subjective feeling of “discomfort” is not the same as being legally prevented from completing its due diligence.
With the mandatory termination argument dismissed, the court evaluated the bank’s use of its contractual right to end the relationship. It applied the Dutch legal principle of “reasonableness and billijkheid” (reasonableness and fairness), conducting a balance of interests. The court concluded that the bank’s interest in terminating—based on a low and unsubstantiated money laundering risk—was minimal. In stark contrast, the client’s interest was profound, as the termination would lead to the forced sale of his family home and a severe housing crisis for him, his wife, and their three children. Finding the bank’s action disproportionate and the alleged “mortgage fraud” unsubstantiated, the court ruled the termination was legally unacceptable and ordered the bank to continue the relationship.
SOURCE
Source: Rechtbank Amsterdam
