Caught between the European Court of Justice and the US Treasury Department

I. Introduction: The 2026 Normative Update – Protection against personal liability risks

Until June 11, 2026, automatic rejection of customers listed on OFAC (US Office of Foreign Assets Control) sanctions lists was standard de-risking practice. The landmark ECJ ruling in case C-81/24 [Jenec] has now eliminated the legal basis for this blanket approach.

The case involved a Slovenian bank refusing to open a basic account for an EU-resident consumer solely because of an OFAC listing—despite no UN, EU, or national sanctions. The ECJ clarified that the Payment Accounts Directive (2014/92/EU) cannot be undermined by automatic third-country listings. Instead, institutions must conduct a specific, risk-based case-by-case assessment under the EU Anti-Money Laundering Directive (2015/849). OFAC entries are only one risk factor; rejection is lawful only if the bank demonstrates that money laundering or terrorist financing risks cannot be managed through proportionate safeguards.

For C-level executives, this intensifies tensions between international sanctions pressure and European law. The previous "better safe than sorry" approach now violates EU law directly. Deficiencies in compliance organization expose management to personal liability and civil claims. Executives must ensure case-by-case reviews are properly documented and legally sound.

II. Key deadlines and fixed points in time

The ECJ ruling is immediately binding on all EU courts and authorities. No statutory transition period applies.

1. Immediate obligation to act (Day 0)
Rejecting clients solely for OFAC entries without documented case-by-case review is now a knowing legal violation. C-level executives face immediate personal liability under Section 43 GmbHG and Section 93 AktG if they do not stop these processes.

2. Adaptation of workflows & IT systems (2 to 4 weeks)
"Hard stop" logic in screening tools must be eliminated and reprogrammed as controlled escalation (manual review). Temporary workarounds must be issued until IT implementation is complete.

3. Processing times for applications (Ongoing: 10 working days)
The Payment Accounts Directive stipulates strict 10-business-day deadlines for basic account decisions. Case-by-case assessment (obtaining OFAC reasoning, reviewing UN/EU convictions, weighing risk mitigation) must be completed within this timeframe. Delays without valid reason constitute regulatory violations.

4. Review of old cases (1 to 3 months)
Customers recently rejected or whose accounts were terminated due to OFAC may assert damages claims. C-level and legal counsel must define a strategy for handling existing claims and dispute proceedings.

III. Obligations of the groups of people

1. C-Level (Board, Management, Chief Risk/Legal Officer)

Issue immediate instruction to suspend blanket, automated rejections for basic accounts on OFAC hits
Realign Risk Appetite Strategy between EU consumer protection law and US secondary sanctions
Ensure sufficient personnel and financial resources in AML/compliance for complex individual case reviews
Establish audit-proof escalation process; final rejection decisions require board or committee approval to minimize personal civil liability

2. Compliance Department (Legal & Risk Management)

Revise onboarding and sanctions policies; replace rigid "OFAC listing = automatic rejection" with flexible scoring model
Redirect automatic IT blocks for OFAC hits to manual review workflows
Define specific security measures for affected customers (transaction limits, enhanced monitoring)
Prepare legal arguments for consumer lawsuits and arbitration complaints

3. AML/KYC Teams

Conduct mandatory case-by-case risk assessment for every OFAC match
Cross-check applicants against UN, EU, and national sanctions lists
Complete investigations and final decisions within statutory 10-business-day deadline
Document risk analysis completely and legally sound; if rejecting, provide precise explanation why risk cannot be controlled even with safeguards

IV. Analysis of the problem areas

The ruling creates a regulatory minefield where mitigating one risk triggers violations elsewhere.

1. Pain Points for C-Level

The Sanctions Dilemma (Catch-22): Opening accounts risks US secondary sanctions (exclusion from dollar payments, OFAC fines); rejecting customers violates EU law

Liability: Personal civil liability under Section 93 AktG / Section 43 GmbHG for breach of duty of care; worst case: full personal asset liability for losses

Resource and Cost Explosion: Individual case review transforms automated IT processes into complex manual legal reviews, requiring time and highly qualified personnel

2. Pain Points for Compliance Department

Balancing Consumer Protection vs. AML: Reconciling Payment Accounts Directive (right to economic participation) with Money Laundering Directive (firm action on suspicion)

Liability: Supervisory fines under Section 60 GwG; blanket rejections increasingly viewed as acceptance obligation violations

Legal Certainty on "Proportionality": Defining proportionate safeguards (e.g., blocking international transfers) without making accounts non-functional or enabling money laundering

3. Pain Points for AML/KYC

The 10-Day Deadline Trap: Analysts have only 10 business days for international research, customer interviews, and watertight documentation—virtually impossible in daily operations

Liability: Civil damages claims under Section 50 Payment Accounts Act / Section 823 German Civil Code

Reversal of Burden of Proof: Banks must prove they cannot control risk. Reports must withstand judicial review

Liability: Criminal liability under Section 261 German Criminal Code (money laundering negligence) if risk misjudgment leads to account misuse for terrorist financing

V. Solutions & Recommendations

1. Process-Oriented Approach: "Two-Pillar Model" in Onboarding

Pillar 1 – Automated Screening: OFAC matches trigger automatic redirection to verification loop (no hard stop)
Pillar 2 – Standardized Case Review: Specialized AML/compliance team reviews using defined matrix:

Is this mistaken identity (false positive)?
What specific act is the person accused of?
Are there EU/UN equivalents or criminal judgments?

Escalation Step: Final rejection decisions require four-eyes principle approval from C-level or risk committee, relieving personal liability through documentation

2. Technical Approach: "Encapsulated Account Management"
Risk is effectively managed while preserving customer rights:

Strict Transaction Limits: Maximum €2,000 per month for deposits/withdrawals
Geographic Geofencing: Domestic transfers only; blocks to third countries/USA
Ban on Cash/Checks: Only traceable transfers from employers or government agencies
Real-Time Monitoring: AI-powered enhanced monitoring; unusual transactions trigger temporary suspension

3. Organizational Approach: Deadline Management Through "Pre-Sifting"

Immediate Customer Obligation: Standardized questionnaire on day one proving non-sanctioned fund usage
Task Force "Sanctions Onboarding": Small expert team exclusively responsible for legal documentation, ensuring reports withstand lawsuits

4. Strategic Approach: Safe Harbor Through Regulatory Authorities

FIU Reporting: In borderline cases with OFAC conflicts, submit suspicious activity reports or seek supervisory authority dialogue
Legal Protection: Supervisory orders eliminate customer damages risk; bank acts on state orders

Practical Conclusion: Method 2 (Encapsulated Account Management) offers the optimal balance. Opening accounts with strict automated safeguards satisfies US authorities (no sanctions evasion), complies with EU law, minimizes money laundering risk, and protects C-level executives from personal liability.

VI. Summary Conclusion: A Turning Point in Sanctions Compliance

Previously: Banks used automatic de-risking: OFAC hits triggered immediate categorical blocking, ignoring European consumer law.

Now: ECJ ruling C-81/24 eliminates automatic processes. Third-country listings require complex, risk-based case-by-case assessment within strict deadlines. Blanket rejections without proof of uncontrollable money laundering risks are unlawful and establish personal C-level liability.

Future: Hybrid onboarding processes with technically "encapsulated basic accounts"—strict transaction limits and domestic geofencing—enable institutions to navigate the legally compliant balance between international sanctions pressure and EU law.