The European Union’s highest court ruled Thursday that a bank may not refuse to open a basic payment account for a consumer solely because the person appears on a U.S. sanctions list, holding that such a refusal is permissible only after an individual assessment of money-laundering and terrorist-financing risk.

The Court of Justice of the European Union said inclusion on a list maintained by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), or any similar list drawn up by a third country, “does not automatically prohibit” a bank from establishing a business relationship with the listed customer. A third-country designation may instead serve as one relevant factor that the bank must weigh in its own risk assessment, the court said.

The judgment, issued by the court’s Fourth Chamber in Case C-81/24, arose from a dispute in Slovenia, where a bank in 2022 refused to open a payment account with basic features for a consumer because of his OFAC listing. The bank, identified in the judgment as OTP banka d.d., formerly Nova Kreditna Banka Maribor, said it acted to comply with Slovenian anti-money-laundering (AML) laws. 

The consumer, identified by the fictitious initials LH, has never been convicted of the offense that led to his inclusion on the OFAC list, and he is not subject to any sanctions imposed by the United Nations, the EU, or Slovenia, according to the judgment. Slovenia’s special state prosecutor closed a case against him concerning the same conduct in 2015. He sued to compel the bank to open the account, and the local court in Maribor referred the matter to the EU court.

The Luxembourg-based court said any consumer legally residing in the EU has the right to open and use a basic payment account under the bloc’s 2014 Payment Accounts Directive, though that right is conditioned on compliance with the bloc’s AML rules. Under the EU’s 2015 AML directive, the court said, a third-country listing triggers enhanced due diligence obligations following an evaluation of all relevant risk factors, but not an automatic refusal of service. 

The court noted that the limited functionality of a basic payment account itself reduces the laundering and terrorist-financing risk attached to opening one. Even so, it said a bank could conclude after a specific assessment that it cannot effectively manage the risk of a business relationship with a listed person through measures proportionate to the institution’s nature and size. Only in that case could a refusal be justified under EU law, the court said. 

The ruling follows a number of controversial OFAC designations made by the Trump administration, including the decision to add Francesca Paola Albanese, the U.N. special rapporteur for Palestinian human rights, to the agency’s Specially Designated Nationals list after she called for the International Criminal Court to investigate and prosecute Israeli officials over their actions in Gaza and threatened to name more than a dozen U.S. companies and two charities in a U.N. report for their alleged role in “contributed to gross violations of human rights.”

The companies included Alphabet, Amazon, Caterpillar, Chevron, Hewlett Packard, IBM, Lockheed Martin, Microsoft, and Palantir.