Contract clause usually allows closing of bank account

President of the Cyprus Bar Association Christos Clerides on Thursday said that the closing of bank accounts was strictly governed by the individual contract that a person has with a bank. Most such contracts, have a clause allowing the bank to close an account.

Clerides clarified that the freezing of accounts was different from closing of accounts and applied only to companies and individuals who have been named in the sanctions list.

Last week sanctions were imposed by the US and UK against 23 Cypriots and 20 Cyprus-based companies for acting as “financial enablers” for sanctioned Russian oligarchs, Roman Abramovich and Alisher Usmanov.

While banks are not bound to freeze such accounts, Clerides explained, they may do so based on the conditions outlined in the contract between the stakeholders and the banks.

He added that if a bank freezes an account without a relevant clause in the contract with the customer, it could be committing a breach of contractual obligations and the offence of unlawful retention of assets, if it refuses to return the money to the customer.

As for the closing of accounts, Clerides explained that the customer-bank contract includes a provision that gives a bank the right to close an account for reasons that it considers to be relevant and serve its interests. Its only obligation was to give the customer notice – the Bank of Cyprus had given customers two months.

“As long as there are these clauses in the contracts, which in this particular case involve Russian customers and Cypriot banks, there is not much the customer could do,” Clerides said. “They will just have to move their money abroad and find other banks that provide services to them,” he added.

The Bar Association sent letters requesting meetings with the President of the Republic and the British High Commissioner to coordinate actions in the context of UK and US sanctions. It has already held a meeting with the US embassy in Cyprus.