Ruling [DE] ¦ No liability on the part of the bank for legal fees incurred as a result of reporting suspected money laundering

Bank Not Liable for Client’s Pre‑Litigation Legal Fees After AML Suspicious Activity Report: OLG Frankfurt Clarifies Scope of Protection

Background and case overview

The Higher Regional Court (OLG) Frankfurt has held that a bank does not owe its customer reimbursement of pre‑litigation legal fees incurred in response to a payment freeze after the bank filed a suspicious activity report (SAR) with the Financial Intelligence Unit (FIU) and refused payout. The decision, which is not subject to further appeal, modifies the Wiesbaden Regional Court’s judgment by denying the claim for €9,875.22 in pre‑action legal costs (plus interest), while leaving intact the first‑instance cost allocation. The court set the appellate fee value at €9,875.22 and declined to admit revision.

Facts in brief

The claimant had maintained a current account with the defendant bank since 2008, noting at onboarding that six‑figure movements could occur due to an inheritance. Until July 2023, activity was routine. On July 12, 2023, €327,923.50 was credited from the claimant’s account at another bank (Bank1). On July 17, 2023, a further €683,569.29 arrived from an account of a third party (A). On July 21, 2023, the defendant reported the customer relationship to the FIU due to unusually high incoming payments and blocked access. That same day, the claimant appeared with her current counsel, who introduced himself as counsel to the third‑party remitter, and indicated that the funds should have been sent from a different account of the claimant to the third party. The bank refused access.

On July 29, 2023, the claimant’s lawyer demanded release by August 8, 2023. The bank filed a supplemental report on August 2, 2023, and on August 29, 2023 returned funds to Bank1. During first‑instance proceedings, after the claimant switched banks, the defendant paid €385,000.48 to the claimant’s new account in early October 2023; the parties declared the dispute partly settled. The claimant continued to seek €686,444.90 plus interest from August 8, 2023 and €9,875.22 in pre‑litigation legal fees plus interest from July 24, 2023. The Wiesbaden court largely granted the principal claim and also awarded the pre‑litigation fees. The bank appealed only the fee award.

Appellate holding

The OLG Frankfurt allowed the appeal and rejected the pre‑litigation fee claim.

Two potential grounds for reimbursement were analyzed and rejected:

• No recovery as delay damages under §§ 280(2), 286 BGB. Delay begins only after a due claim is not performed by the deadline set in a proper reminder. Here, the reminder set August 8, 2023, making delay start on August 9, 2023. The claimant was already represented by counsel at least by July 29, 2023 (the date of the demand letter), so the fees were incurred before delay commenced.
• No recovery for culpable breach of duty under § 280(1) BGB. The bank’s refusal to execute or release the funds up to and including July 29, 2023 was not culpable. Under § 43(1) No. 1 GwG (German AML Act), the bank was obligated to report when facts indicate a money‑laundering predicate. Under § 46(1) sentence 1 GwG, once a report is made, the transaction may be executed only if the FIU or public prosecutor consents, or after the third business day following the report has elapsed without prohibition. The report was made on Friday, July 21, 2023; the earliest execution date was Thursday, July 27, 2023 (Saturday not counted). The statute states “at the earliest” (frühestens), acknowledging the bank’s limited window for assessment of residual risk even after the waiting period. Given the third‑party account involvement, the unusually high sums (nearly €700,000), and potential liability for paying a non‑entitled recipient, the court considered a few additional days of reaction and deliberation reasonable. Hence no payout duty arose before July 30, 2023. By then, the claimant’s counsel had already been retained (as shown by the July 29 letter), breaking the causation chain for fee recovery.

Bastian Schwind-Wagner_Follow "OLG Frankfurt held that a bank lawfully filing an AML suspicious activity report and temporarily freezing funds is not liable for the customer’s pre‑litigation legal fees. Fees incurred before delay and without a culpable breach are not recoverable."

Statutory protections for reporters

Crucially, the court pointed to § 48(1) GwG, which shields reporting institutions from civil liability unless a report is intentionally or grossly negligently false. That protection applies irrespective of whether the underlying suspicion ultimately proves justified. There was no allegation or indication that the report here was knowingly or grossly negligently false.

Causation and timing are decisive

The decision turns on precise timing and causation. To recover pre‑litigation legal fees as damages, the claimant had to show either that the fees were incurred after the bank’s delay began or that they were caused by a culpable breach preceding the retainer. Neither was present. Delay started on August 9, 2023, while the retainer predated that. And up to July 29, 2023 the bank’s stance was protected and non‑culpable under the AML framework. Later conduct by the bank—such as ultimately returning funds to the other bank on August 29, 2023 — could not retroactively justify reimbursement of legal fees incurred earlier.

Practical implications for banks

• AML reporting and temporary freezes: When a SAR is filed, the statutory waiting period under § 46 GwG is a minimum threshold. The court confirms banks may take a brief, reasonable buffer beyond “day three” to assess residual risk in complex or high‑value cases without being deemed negligent.
• Liability shield: § 48 GwG remains a robust safe harbor against civil claims arising from AML reporting, absent intentionally or grossly negligent falsehood in the report.
• Documentation and communication: Meticulous records of report timing, internal assessments, and communication with customers are vital to defend fee claims and to demonstrate reasonableness during the post‑waiting‑period evaluation window.

Practical implications for customers

• Counsel costs are not automatically recoverable: Retaining counsel immediately after a freeze does not guarantee reimbursement. To claim pre‑litigation fees, customers must show either that the bank was already in delay at the time of retainer or that a culpable breach had already occurred and caused the need to instruct counsel.
• Manage timing and strategy: Demands should track statutory timelines. If a bank remains inert well after the earliest permissible date and without justification, later‑incurred legal costs might be more defensible. But the initial freeze period following an AML report will rarely support fee reimbursement.

Conclusion

The OLG Frankfurt’s ruling clarifies that AML compliance actions — reporting and the ensuing temporary freeze — do not expose banks to reimbursement of a customer’s pre‑litigation legal fees where those fees were incurred before delay and absent a culpable breach. The judgment underscores the statutory shield for good‑faith AML reporting and validates a narrow, reasonable window for banks to assess risk even after the formal waiting period expires.

Dive deeper

• OLG Frankfurt, 10th Civil Division ¦ 10 U 18/24 No liability on the part of the bank for legal fees incurred as a result of reporting suspected money laundering ¦ Link