My bank has frozen my accounts after I tried to send a larger payment than average. I’m not getting any response and it’s been two weeks. What’s happened and what can I do to stop my bank from freezing my accounts?
Sam Tate, partner at law firm RPC, says authorities around the world, including the UK’s National Crime Agency (NCA) and Financial Conduct Authority (FCA), are increasingly being asked to focus on money laundering and sanctions. As a result, banks over the past few years have become noticeably more nervous about committing an offence by permitting transactions that they should have stopped.
Most banks monitor transactions using automated screening tools. Many different factors that may trigger an alert, such as the size of the transaction, the total value of transactions over a given period, where transactions are going, and whether any transaction “makes sense” based on what the system knows about you and the recipient.
If the internal bank monitoring system blocks a transaction, it will be escalated to a team within the bank for manual review. As the systems regularly block perfectly legitimate transactions, manual reviews are often completed quickly and transactions promptly released.
There are several reasons why your transaction may have taken longer to clear. It could be that the bank’s team has a large backlog of reviews and has simply not got around to your transaction yet. Alternately, the team may have escalated your transaction further up the chain for additional scrutiny.
In some cases, the bank may decide to raise a suspicious activity report (Sar) to the NCA in relation to a transaction. Banks have a legal obligation to raise a Sar when they encounter potentially suspicious activity and may face severe penalties if they fail to do so. On the other hand, there is no penalty if a bank raises a Sar when it did not need to. As a consequence, banks raise a lot of Sars effectively “just in case”.
If the bank hears nothing back from the NCA for a month after raising a Sar then the transaction may proceed. However, during this period it is a criminal offence for the bank to “tip off” its customer that a Sar has been raised or that the transaction is under investigation. If your bank blocks your account and stops answering your calls, this may well be the reason why.
The best way to avoid your accounts being frozen is to plan ahead. If you have an upcoming transaction that is notably different from your normal account activity, such as it being larger than average or going to a foreign country, you should call the bank in advance and let them know it is coming. This may not stop the automated screening system from flagging the transaction, but once it gets in front of a real person it should hopefully help them understand the true context.
If your account has been blocked and the bank is not explaining why, it may simply be waiting for the one-month Sar moratorium period to expire (which they cannot tell you about due to the potential for “tipping off”). The bank will then release your transaction with a nondescript apology for the inconvenience. However, if you are really worried about your frozen account, then you should consider speaking to a suitable lawyer for further advice, including in relation to your rights to be treated fairly as a customer under FCA rules.
Anita Clifford, barrister and principal associate at Bright Line Law, says that when a bank freezes an account, all too often the account holder is left in the dark and the impact can be disastrous.
In the first instance, an algorithm has flagged that the transaction is out of line with your profile. From there, the bank has considered there to be a risk that the money might have an illegal origin. This has called into question all of the money the bank holds on your behalf and, in an effort to manage risk, it has chosen to suspend your accounts.
In some situations this approach will be sensible, but in many cases freezing accounts is unnecessarily heavy handed.
One of two things are likely to have happened. The bank is either conducting a review to see whether there is a concern or has concluded this process and made a Sar to the NCA who have started their own investigation. As soon as it suspects or considers that there are reasonable grounds to suspect crime, a bank must report it externally.
The NCA abides by strict timeframes when investigating Sars but the Crown Court in England and Wales can allow more time and, throughout the period, the bank will be unable to progress any transactions unless the NCA says otherwise. Separate to action taken by your bank, it can also apply to the court to freeze your accounts if it thinks they contain the proceeds of crime. You can challenge the order but will typically only be notified after it occurs. Further, once a Sar has been submitted, the bank cannot tip off the customer. All this is likely to explain why you have been stonewalled.
Given the consequences, you should make representations to your bank as soon as possible about the legitimacy of the transaction and the money in your accounts. Supporting documents may be needed. In practice, it can be difficult for an account holder to contact the right people at the bank and representations about the source of funds may be more effective from a legal representative specialised in freezing and money laundering issues.
Timing is critical. Ideally, representations will be made when the bank is conducting its own review so that concerns can be dispelled before the NCA becomes involved.
If necessary, legal action may be taken against the bank if there is delay in considering the representations or an unreasonable refusal to lift the freeze. In the future if an unusual transaction is planned you should always notify your bank in advance to mitigate the risk of it leaping to conclusions but do take comfort in knowing that if accounts are frozen, you are not out in the cold and swift action can be taken to lift the freeze.
The opinions in this column are intended for general information purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not responsible for any direct or indirect result arising from any reliance placed on replies, including any loss, and exclude liability to the full extent.
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