As the digital and crypto economy continues to expand, banks and other financial institutions are required to balance the banking service they have agreed to offer to their customers and their compliance responsibilities. This is resulting in innocent and ordinary customers having their bank accounts frozen and individuals and businesses being unable to access the funds in their accounts.
One of the most common reasons bank accounts are frozen is generally due to perceived fraud and/or money laundering, which can occur when large or unexpected sums are transferred in or out, particularly to and from accounts with links to certain countries that are deemed higher risk. A list of these countries can be found on the link below.
Banks may terminate their relationship with customers where there are concerns about the risk arising on the account including but not limited to fraud risk, credit risk or reputational risk.
If a bank takes the decision to close an account or discontinue their banking relationship with you, provided adequate notice is given, it is rather difficult to challenge the decision. Quite often, the terms and conditions which bind customers and banks allow for bank’s to terminate their relationship in certain circumstances. The Financial Ombudsman has made it clear that customers should have reasonable notice of at least 30 days if they intend to close a personal bank account. This should allow customers sufficient time to make alternative banking arrangements. Banks and other electronic money institutions should always consider their obligations pursuant to the FCA Banking Conduct of Business Source (“BCOBS”). Under the BCOBS, a banking institution must always pay due regard to the interest of its customers, treat them fairly and communicate information to them in a clear manner. If you do not believe a bank or financial institution has compiled with the BCOBS, please do not hesitate to contact a member of our team.
Banks have a responsibility to monitor their customers’ bank accounts and identify unusual transactions. Banks use algorithms and manual checks to identify suspicious activity that could be connected with money laundering or terrorist financing.
Each bank will have a nominated officer who is under a duty to report suspicious information to the National Crime Agency. This is widely known as a Suspicious Activity Report (SAR).
When the nominated officer files the SAR, the bank will freeze the customer’s bank account. This causes a huge number of issues for individuals and businesses as they are unable to carry out their day to day transactions of access funds. The period of time the account is frozen for is dependent upon the response of the NCA.
Once the SAR has been filed, the NCA is required to provide a response within 7 working days concluding whether or not the transaction should be permitted. If the NCA does not respond, consent is implied and the account will be unfrozen. Further, the bank account will be unfrozen if the SRA expressly provides consent within 7 working days.
However, if the NCA responds to the bank refusing consent to proceed with the transaction, the bank must keep the bank account frozen for a further 31 calendar days whilst the NCA carries out an investigation. In our experience, very rarely does the NCA require more time than this
It is a criminal offence to “tip” somebody off about a SAR. Your bank will say very little to you after all, any discussions the bank may have if you could hinder or prejudice the investigation.
If your bank account has been frozen, the starting point is to assume that there are concerns relating to fraud or money laundering. It is, therefore, advisable that you maintain an open and communicative relationship with the bank and provide as much information about recent transactions as possible to assist in their investigations to minimise suspicion. Depending on the circumstances, if the bank continue to fail in engaging with you, there may be further steps that can be taken such as:
Our solicitors regularly act for individuals and businesses who have had bank accounts frozen or terminated. We can assist you with the following:
To use the Wyn Legal 24 hour service is writing to your bank following the freezing of the bank account, please use our dedicated Frozen Bank Accounts Investigation platform.
https://www.legislation.gov.uk/ukpga/2002/29/contents
https://www.lawsociety.org.uk/en/topics/anti-money-laundering/high-risk-third-countries-for-aml-purposes
