Reasons why a bank would freeze your account
Suspicious or Illegal Activity
Following the events of September 11, banking regulations have become much more stringent to restrain terrorists and criminals using financial institutions as a tool to run their business. Banks have the right, in their sole discretion, to suspend your account if they suspect that its holder is engaged in unlawful or suspicious activity such as money laundering. They are alert when large sums are deposited in the account and then relocated to look as if they came from a legitimate source. Such transaction behaviour is being critically examined.
Here a list of activities that may look suspicious and could entail freezing your account:
- Substantial deposits and withdrawals from an unknown source. For example, when you receive a large sum of money from an inheritance and you didn’t inform your bank account manager.
- Inaccurate or misleading information in your customer record: Make sure you give valid personal details when you open your account. If you change your address, modify your surname or your phone number, you should update the bank as soon as possible. Not answering the phone or a disconnected phone, in general, is also a red flag.
- Large transfers of money, especially cross-border ones. Banks constantly monitor large money transfers specially rounded numbers like 5,000, 10,000, or 20,000. If you make such transfers, or with similar amounts 4,999, 9,999 or 19,999, this is definitely a red flag.
- Regular cash transactions: regular cash deposits in your account can also be seen as a red flag. We know, cash is king, but criminals like it too.
- Duplicated accounts in the same name, or recurring transfers. When you move funds between your accounts frequently, this is also considered suspicious.
- Deposits from suspicious sources: If you receive funds from a person or a business flagged for suspicious activity, it can initiate an investigation upon the source of funding.
- An immediate rise in transactional activity: If your normal bank activity of deposits and withdrawals increases, the bank may also take action.
- Purchasing high-risk items such as firearms, precious metals or Van Gogh paintings can be suspicious for money laundering.
Your account can also be frozen even if there are no suspicious activities. Here are some examples:
Outstanding debts to creditors
If you have a bank account and at the same time you owe funds to the same bank, they can automatically deduct the debt. This will pay off the outstanding loans without filing a lawsuit or court decision against you.
If your company is in liquidation, and if the business is viable, the bank account may be frozen. This usually happens after receiving notice of the petition to avoid possible liability for debts accumulated during the bankruptcy.
Insufficient funds in your account
Accounts can also be suspended due to insufficient funds to make payments. Banks can also put a hold or block your card. In such cases, you need to either transfer funds, if available, into that account or arrange to repay the money.
Victim of a fraud
When a security breach occurs, the freeze on your account stands for your protection.
If your bank detects purchases that don’t align with your normal pattern, it may assume that your account was hacked or your wallet was stolen. They could put a temporary freeze on your account to keep your money safe. You might find out about this freeze while you’re standing at the checkout in a cashier or trying to make a purchase online. A security freeze can usually be unblocked with a phone call to verify you are the one making the purchase.
What are your rights when your bank account is frozen?
Finally, let’s talk about YOUR rights. If you are not a money launderer, a terrorist financier or fraudster, you have the right to receive adequate information on what’s the reasoning behind your account freeze.
Once you’ve received a notification that your account has been frozen – either from a creditor company or from the bank itself. Either way, make sure to call your bank immediately or better go to the nearest bank branch to consult what the next steps are.
At this point, when you start the conversation with your bank, keep in mind two magic words: Cooperation and Transparency. Always be transparent and cooperate. You know your account activity is legitimate, so be transparent. Also cooperate by providing proof of the bank activity.
Remember that just as you need to be open and cooperative, on the other hand, you have the right to receive information on what is happening with your bank account.
If you can prove that there is no reason to freeze, the bank will certainly lift up the restrictions by giving you full access to the account again.
What are the actions when accounts are frozen for security reasons?
As mentioned above, follow the principles of openness and cooperation. Typically, a conversation and re-verification of your identity by the bank’s fraud department would lift the restrictions on your account.
If your identity was stolen, or account account hacked, the bank will guide you on how to report it. Please remember to always check your last bank statements in detail and trace transactions.
NOTE: There is a regulatory framework that imposes restrictions on how much money you can lose when your ID card is stolen. The latter depends on how the thieves gained access and whether you reported on time to the bank. It was estimated that the average cost of identity theft is 1,141.15 EUR for victims who had experienced a momentary loss.
How to proceed when you have unpaid debts?
Any bank account seizure is preceded by an effective court decision. A seizure is imposed up to the amount of the claim. In case your debt is greater than the balance on your account, the creditor can freeze it all. The different types of debts could be any kind of loans, judgments or liens from civil lawsuits, divorce settlements, child support, back taxes, among others.
The basic rule when your bank account is frozen due to debt or judgment is to find out who the creditor is. The bank must give you a notice with information about the debt and who is the plaintiff in the civil action against you. In this case, it is advisable to seek legal assistance, thus drawing up an agreement with the creditor to reschedule the debt through instalments.
We have written an extensive article on what to do if your credit card gets stolen and what are some best practices to keep your credit card safe in general. But in case your Payhawk card gets stolen, or you loose hold of it, you can freeze the card immediately from the app. You should contact your administrator and don’t hesitate to contact our customer support.