The decision to freeze a bank account happens with no warning or explanation. Customers suddenly find they have no access to cash, their direct debits and standing orders are suspended and that their day to day banking facilities such as internet banking, bill payments and cash withdrawals will be suspended.
The reason? Banks find it hard to distinguish between unusual account activity and criminal behaviour. They are caught between the need to prevent money laundering, and their duty to look after their loyal customers. Under lockdown, financial fraud has risen sharply, and banks are on high alert for suspicious transactions. Yet at the same time, Covid-19 has limited access to in-branch services, putting increased strain on telephone helplines as customers attempt to resolve problems and ‘unfreeze’ their accounts.
Why did the bank freeze your account?
What is a SAR?
How long does a SAR last?
Why did the bank freeze your account?
There are many reasons why a Bank or financial institution may make a SAR, some of which are listed below.
It could be that there has been an exceptionally large cash payment to the account.
It could be that the customer has been acting unusually.
It could be that the transaction does not make commercial sense.
The most common reason for a Bank to freeze a bank account is due to large cash payments or deposits made into a bank account which may trigger an alert over an account and require further investigation.
If your bank account has been frozen or you have been locked out of your account, and on contacting your bank they are refusing to give you any information about why this has happened or when the issue will be resolved, it is likely that there is a suspicion of either fraudulent activity or money-laundering on the account and a Suspicious Activity Report (SAR) has been made.
An institution has an obligation to make a SAR if they have concerns about suspicious activity on an account.
What is a SAR?
Suspicious Activity Reports (SARs) refers to the system in place whereby a financial institution reports unusual or suspicious activity related to money laundering or terrorist financing to the UK Financial Intelligence Unit (UKFIU), which is part of the National Crime Agency (NCA).
All such reports are logged on a SAR database and this information can then be made available to law enforcement agencies, HMRC, or government departments for further investigation if necessary.
SARs provide vital intelligence information to law enforcement, which is used predominantly in relation to financial crime and money laundering, or sometimes other criminal activity.
Why You Didn’t Know About The SAR?
If a financial institution makes a SAR on your account, the Bank or other financial organisation are prohibited from informing you. This is to prevent any “tipping off”. They will often advise you that your account has been suspended or “frozen” but they cannot give you further information.
Who can make a SAR?
An individual working in the regulated sector is required under Part 7 of the Proceeds of Crime Act 2002 (POCA) and the Terrorism Act 2000 to submit a SAR if they become aware of any information in the course of their business, or suspect or have reasonable grounds for knowing or suspecting, that a person is engaged in, or attempting, money laundering or terrorist financing.
How SARs are used
A single SAR is often used multiple times by different users for different purposes. For example, the information within a SAR may inform HM Revenue & Customs about taxation, local police about fraud or theft and a government department about an issue or weakness in a financial product.
How long does a SAR last?
Once a SAR has been reported on an account, the NCA has 7 days within which to respond to the financial institution indicating whether the suspension can be lifted, or whether they need more time to investigate the unusual activity. If no response is received by the Bank from the NCA within 7 days, then the Bank can assume that the inhibition can be lifted.
If the NCA respond requiring that the suspension remains and they need more time, before 2007, a Bank has a further 31 days to investigate. During this period, the Bank cannot provide any information to the customer so as to avoid tipping off. However, since the Criminal Finances Act which came into force in 2017, Banks can apply to the Crown Court for an extension of up to 6 months. If the Crown Court is satisfied that the investigation is ongoing, then the court is likely to grant the extension.
During the investigation it is unlikely that the Bank will tell you exactly what is going on. This is because of Section 333 of the Proceeds of Crime Act 2002, which creates an offence to “tip off” anybody that is being investigated. The offence of “tipping off” comes with a maximum penalty of five years imprisonment or a fine, or both.
Dispute Solicitors
How can Pure Business Law help?
If your bank account has been blocked or frozen by your Bank and you do not know what to do, please contact us and book a consultation with one of our expert dispute solicitors.
We are specialist dispute Solicitors based in Bedford and London and we operate nationally.
If you would like to discuss a business or consumer dispute that you have or any issues raised in this article, please do not hesitate to contact us and speak with one of our solicitors. Pure Business Law is regulated by the Solicitors Regulation Authority and is a licensed member of the Law Society of England & Wales.