Bank account frozen

BanksFrom time to time I am contacted by people who have found their bank account frozen by the bank without warning or explanation.  Perhaps the account holder discovers this when he attempts to use a debit card, draw cash from an ATM, use online banking, or visit his bank to pay money in or take it out.

What should the customer do and what can he expect to happen?

 

Contact the bank

The first thing to do is to contact the bank and ask for an explanation.  The bank might be rather evasive in response – perhaps referring to ‘technical difficulties’ – or the bank may refer the customer to a specialist department (such as the fraud department) – or the bank may hand over a pre-printed leaflet about money laundering.  But the bank are unlikely to provide a full explanation about what is happening or when the account will be unfrozen.

If the bank won’t tell the account holder what is going on the likelihood is that someone at the bank has flagged up the account for possible ‘money laundering’.  In other words someone at the bank (or the bank’s computer system) has noted what appears to be unusual activity on the account which might be connected to proceeds of some sort of crime.

If that is the case then it may be helpful if the customer very swiftly supplies to the bank further information, explanations and, if possible, documentary evidence in support of an innocent explanation for any unusual recent transactions.

Also, if there is a particularly urgent need to have the account unfrozen – for example where the account is a business account and it is necessary to pay employees’ wages or a supplier almost immediately – tell the bank about the urgency.

The bank will not disclose which transactions have triggered their action or what suspicions they have, so the customer will be left guessing how he can best put the bank’s mind at rest.

But that further information needs to be supplied as quickly as possible, preferably the same day – delaying for a couple of days will probably be too long.

 

Inside the bank

What is happening inside the bank is probably that the customer’s account (or accounts) will have been referred to the bank’s anti-money laundering or anti-fraud department for consideration of whether a Suspicious Activity Report (SAR) should be made to the National Crime Agency (NCA) by the bank’s Money Laundering Reporting Officer (MLRO).

If the MLRO decides that there is a valid basis for a suspicion of money laundering (which is very widely defined) then an SAR will promptly be submitted to the NCA.  The SAR will ask the NCA to give consent for the bank to unfreeze the account.  Once that SAR is submitted matters will be largely out of the bank’s control – which means that nothing is likely to be achieved after that time by the customer supplying further information, or making a complaint, to the bank.

But the bank will not normally tell the customer whether it has made an SAR or when the SAR was submitted.

Once the bank has submitted an SAR to the NCA the account will remain frozen until either the NCA have replied to the bank authorising the bank to unfreeze the account, or the ‘notice period’ has elapsed without the bank receiving any response at all from the NCA.

The ‘notice period’ is seven working days starting from the day after the bank submits the SAR to the NCA.  So, for example, if the bank submitted an SAR on Thursday 9 June 2016 the ‘notice period’ would end on Monday 20 June.

In practice however the NCA aim to respond to these consent requests before the end of the ‘notice period’.  If the NCA are told by the bank that there is a particular urgency they will attempt to respond particularly swiftly (which is one of the reasons the customer should tell the bank if there is a particularly urgent need to have the account unfrozen).

If the NCA require further time to consider the matter they will respond to the bank by refusing consent.  Once that happens the account will remain frozen until the ‘moratorium period’ expires.  The ‘moratorium period’ is 31 days starting with the day on which the bank receives refusal of consent from the NCA.

So, for example, if the bank receives refusal of consent on Thursday 16 June 2016 the last day of the ‘moratorium period’ will be Saturday 16 July.  The account should then be unfrozen on the next working day.

[UPDATE: The Criminal Finances Act 2017 includes legislation which will allow a court to extend the ‘moratorium period’ by up to a further six months (an additional 186 days).  This is not yet in force.]

During the ‘moratorium period’ the NCA will continue to consider the position and may at any time give the bank consent to unfreeze the account.

If the NCA do not give consent then the bank should unfreeze the account once the ‘moratorium period’ has expired unless in the meantime the authorities have obtained a ‘restraint order’ from a Crown Court judge.

If a ‘restraint order’ has been obtained from a Crown Court judge then copies of that order are served promptly on the bank and on the customer (and perhaps also on others, such as the Land Registry).  A ‘restraint order’ will normally freeze all the assets of the customer indefinitely.  There is more information about ‘restraint orders’ HERE.

A customer who is served with a copy of a Crown Court ‘restraint order’ should seek advice from a solicitor experienced in such matters immediately.

 

What can the customer do?

The bank ‘s customer will not know whether the bank has submitted an SAR to the NCA, when the SAR was submitted, or what response has been received from the NCA, if any.

Because of this the customer will not know when the ‘notice period’ or the ‘moratorium period’ are due to expire.

Aside from very swiftly providing additional information and documents and telling the bank about any particularly urgent need to have the account unfrozen, as already mentioned, the customer will be able to do little more than check with the bank every day whether his account has been unfrozen.

 

What about the Banking Ombudsman?

In my experience the Banking Ombudsman does not intervene where the bank has a suspicion of money laundering and is acting in accordance with its Terms and Conditions.

 

How often are bank accounts frozen?

Figures published by the NCA indicate that they receive approximately 8,000 consent requests each year from banks, building societies and similar institutions.

The NCA on average respond to these consent requests in five working days – and give consent in about 90% of cases.  In about a further 5% of cases they give consent during the moratorium period.

However even where consent is granted the bank’s customer may become the subject of an investigation by the authorities (such as the police, HM Revenue and Customs or the Single Fraud Investigation Service).

 

What is the legal basis for this?

Most of the relevant law is to be found in Part 7, Proceeds of Crime Act 2002 – particularly in s335 and s340.

A case concerning the freezing of a bank account when a suspicious activity report had been filed with the NCA by the bank was considered by the Court of Appeal in London in the case of The National Crime Agency v N & Royal Bank of Scotland plc [2017] EWCA Civ 253 (07 April 2017).  The court concluded that it would only very rarely be appropriate for the court to interfere with the temporary freezing of a bank account where a report had been made to the NCA.

 

How long will the account be frozen?

In the majority of cases the account should be unfrozen within about two weeks.  In a minority of cases the account will be frozen for up to about six weeks, perhaps slightly longer.

[UPDATE: The Criminal Finances Act 2017 includes legislation which will allow a court to extend the ‘moratorium period’ by up to a further six months (an additional 186 days) which will mean that an account can be frozen for up to about 32 weeks without a ‘restraint order’. This is not yet in force.]

Where a ‘restraint order’ is obtained the account will remain frozen after that.

 

What happens after the account is unfrozen?

After the account is unfrozen the bank’s relationship with the customer may return to normal or the bank may write to the customer asking him to close his account (or accounts) within 60 days and move to another bank.

The bank may not give any reason for requiring the customer to close his account.

 

Can the customer claim damages against the bank?

I am not aware of any cases in which bank customers have successfully claimed damages against their bank in relation to an account which has been frozen because of a reasonable suspicion of money laundering (even where, on investigation, no ‘money laundering’ was discovered).

 

Contacting us

Our contact details are here.

David

(Note: This article applies to matters arising under the provisions of the Proceeds of Crime Act 2002 in England and Wales.  Appropriate professional advice should be sought in each individual case.)

Money Laundering Regulations 2017

Comments upon some changes made by the Money Laundering Regulations 2017

Alleged possession of criminal property

How our forensic accountant’s expert witness report helped Tony’s solicitors obtain his acquittal on a charge of money laundering involving possession of criminal property.

Criminal Finances Act 2017

The new Criminal Finances Act 2017 strengthens civil recovery of the proceeds of crime; creates unexplained wealth orders; creates new offences of failing to prevent the facilitation of tax evasion; and extends existing investigation powers in relation to money laundering and terrorist finances

Challenging a s22 PoCA 2002 confiscation reconsideration

This blog post considers the provisions of s22 regarding reconsideration of the defendant’s available amount and ways in which prosecution applications under s22 may be challenged by the defendant.

Criminal Finances Bill proposed

A new Criminal Finances Bill was proposed in the Queen’s Speech at the opening of the new parliamentary year on 18 May 2016. The new Bill is intended to assist in tackling corruption, money laundering and tax evasion.

Piercing the corporate veil in confiscation

This article attempts to trace recent developments in piercing the corporate veil in caselaw in respect of confiscation and to suggest some practical implications of the present-day legal position in England and Wales.

Balance of probabilities in confiscation

In confiscation law ‘the balance of probabilities’ plays a key role. The inherent probability or improbability of an event is itself a matter to be taken into account when weighing the probabilities and deciding whether, on balance, the event occurred.

Defence opening statements to be introduced

Defence opening statements are to be introduced in the Magistrates’ Court and Crown Court in England and Wales from 4 April 2016. One of the aims of this change is to better identify for Magistrates and jurors, at an early stage, those matters which are in dispute between prosecution and defence.

Confiscation & proportionality

Since the UK Supreme Court decision in R v Waya the issue of proportionality in confiscation has been exercising legal minds in England & Wales. But what does ‘disproportionate’ mean in practice?