Frozen bank accounts are infuriating. Your bank transfers aren’t going through. You can’t withdraw money.
You’re trying to hit payment deadlines to your suppliers or business partners. Good faith is the bedrock of business and late payments caused by a frozen bank account don’t just cause frustration, they sow seeds of distrust.
Suspicious transactions. Anti-money laundering. Money owed to credit card companies. There are many reasons for frozen bank accounts. Banks decide to freeze accounts because they’re beholden to a tonne of regulatory obligations from government departments to scrutinise all transactions made in all bank accounts.
In this article, we show you the telltale signs that your bank account is frozen, how you can unfreeze your bank account, and ways you can prevent future account freezes.
This article at a glance
Having your bank account frozen means that you can’t withdraw or transfer money from your account or make scheduled payments. However, you can still receive deposits. Not to worry, the funds in your frozen bank account remain, unless further action is required. There are many reasons for a frozen bank account, and you may need to take specific action to unfreeze your bank account.
3 key reasons a bank account would be frozen
There are 3 key reasons why a bank chooses to freeze your account.
Suspicious or illegal activity
This happens if the bank suspects the account holder has been conducting illegal activities using the account, such as money laundering, terrorist financing, tax evasion or other suspicious transactions. Banks have always been on the lookout for illegal activities, although they have been more strict since the COVID-19 pandemic when financial scams were on the rise. In the case where suspicious activity was confirmed by the bank, they can close your account without notice.
Tip: If you are aware that you will make a one-time big deposit or daily deposits of over $ 10,000, you can preempt your bank before you deposit your cash. Doing so could prevent your bank from freezing your account due to suspicious activity.
Unpaid debts to the government
A student with outstanding loans or any account holder with unpaid taxes to the government may find their bank account frozen.
In most cases of unpaid student loans or taxes, the government can:
- Seize your tax refund
- Garnish a percentage of your paycheck each month, without pursuing a court judgement
Unpaid debts to creditors
If you have unpaid debts to a credit card company or other financial institutions, your creditors may get the bank to freeze your account. While your account is frozen, creditors could pull money out of it to pay off your debt. They will need a court order before the bank can authorise the freeze.
If you took out a loan at the same institution as your bank account, the lender can access your account without a court judgement if you have any defaulted loan payments. Always check your loan contract for this clause before signing it.
Bank account freeze rules in the UK
If your account is under suspicion, the account freezing process is one of the methods used during the investigative process. Any senior enforcement officer can apply to a Magistrates Court for an account freezing order.
In the UK, the Proceeds of Crime Act 2022 (or POCA 2022) as amended under the Criminal Finance Act (2017) allows a bank or building society to legally freeze accounts for two years while investigations are ongoing.
During investigations, your bank is not allowed to tell the account holder any information regarding their frozen account. Under POCA 2022, there may be a 5-year sentence for the involved parties.
Here’s an overview of the steps taken in an account freeze.
- Bank suspects your account is used for illegal activities
- Bank makes suspicious activity report (SAR) to National Crime Agency (NCA)
- NCA responds to the bank within 7 days or 31 days with an extension
- If the NCA believes your account is suspicious, it will apply for an account freezing order (AFO)
How long can a bank legally freeze your account in the UK?
Freezing bank accounts is legal. For simpler situations or misunderstandings, usually, your account is frozen for seven to ten days.
Complicated situations may require detailed information from you before the bank decides on the next course of action: to unfreeze or close the account entirely. This decision could take 30 days or more.
This decision often happens without any notice, warning or explanation. This means that you can’t make transfers, your standing orders are suspended, and not know the reason why. It could be because of certain factors that put your account in the spotlight.
Some reasons may be that your bank balance is significant, or if you make multiple large international transactions during a short period. Another reason could be to protect your account from financial scams.
A frozen account is unlike a blocked transaction. Read more about blocked transactions here.
Can money be paid into a frozen bank account?
You can still access your account, but what you can do with the cash within it is limited. You can view your account closing balance and receive deposits into your account. However, you cannot withdraw or transfer any of the existing or deposited cash.
Any pre-authorised payments may be cancelled. So if you have a monthly payment like rent, a loan, or a subscription, it’s likely that the payment will not go through. In cases like these, you will need to find another way to pay these bills. You can also choose other methods to receive global payments if your account is frozen. Read the 5 Ways To Receive Global Payments In the UK.
How to unfreeze a bank account?
Here are some steps you can take to unfreeze your account.
1. Contact your bank immediately
The first thing you should do is to contact your bank. You could ask why your account was frozen. Meanwhile, you could also find out what your bank’s freeze rules are and what steps you can take next. Never ignore a bank freeze. It could cause your credit score to decrease and incur unnecessary bank fees.
2. Halt any outgoing payments
While investigations are ongoing, you should contact any individual or institution you have automatic payments or pending transactions with. Cancel these payments until your account is unfrozen.
3. Dig up records for proof of payments
If the bank informs you that there is suspicious activity on your account and you know it is legitimate, find proof to substantiate your claim. This could include invoices, payment contracts and more. In most cases, proof of transaction can hasten the investigation process. Keep in mind to submit your proof as soon as you can, as you might have limited time to make a claim.
4. Seek professional help
If all fails, get legal help. You could hire an attorney to help work out an arrangement or approach legal clinics or legal aid services, depending on your country and jurisdiction.
How long does it take to unfreeze a bank account?
Most commonly, account freezes are not permanent. They require you, as the account holder, to take certain actions to unfreeze your account. Once the outstanding payment has been made in full or the bank has cleared you of illegal activity, the freeze is lifted. Therefore, the time taken to unfreeze your account will depend on your exact situation.
How do I prevent my bank account from being frozen?
Avoiding the hassle and unnecessary stress of having a frozen bank account is not all that difficult. Here are some simple tips to follow.
- Always answer and follow up on calls from debt collectors
- Keep up with your credit bills
- Do not open an account if you owe that bank money
- Scrutinise the terms and conditions before opening an account
- Separate your personal and business accounts
- Always pay attention to your monthly bank statements to ensure there are no suspicious transactions
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