Frozen bank account: why did this happen and what to do next (2024)

Frozen bank accounts are infuriating. Your bank transfers aren’t going through. You can’t withdraw money.

You’re trying tohit payment deadlines toyour suppliers orbusiness partners. Good faith isthe bedrock ofbusiness and late payments caused byafrozen bank account don’t just cause frustration, they sow seeds ofdistrust.

Suspicious transactions. Anti-money laundering. Money owed tocredit card companies. There are many reasons for frozen bank accounts. Banks decide tofreeze accounts because they’re beholden toatonne ofregulatory obligations from government departments toscrutinise all transactions made inall bank accounts.

Inthis article, weshow you the telltale signs that your bank account isfrozen, how you can unfreeze your bank account, and ways you can prevent future account freezes.

This article ataglance

Having your bank account frozen means that you can’t withdraw or transfer money from your account ormake scheduled payments. However, you can still receive deposits. Not toworry, the funds inyour frozen bank account remain, unless further action isrequired. There are many reasons for afrozen bank account, and you may need totake specific action tounfreeze your bank account.

3 key reasons abank account would befrozen

There are 3 key reasons why abank chooses tofreeze your account.

Suspicious orillegal activity

This happens ifthe bank suspects the account holder has been conducting illegal activities using the account, such asmoney laundering, terrorist financing, tax evasion orother suspicious transactions. Banks have always been onthe lookout for illegal activities, although they have been more strict since the COVID-19 pandemic when financial scams were onthe rise. Inthe case where suspicious activity was confirmed bythe bank, they can close your account without notice.

Unpaid debts tothe government

Astudent with outstanding loans orany account holder with unpaid taxes tothe government may find their bank account frozen.

Inmost cases ofunpaid student loans ortaxes, the government can:

1. Seize your tax refund
2. Garnish apercentage ofyour paycheck each month, without pursuing acourt judgement

Unpaid debts tocreditors

Ifyou have unpaid debts toacredit card company orother financial institutions, your creditors may get the bank tofreeze your account. While your account isfrozen, creditors could pull money out ofitto pay off your debt. They will need acourt order before the bank can authorise the freeze.

Ifyou took out aloan atthe same institution asyour bank account, the lender can access your account without acourt judgement ifyou have any defaulted loan payments. Always check your loan contract for this clause before signing it.

Bank account freeze rules inthe UK

Ifyour account isunder suspicion, the account freezing process isone ofthe methods used during the investigative process. Any senior enforcement officer can apply toaMagistrates Court for anaccount freezing order.

Inthe UK, the Proceeds ofCrime Act 2022 (orPOCA 2022) asamended under the Criminal Finance Act (2017) allows abank orbuilding society tolegally freeze accounts for two years while investigations are ongoing.

During investigations, your bank isnot allowed totell the account holder any information regarding their frozen account. Under POCA 2022, there may bea5-year sentence for the involved parties.

Here’s anoverview ofthe steps taken inanaccount freeze.

1. Bank suspects your account isused for illegal activities
2. Bank makes suspicious activity report (SAR) toNational Crime Agency (NCA)
3. NCA responds tothe bank within 7 days or31 days with anextension
4. Ifthe NCA believes your account issuspicious, itwill apply for anaccount freezing order (AFO)

How long can abank legally freeze your account intheUK?

Freezing bank accounts islegal. For simpler situations ormisunderstandings, usually, your account isfrozen for seven toten days.

Complicated situations may require detailed information from you before the bank decides onthe next course ofaction: tounfreeze orclose the account entirely. This decision could take 30 days ormore.

This decision often happens without any notice, warning orexplanation. This means that you can’t make transfers, your standing orders are suspended, and not know the reason why. Itcould bebecause ofcertain factors that put your account inthe spotlight.

Some reasons may bethat your bank balance issignificant, orifyou make multiple large international transactions during ashort period. Another reason could betoprotect your account from financial scams.

Afrozen account isunlike ablocked transaction. Read more about blocked transactions here.

Can money bepaid into afrozen bank account?

You can still access your account, but what you can dowith the cash within itislimited. You can view your account closing balance and receive deposits into your account. However, you cannot withdraw ortransfer any ofthe existing ordeposited cash.

Any pre-authorised payments may becancelled. Soifyou have amonthly payment like rent, aloan, orasubscription, it’s likely that the payment will not gothrough. Incases like these, you will need tofind another way topay these bills. You can also choose other methods toreceive global payments ifyour account isfrozen. Read the 5 Ways ToReceive Global Payments Inthe UK.

How tounfreeze abank account?

Here are some steps you can take tounfreeze your account.

1. Contact your bank immediately

The first thing you should doisto 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 abank freeze. Itcould cause your credit score todecrease and incur unnecessary bank fees.

2. Halt any outgoing payments

While investigations are ongoing, you should contact any individual orinstitution you have automatic payments orpending transactions with. Cancel these payments until your account isunfrozen.

3. Dig uprecords for proof ofpayments

Ifthe bank informs you that there issuspicious activity onyour account and you know itislegitimate, find proof tosubstantiate your claim. This could include invoices, payment contracts and more. Inmost cases, proof oftransaction can hasten the investigation process. Keep inmind tosubmit your proof assoon asyou can, asyou might have limited time tomake aclaim.

4. Seek professional help

Ifall fails, get legal help. You could hire anattorney tohelp work out anarrangement orapproach legal clinics orlegal aid services, depending onyour country and jurisdiction.

How long does ittake tounfreeze abank account?

Most commonly, account freezes are not permanent. They require you, asthe account holder, totake certain actions tounfreeze your account. Once the outstanding payment has been made infull orthe bank has cleared you ofillegal activity, the freeze islifted. Therefore, the time taken tounfreeze your account will depend onyour exact situation.

How doIprevent mybank account from being frozen?

Avoiding the hassle and unnecessary stress ofhaving afrozen bank account isnot all that difficult. Here are some simple tips tofollow.

1. Always answer and follow uponcalls from debt collectors
2. Keep upwith your credit bills
3. Donot open anaccount ifyou owe that bank money
4. Scrutinise the terms and conditions before opening anaccount
5. Separate your personal and business accounts
6. Always pay attention toyour monthly bank statements toensure there are nosuspicious transactions

Want toavoid unnecessary bank freezes? Ensure your payments gothrough.

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