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Banks and businesses. Why are accounts blocked by banks? What should you do if your bank account is blocked?

Published: 12 Mar 2020

Bank account blocking is one of the most relevant topics in the business domain. Any bank may block accounts for a number of reasons, and getting back to receiving standard services involves a lengthy procedure which could also include court appeals.

This article offers a detailed overview of the main reasons for account blocking and of the steps one should take in the event of blockage and also avoid this problem.

Reasons for bank account blocking

Blocking the accounts of entities and sole proprietors is one of the most effective mechanisms used by the government to fight tax avoidance and money laundering. To enhance efficiency, the state engages lending institutions in this fight. If its account is blocked, the entity is not capable of making spending transactions, potentially resulting in great losses.

Financial institutions are authorized by law to block your bank account until you confirm the transaction’s legal nature. The following may raise suspicions:

  • transactions made using a different gadget;
  • an overly large withdrawal amount;
  • unusual location or time of the transaction;
  • unusual transaction.

Besides, bank clients could face blocking if they are not aware of their counteragent’s problems or if they make one-off payments, not in line with their specified type of activity, or if they indicate an inaccurate payment purpose.

My account has been blocked. What should I do?

In that case, the bank contacts the customer to verify the transaction legality. If not proven, the bank account will be blocked. One needs to be ready to confirm the transaction’s nature with documents and if necessary provide the bank with those documents.

The essential rule is to be open to dialogue. The bank may request additional information and documents confirming the economic rationale and lawfulness of the transactions, including contracts, cheques and any other documents supporting the transaction.

The bank will specify a deadline for providing the data. If the situation is cleared and the bank has no grounds for suspecting fraud, the money will be transferred to the beneficiary.

SBSB lawyers will help you settle the bank account blocking issue. We are aware of which documents and when should be provided to the bank to confirm the legal nature of transactions.

What is there to be done to avoid account blocking?

The following steps will help prevent bank account blocking:

  • operate only in the selected area of activities;
  • specify correct payment purpose;
  • verify counteragents;
  • pay taxes and insurance premiums for your entity and employees, preferably using the account in which all the other transactions are made;
  • provide documents on time if the bank requests them;
  • inform the bank in advance about complicated deals or those which are not typical for your business.

The above measures do not guarantee ultimate protection against account blocking but minimize the risk. Furthermore, tax and other public authorities will have fewer questions to ask about your company.

We advise you to pause to think about the consequences of error. Those could include serious trouble, from transaction cancellation and account blocking to criminal liability.

If you have already faced bank account blocking or are looking to avoid this issue in the future, do not hesitate to contact SBSB lawyers. We are well-versed in the measures required and will help protect you and your company against losses. Join our Telegram chat to get a free online consultation.


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Yuliya Barabash

Firm: SBSB Legal Service
Country: Ukraine

Practice Area: Commercial

  • Kozhemyatska Street, 20
    Kiev


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