More and more we are being contacted by both individuals and companies who have had access to the funds in their bank or building society account(s) unexpectedly denied. In some cases, the funds will have simply disappeared from the account and calls to the Customer Services, or Complaints departments are usually met with a standard response that there is an administrative issue, which is being looked into. But no proper explanation is given about what to do, or what is going on, or for how long and the customer is left feeling helpless.
If this sounds familiar, it is possible that you have been made the subject of a Suspicious Activity Report (SAR). The SAR regime was designed to help law enforcement, and specifically the National Crime Agency (NCA) identify individuals, groups and organisations potentially involved in criminal conduct.
Unfortunately, many innocent people are being caught by this regime. Statistics show that financial institutions are filing high volumes of low-quality defensive SARs and 470,000 reports were made in the last year alone. Quite a large percentage of those were made against innocent customers making perfectly legitimate transactions.
SARs are often triggered as a result of unusual credits or debits, especially cash deposits, particularly those that may appear to be ‘smurfing’ i.e. where several deposits of cash are made, in s short space of time, but are under the threshold for amounts that might attract attention if paid in one deposit. Cash deposits that appear to be ‘smurfed’ are generally perceived to be money laundering. Transactions with high risk jurisdictions, or of an unusually high value, or those which appear to be inconsistent with the normal operation of an account can also trigger a SAR. We have also come across cases where people have had their accounts frozen by their bank, as a result of activity of online fraudsters.
How long will it take for your account to be unfrozen:
If your account is under review for suspicious activity, the financial institution cannot give you a reason as to why it has denied access to the funds, hence lack of information, or excuses made to customers. This is because the bank itself, or persons within it, may be committing the criminal offence of ‘tipping off’. Frustratingly, you will have to wait for the National Crime Agency (NCA) to carry out a review of the disclosure.
The NCA has 7 working days, starting with the day after the SAR was made, to either give consent for the transaction to continue, which in practice then means the bank or building society allowing its customer to access their account and funds. Or refuse consent, in which case a further ‘moratorium’ period is triggered. This allows the NCA a further 31 calendar days to decide what to do. However, the NCA also has the power to apply to the court for extensions of the moratorium period, up to a maximum of 6 months.
Until such time as the bank is given the all clear by the NCA (known as appropriate consent), you will not be able to access your bank account and it will be effectively frozen by the financial institution, with the whole credit balance often being moved into an internal bank, or building society Treasury account for safe keeping.
The consequences of a SAR being made, can result in the disclosure being referred by the NCA to other law enforcement, whether that is the police, or HM Revenue & Customs etc. which may then commence a criminal investigation and apply to the court for a separate freezing order (see our article on Restraint Orders for more information).
It can be a desperate time for people and business owners to find they have no access to their money.
A typical example is as follows:
Suzy earns £62,000 per year and has a bank account at one of the well-known high street banks. Suzy receives £280,500 into her account from the Turkish Republic of Northern Cyprus. The bank’s computer has an algorithm designed to spot any transactions that are unusual or suspicious. An alarm bell rings, and the transaction is brought to the attention of the bank’s Nominated Officer – let’s call him Bryan.
Bryan looks at the information and has concerns that the activity is suspicious, i.e. he suspects money laundering. He files an electronic SAR with the NCA. Dave presses a button on the bank’s computer system and the account(s) are frozen.
As previously explained, Bryan has done this because the Nominated Officer is obliged to report any suspicious activity to the NCA. If he does not, he may commit a criminal offence.
Following the accounts being frozen, Suzy tries to pay for her food shopping. Her card doesn’t work. Suzy leaves the supermarket and calls her bank to ask what is going on. She knows her account is in funds; she had just recently received a large sum of money from the proceeds of a property sale.
The NCA will review the SAR relating to Suzy and cross-reference it with existing information. It may refer the information to a law enforcement agency to investigate further. Alternatively, it might determine no further action is necessary. The NCA can authorise the bank to lift the freeze within days and sometimes within hours, but this is not always the case.
If the NCA determine that Suzy’s banking activity is suspicious, her account will remain frozen whilst the NCA decides what to do, which could involve law enforcement starting a criminal investigation. It may simply result in the bank or building society being given appropriate consent and in which case, access to the account would be restored. If the accounts are eventually unfrozen, it is likely the bank will offer no explanation.
There may also be the possibility that your account(s) will become subject to a Restraint Order. This is where a prosecuting authority has obtained an order from the court preventing your assets from being disposed of pending the outcome of a criminal investigation and possibly, prosecution.
What are your options?
Your legal options during this period are very limited but in view of the potential for the matter to develop into a criminal investigation and a Restraint Order, or an Account Freezing Order (see our article here), it is worthwhile seeking early legal advice so you know what to expect.
Please note, there must be strong evidence to establish the possibility of ‘financial ruin’ for the court to be persuaded to grant such relief.
Should I take legal advice?
In short, yes. If you have had your bank account frozen, we suggest that you seek urgent legal advice. Please email us at email@example.com or call us on 0203 666 5155 to discuss how we can help.
Kelsey is an associate at Sperrin Law. She has extensive experience of regulatory investigations, including those brought by the SFO, NCA and FCA. She has worked on cases involving LIBOR manipulation, tax evasion and Sign-On Fraud.