You’re a business owner who has found themselves in one of the most distressing situations possible. Your corporate account has been frozen. Without notice or explanation. How will you pay staff, suppliers or even the taxman? You risk endangering your credit ratings if bills go unpaid. You can’t open an account with another UK bank while the account is suspended. Most importantly, you have done nothing wrong! This was a recent client scenario for fraud and financial crime lawyer, Susan Monty. In this article, she explains why the bank may have made the decision to freeze your account and the next steps you should take to resolve the issue.
There are numerous reasons why an account may be frozen:
- There are insufficient funds in your account.
- A freezing order has been made against you by a UK court to protect assets in dispute in legal proceedings (even if you are innocently caught up in another’s wrongdoings).
- If your company is the subject of a winding up order, even if the business is viable, the bank will freeze your account on notice of the petition to avoid any potential responsibility for debts accrued during the insolvency.
- A third party has obtained a court order against you for a sum of money. The court may order the account be frozen until the debt (which can include a commercial debt, a tax liability or unpaid child maintenance) is satisfied.
- Immigration checks show a problem. The Home Office has the power to freeze accounts.
- The bank (or a law enforcement agency) has detected a potentially suspicious transaction (such as money laundering or terrorist financing) and has reported it to the National Crime Agency who have 31 days (and much longer if they apply to court to extend) to investigate. The bank may not tell you they have done this, as they would be committing the criminal offence of tipping you off that the bank thought suspicious activity was taking place.
- The bank is conducting its own internal ‘de-risking’ account scrutiny, often euphemistically called a ‘case review’ or ‘safeguarding procedures’. It may withdraw banking facilities from categories of customers whom they consider at high risk of involvement with money laundering or terrorism financing, either as a result of the type of business they engage in (diamonds, arms dealers, money bureaus, etc.) or because of links by the business or its directors to high-risk countries.
All of these matters can be resolved, some more quickly and painlessly than others. How? An effective response could be as easy as one carefully drafted letter from your lawyer, as in our client’s case.
- It is important that you act quickly should you find yourself in this situation.
- Don’t threaten the bank with writs or injunctions.
- Arrange an alternative interim source of funds to pay immediate bills, and staff.
- Keep in contact with your personal banking manager, or obtain the name of someone at the bank with whom you can establish an ongoing dialogue.
- Collect all the legal and financial documents that can support your legitimate business and answer the bank’s questions, including translated foreign documents, if relevant.
- Speak to a specialist, experienced lawyer.
This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.