Account freeze - is an action taken by a bank or other broker to counteract the appearance of any transaction on a given bank account. Very often such transactions become frozen or their debit instructions are not recognized. The bank account may also be frozen by the initiation of the account by the owner of the bank number or another third party. It also happens that many banks allow you to block your account using a web application. This is especially important in case of stolen credit cards or unauthorized access to accounts. The above actions result from, among others, the fact that nowadays, Internet banking based on a self-service model, which is supposed to improve the cyber security of their users, is becoming more and more popular.
Dangerous situations following account freeze
Any action to freeze a bank account is linked to a breach of some kind of security policy. This can result in unauthorized access to your account by a third party logging in from a suspicious IP address or an unrecognizable digital device. It could also be a money transfer activity for the purpose of terrorist financing or money laundering. Additionally, these may also be other suspicious transactions that have not been properly validated, e. g. by providing an appropriate verification code or a security key held by the user. Nevertheless, the two most important situations are as follows:
- Trying to break into an account by bypassing bank security;
- Attempted terrorist financing or money laundering.
The first one is that an unauthorized third party gets access to the victim's account by means of pishings (a method of deception). Then, on the basis of the information obtained, he starts the process of cleaning the account of all funds. If the bank has appropriate security procedures in place or if the victim responds quickly to the hotline, it will be possible to freeze the account (M. Khonji, Y. Iraqi, A. Jones 2013, s. 2091-2100).
The latter is regulated by the anti-money laundering convention. These are special regulations obliging institutions obliged to control cash flows executed through them (e. g. banks). In view of the above, when transactions are carried out that exceed a certain value, banks will be required to scan it and check its source of origin. If it turns out that the transaction may be related to criminal activity, the bank may withhold it or block the bank account of the person ordering instructions or accepting data transfers (Muhammad Usman Kemal 2014, s. 416-427).
Consequences of account freeze
The basic consequence of losing access to the account is that it is impossible to make other transfers. This is particularly important for business. An entrepreneur who loses access to his bank account or who is frozen by a bank or tax office loses liquidity. As a result, a large number of counterparties may terminate their existing agreements or the banks will deny them the right to withdraw further funds from their credit lines. The last consequence of freezing an account is that it can be closed completely if the bank determines that it has actually been used for criminal activities. In such a case, there is nothing else than going to court - which may involve a lengthy trial and a lack of promise to recover the money (assuming that the entity acted unconsciously or without any fault) (M. Moser, R. Bohme, D. Breuker 2013, s. 1-10).
- Kemal M. U. (2014) Anti-money laundering regulations and its effectiveness "Journal of Money Laundering Control", nr 4
- Khonji M., Iraqi Y., Jones A. (2013) Phishing Detection: A Literature Survey "IEEE Communications Surveys & Tutorials", nr 4
- Moser M., Bohme R., Breuker D. (2013) An Inquiry into Money Laundering Tools in the Bitcoin Ecosystem "eCrime Researchers Summit"
Author: Anita Byś