Companies and private banking clients alike can be affected: the bank blocks an account due to suspicion of money laundering.
If money laundering is suspected, credit institutions, financial services providers and payment institutions are obliged to take security measures to prevent money laundering in order to meet their duties of care. For those affected, being confronted with a blocked or frozen account due to suspicion of money laundering can be outraging. Businesses and individuals alike rely on the functionality of their bank accounts to wire transfers and to execute financial transactions. An account freeze can lead to serious complications (e.g. tax authority investigation, criminal proceeding, prosecutor’s attachment order) and even jeopardize a company’s financial stability. With business transactions in particular, having access to your own bank account is of essential importance.
Consequences arising from suspected money laundering
Once money laundering is suspected, the bank account can be blocked at the request behest of the investigating authorities, but also at the bank’s discretion. A credit institution must immediately report a suspicious transaction to the Financial Intelligence Unit (“FIU”).
A payment or transfer from the affected account must not be executed during the holding period as stipulated in sec. 46 GwG (German AML Act). If the law enforcement authorities do not take action within the holding period or issue further instructions to the bank, the transaction may be executed. The statutory rules, however, do not specify for how long banks may maintain the restrictions imposed on an account.
In reality it can be observed that banks voice suspicion of money laundering or tax evasion even in relation to completely harmless cases and manageable, smaller sums of money and inform the authorities. Banks and financial service providers often do not have to fear claims for damages due to delayed execution of transactions.
According to law, a bank account can also be frozen when a person effects transactions on an account belonging to a different person, thus using the account in question under false identity.
Even though in many cases the matter is swiftly cleared and resolved, a suspicion of this kind oftentimes bears consequences. Tax authorities act fast in these circumstances, and tax audits or criminal tax proceedings can be the result.
Legal Measures to release Funds
Even though banks are obliged to report a suspicious transactionn, the question remains as to when exactly a transaction is unusual or suspicious and when the reporting obligation is rightfully triggered. It is therefore advisable to notify the bank beforehand about the nature and source of transactions or (cash) payments to be expected.
In his over ten years of legal practice, Benjamin Hasan combines the expertise of an experienced litigator and expert lawyer for banking law with that of a bank's CCO, manager and board member. In the event of unjustified measures (e.g. frozen account) by a bank, a financial service provider or a payment institution, Benjamin Hasan evaluates with his clients all viable legal measures to find the most effective way to unfreeze the account and to restore access to the client’s funds.
The content of this article is valid as at the date of its first publication. It is intended to provide a general guide to the subject matter and does not constitute legal advice. We recommend that you seek professional advice on your specific matter before acting on any information provided. For further information or advice, please contact Benjamin Hasan, Partner at the Frankfurt office, via telephone at +49 69 247 428 444 or by email at benjamin.hasan@kyprianou.com
