Banks in the UK are very heavily regulated, and this can sometimes have a severe impact on individual or business customers. In particular, banks are increasingly deciding to close and/or block accounts without giving reasons, and this can sometimes result in long delays before the customer can access their funds.
The principal relevant legislation is the Proceeds of Crime Act 2002 (POCA) and the Money Laundering Regulations 2007 (MLR), whose combined effect is that banks will often feel compelled to file Suspicious Activity Reports (SARs) to the National Crime Agency (NCA), and not complete a transaction until the NCA consents.
The first point to note about this scheme is that the threshold for suspicion is very low. In practice the banks have very sensitive systems to flag up any potential concerns about customers and funds, and will often file SARs to protect their position. The effect is that a single adverse story online, or the receipt of funds from a high risk jurisdiction or a ‘politically exposed person’, or from someone whose name matches a sanctions target on a database, can cause disproportionate problems.
The second point is that your bank will almost invariably tell you nothing, under strict policies to avoid the risk of ‘tipping off’ anyone about an investigation or a SAR. Some banks will routinely say that they are complying with their regulatory obligations; others may make excuses about IT or unspecified ‘operational difficulties’.
The third point is that the outcome and timescales of this process can be hard to predict. Under POCA the NCA needs to give or refuse consent to a transaction within seven working days (otherwise consent can be assumed), but if they do refuse, there is a further ‘moratorium period’ of 31 calendar days before the transaction can take place. The theory of this is that it allows the authorities time to apply for a court order if the circumstances justify it. In practice accounts can be informally frozen in this way for longer periods, and customers can face additional difficulties in getting their funds back.
The bad news is that the authorities and the banks are increasingly making life difficult for customers in these scenarios, and depending on the underlying issue, what starts as a banking issue could develop into something worse. Legislative plans to tighten the MLR requirements and to allow the courts to grant up to six further moratorium periods will only increase these difficulties.
The good news is that with the right advice it can be possible to shortcut this process, for instance by identifying the issue and providing information and evidence via the banks to the investigators to resolve it, and/or by taking a hard line with the bank and, where necessary, taking action in court to get funds back (and in rare cases, try to halt an account closure). But with the risk of delays being extended and ever more serious consequences for the customer, it is crucial in these circumstances to seek such advice as soon as a problem becomes apparent.