Blocked bank account: why? What to do?
Has your German neobank suspended your account and is asking for specific information or a photo of you with your ID card? It is possible and even legal! Banks, neobanks and other payment services are obliged to know their customers and monitor their transactions in order to combat money laundering and terrorist financing. But in Europe, these “know your customer” procedures are highly regulated in the financial, banking and insurance sectors.
Who can ask for my personal information?
The list of financial organisations that have an obligation to identify and know their customers and to verify their transactions is restrictive. All actors subject to these obligations are listed in France in the Monetary and Financial Code.
These include banks, online banks, neo-banks, fintech, insurance companies, gambling and betting companies, investment companies, payment service providers such as online payment or money transfer platforms (Paypal, Western Union…) or payment card solutions without bank accounts…
What information can a bank request?
In the banking, financial and insurance sectors, the information that you may be asked to provide as part of “know your customer” control procedures is strictly regulated. It may only be used for the purposes of combating money laundering and the financing of terrorism. These regulations are transposed and completed in France in the Monetary and Financial Code (the so-called LCB-LT regulations).
When opening an account in the EU, banks, credit institutions, payment service providers, neo-banks and fintechs may therefore ask you for an identity document and proof of address. To ensure that you are the holder of the ID presented, an online bank/neo-bank may ask you to take a photo of yourself with your ID. In Germany, video identification procedures are even becoming more common.
The European banking supervisory authorities validate the procedures and guarantee that they comply with the legal obligations in terms of “Know Your Customer” procedures. E.g. the Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg has specified all the steps to be followed and the guarantees to be given in the event of the identification of new customers by “video chat”, which some European neo-banks practise.
When subscribing to certain services, you may be asked for other documents concerning you in order to meet the obligation of advice of European banks, neo-banks, etc.
Examples: proof of income and/or assets + information on your family situation to subscribe to a savings product, explanations on the origin of the money if you subscribe to a life insurance policy to avoid any risk of money laundering.
What does the bank do if it suspects a fraudulent transaction?
When a transaction could potentially be fraudulent (your account is suddenly credited with a large sum of money without any details of the transfer or you transfer an unusual sum of money from your account to an external account), the bank may ask you about the origin of the funds or even ask you for proof (purpose of the transfer, tax identification number, proof of residence, proof of income, etc.).
Please note! An unusual transaction is not the only scenario that justifies controls! The regulations provide for several other cases that require the bank to take enhanced vigilance measures (transactions of a certain amount, involving high-risk third countries, etc.).
If the bank cannot obtain proof of the legal origin of the funds received into or transferred from your account, it is obliged to alert the national authority of the country in which it is located. In France, it is with the “Service de Traitement du renseignement et action contre les circuits financiers clandestins” (TRACFIN) that the report of suspicion must be made. A German neo-bank will make such a report to the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin). It must report all sums of money or transactions that it suspects to be the result of an offence punishable by more than one year’s imprisonment or that it knows to be related to the financing of terrorism. The bank may even close the account.
Any bank or other due diligence provider that fails to monitor or report the suspicion of fraud faces criminal penalties of up to 100 million euros or 10% of annual turnover. In Germany, the fine can be up to 5 million euros or 10% of annual turnover.
Example: A German neo-bank was fined a total of €4,250,000 because of shortcomings in the fight against fraud, in particular in the identification process of new customers. This neo-bank was also forced by BaFin to limit the number of new accounts opened per month for a certain period of time.
What to do if your account is suspended or blocked?
In most cases, if your account is checked for unusual activity, you may not even notice because the analysis is so automated and fast these days. But many providers, such as online banks and other online payment or money transfer services, may have to suspend activity on an account while they confirm or deny suspicions, or even close it permanently.
Your account is suspended
If your neo-bank suspends your account, it usually informs you promptly and asks you to provide certain information (e.g. proof of the contract for the sale of your car to justify crediting a large sum to your bank account).
Advice:
- Send them the requested information and supporting documents as soon as possible. If you have any doubts, contact them.
- If your neo-bank does not react to the sending of your proofs and leaves the account suspended, contact it via all the means of communication in place (e-mail, telephone, etc.) and also online chats.
- Don’t forget to save your exchanges by capturing images of the online chat in order to prove that you have already made a claim if the discussion is terminated by your interlocutor.
Your account is closed
Your neo-bank announces the closure of your account within 72 hours and asks you to provide your international bank details (IBAN and BIC) for the remaining balance? Act quickly! Otherwise, the amount will be blocked and the account closed.
- Transfer the balance of your account to another bank account and keep any proof of the remaining balance if necessary (by taking a screenshot or generating a bank statement if possible).
- If you do not have another bank account, open one quickly. More information on your right to an account in Europe.
- If you have not acted within 72 hours, insist that the neo-bank contacts you, providing your IBAN and BIC and asking them to transfer the balance within a reasonable time.
Who can help me in case of a problem?
If you do not know why the bank is asking you for personal information, if your account is suspended despite the information provided, or if your account is closed and the balance frozen, the following remedies are available:
- contact your bank’s mediator. Since 2015, Europe has made it compulsory to have one or more alternative dispute resolution (ADR) bodies in all consumer sectors in all EU countries. Please note! In France, you must first contact a customer service before you can contact the ombudsman of the service provider concerned. This service is normally mentioned in the general conditions of your contract and the contact details of the mediator appear on your account statement. In other European countries, you can usually contact the ombudsman more quickly.
- Or make a complaint to the financial dispute resolution network FIN-NET. This network can help you to resolve your dispute with a financial services provider established in another EU country, Iceland, Liechtenstein or Norway.
- To report your problem with a bank, insurance company or intermediary in the banking sector, or to ask a question about the regulations, you can contact the Autorité de Contrôle Prudentiel et de Résolution auprès de la Banque de France.
- Finally, if you suspect abuse and wish to claim damages, seek legal advice. You will have to prove your loss. You should know that banks/neo-banks… are exempt from liability if they justify their decision by their obligation of vigilance imposed by the “know your customer” controls in order to fight against money laundering and the financing of terrorism.
5 tips to avoid account blocking
- Answer correctly to the requests of a bank, insurance or any other financial provider when you open your account;
- Be sure to state the purpose of each transfer you make. Make sure that the sender of a transfer to you is also explicit.
- If the bank asks you for documents or personal information, act quickly. Beware of phishing (fraudulent e-mails with a bank’s logo)! Be aware that a bank will never ask you for your bank details and password by e-mail or phone.
- If you do not understand the purpose of the request, or if you have any doubts, contact your bank. Read the general terms and conditions of the contract to find out who you can contact and what recourse is available.
- If the bank announces the closure of your account, quickly ask for the balance to be transferred to another account!
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Funded by the European Union. Views and opinions expressed are however those of the author(s) only and do not necessarily reflect those of the European Union or the European Innovation Council and Small and Medium-sized Enterprises Executive Agency (EISMEA). Neither the European Union nor the granting authority can be held responsible for them.
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