Why is My Bank Account Frozen?

Having your account frozen can be frustrating and confusing for anyone, especially business entities that rely on bank accounts for daily transactions. But what exactly is a frozen bank account? In simple terms, a frozen bank account means you’re locked out of making any outgoing transactions. You won’t be able to withdraw money from the ATM, over the counter, or make any purchases using the account. However, incoming transactions are allowed into the account; you can still receive deposits and monitor the account balance despite its frozen state.

According to I&M Bank, banks have the authority to refuse instructions related to your account and can exercise this discretion for a number of reasons. Here are some of the reasons why your account was frozen.

Civil Disputes

If there are disagreements between the bank and the account holder, the bank may decide to freeze the account until the issue is resolved. This occurs when there is a dispute on certain transactions, fees or services offered by the bank. Additionally, if the bank receives conflicting instructions or disagreements from the signatories of the account, they may choose to freeze the account to avoid unauthorized transactions.

Tax Issues

The Business Daily reports that the Kenya Revenue Authority has increased its efforts to recover tax arrears. Taxpayers with outstanding arrears dating back to December 2022 risk having their accounts frozen. Those who missed the government’s partial tax amnesty window that ended in June 2024 and failed to communicate their repayment plan risk legal action. KRA has the authority to issue agency notices to banks holding deposits on behalf of taxpayers; this would result in accounts being frozen until the debt is settled.

Suspicious Transactions

Banks are bound by strict regulations to prevent illegal financial activities. Under section 44 (2) of the POCAMLA, financial institutions are required to report any suspicious transactions. To comply with this regulation, banks routinely monitor accounts for any illegal financial activities.

 Joseph Kitoonka, a universal banker at ABSA, explains that if a bank detects unusual activity in your account, such as receiving huge sums from unknown sources or sudden unexplained increments in banking transactions, they are obligated to investigate. In such cases, the bank may freeze the account to prevent further illegal dealings.

Court Orders

 Under the Bankruptcy Act, creditors have the right to petition the court to freeze their accounts to recover outstanding debts. Once a court order is issued, the bank is required to freeze the account until the court order is lifted. In addition, law enforcement agencies like KRA may request that your account be frozen for investigation purposes.  

Identity Theft

The bank may detect a security breach in your account and freeze it to protect your finances. It may detect unusual purchases or online transactions that are inconsistent with your banking patterns. However, security freezes are easy to unblock once they verify your account is not under threat.

Account Inactivity

 Leaving your account unattended for an extended period of time may lead to dormancy. This restricts you from carrying out transactions using the account, such as making deposits, withdrawals, or payments. The demise of an account holder without a beneficiary may also lead to the freezing of an account. Ensure to check the status of your account before assuming it is frozen.

 In the event that your account is frozen, the bank will disclose the reasons that led to this decision. However, whether you are notified before or after the action depends on the nature of the issue. In cases of illegal or suspicious activities, the bank refrain from informing you in advance to avoid any tampering. Other reasons such as court orders and disputes, the bank may notify you prior.

Wrapping Up

Navigating the complexities of a frozen bank account can be daunting, but there are steps you can take to resolve the issue. It is advisable first to contact your bank to check the status of your account. The bank representative will share details about your account, including the cause of the freeze. Be sure to ask about the next steps you can take to resolve the issue. If the account has received unusual transactions, the bank is likely to request proof of funds.

Simply, a proof of funds documents reveals how the funds were obtained, it could be a sale agreement for an asset you recently sold or an invoice for services you rendered. Ensure to provide any piece of evidence that reveals you obtained the money legally. Resolving any legal issues with creditors or tax authorities could also help unfreeze your account faster. However, if the account was flagged due to illegal or fraudulent activities, you should engage legal counsel and cooperate with the investigation.

 To sum it up, there are several reasons why your account may have been frozen. The first step to resolving the issue is contacting the bank and providing any required documentation. Remember, you will need to address all underlying issues before regaining control over the account. 

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