How to prevent a payment freeze when working with a foreign bank?

In the modern world of globalization and international financial transactions, more and more companies and individuals are faced with the need to use the services of foreign banks for various payments. And of course this is a convenient solution for many businesses and even personal needs. However, among the many advantages of this choice, there are points that all clients of foreign banks should know in order to avoid unnecessary proceedings, freezing funds or even an account in a foreign bank.

Introduction to European banks

Today, being a client of a foreign bank, for example, a European one, is completely different than being, for example, a client of the Ukrainian Privatbank (when you are a resident of the country, you only need a passport to open and there are no special problems with payments or other operations).

All European banks are limited by international regulation, strict AML standards, sanctions policy and internal compliance. Therefore, banks do not serve everyone who applies to them to open an account, they are not chasing quantity, but very carefully approach the issue of cooperation, and in the future to “monitoring” you and your operations. And if you are also a non-resident or do not have a residence permit of the country in which you plan to open an account, the verification and supervision will be even more in-depth. All this is explained by the fact that banks monitor their reputation and do everything possible (sometimes to the detriment of their profits) so that regulators do not deprive them of their license or impose sanctions for working with dirty money.

Thus, the primary task of a foreign bank is a trustworthy and “clean” client. And the task of the client is to prove this status to the bank. But even after opening an account, everything is not so simple, customers must comply with all bank requirements and avoid suspicious transactions or cash flows. And that’s what we’ll talk about in more detail.

What transactions or payments are considered suspicious?

Of course, each country has its own internal laws and the main financial regulator establishes a whole list of transactions that are subject to increased monitoring or inspections. But, summarizing these criteria, we can distinguish the following operations that should be avoided when working with any foreign banks:

• payments through the cash desk in large cash amounts that do not have documentary evidence;
• bulk fractional payments on the same day or to the same account;
• non-core transactions (for example, transactions do not correspond to the company’s activities or business goals);
• payments to individuals or companies that are under sanctions or politically exposed persons;
• payments from/to sanctioned banks, for example, the Russian Federation or Belarus;
• account turnover that does not correspond to the company’s business capacity;
• a sharp increase in activity on the account, especially if the account was previously “sleeping”;
• replenishment of the account with further withdrawal of funds or transfer on the same day;
• purchase of bank products that does not correspond to the welfare indicated in the questionnaire.

It is important that even if the bank had questions or needed any confirmation of the legality of your financial actions, you must not ignore the connection with the manager and provide all the required documentation or information so that the operation can still be carried out after proper verification. Avoiding contact with the bank manager may result in blocking the account altogether. Thus, a frozen payment in a foreign bank can turn into a frozen account.

How to unfreeze a blocked payment in a bank?

When a payment has been blocked or frozen, there are a few basic steps you can take to unfreeze a blocked payment:

1) Promptly contact the bank and find out the reason for the blocking (it is advisable to contact the phone number that you previously indicated in the questionnaires when opening an account)

2) Provide the necessary documents to confirm the legitimacy of the payment

3) Or Establish contact with the payee if the payment was blocked by his bank

4) Follow the instructions and banking procedures (be in touch, because the bank may require confirmation of the operation by phone or via e-mail)

5) Request an urgent review (often European banks may postpone your issue until “tomorrow”)

6) Contact a lawyer or financial specialist if all of the above steps did not help unfreeze the payment

It is important to remember that each bank has its own procedures and policies, so payment unfreezing methods may vary. The most effective way to resolve the problem is to contact the bank in a timely manner and comply with their further requirements and instructions.

Recommendations for working with foreign banks

Before opening an account with a foreign bank and starting to work with it, it is important to carefully study its reputation and stability, get acquainted with customer reviews, as well as with ratings provided by international agencies S&P, Moody’s and Fitch. Give preference to well-known and established banks with good financial performance.

After that, remember a few simple rules:

1) Before using foreign banks to make payments, it is necessary to take into account the tax obligations of the beneficiary, such as declaring income and paying taxes both in their country and in the country where the foreign bank is located, especially in light of the launch of the CRS exchange in Ukraine.

2) If you plan to make mass payments through a bank account, payment systems are better suited for such purposes.

3) Timely informing the bank about planned financial transactions can help prevent freezing of the account or payments. If you have special transactions or significant amounts, you must notify the bank in advance and provide documents confirming the legitimacy of these transactions.

4) Update your personal data at the bank in a timely manner, especially if your financial situation, business structure has changed, an additional line of business has been added, partners, counterparties, sales geography or other significant details.

5) Correctly fill in all fields when making financial transactions, avoid inaccuracies or errors, and keep documents confirming each payment and its legality.

In conclusion, in order to avoid freezing a payment in a foreign bank, it is necessary to choose a reliable and stable bank, comply with all its requirements under the contract, provide the necessary documents, take into account tax and legal aspects, make allowable payments and inform the bank about its activities or changes. By following these measures, you will be able to minimize the risks of freezing your account and funds in a foreign bank and carry out financial transactions without problems.