IBA Compliance Connection

Your go to source for compliance!

Our bank received a court order that would appear to require us to freeze all of a customer’s accounts with us. The order requires any “financial institution … maintaining or having custody or control of any account or other asset of [our customer] or any corporation, partnership, or other entity directly or indirectly owned, managed, or controlled by [our customer]” to freeze all “assets, funds, documents, or other property held by, or under its control . . . that are subject to access or use by, or under the signatory power of [our customer].” This customer has several accounts at our bank for businesses that we know he owns or manages, and for which he is an authorized signer. Should we freeze those accounts?

—

by

admin

Whether a court order applies to accounts held at your bank depends on the precise language of the order. In this case, the order is very specific. It applies to “any account or other asset of [your customer] or any corporation, partnership, or other entity directly or indirectly owned, managed, or controlled by” your customer. Here, your bank knows that it maintains accounts for business entities that are “directly or indirectly owned, managed, or controlled by” the customer named in the order. If you fail to freeze the accounts that you were ordered to freeze, your bank may be liable for any funds drawn from those accounts after you have received the court order.

For resources related to our guidance, please see:                   

  • Illinois Code of Civil Procedure, 735 ILCS 5/2-1402(f) (“The court may punish any party who violates the restraining provision of a citation as and for a contempt, or if the party is a third party may enter judgment against him or her in the amount of the unpaid portion of the judgment and costs allowable under this Section, or in the amount of the value of the property transferred, whichever is lesser.”)
  • Seventh Circuit Court Case, Mendez v. Republic Bank, 725 F.3d 651, 662-63 (7th Cir. 2013) (“A citation recipient who fails to comply with the restraining provision may be liable to the judgment creditor for any transferred funds that belonged to the judgment debtor … no showing of contempt is required to impose liability on the citation recipient.”)