IBA Compliance Connection

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Do we need to have a legal document authorizing us to freeze a customer’s account, or can we initiate a freeze to investigate suspected fraud if our account agreement allows us this privilege? We believe a customer may be committing fraud, and we want to freeze their account before any more potentially fraudulent checks are deposited into the account.

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No, we do not believe you need a document authorizing you to freeze an account if the terms of your account agreement allow you to freeze an account to investigate suspected fraud. Generally, your bank’s authority to freeze your customer’s account is governed by your account agreement.

Additionally, we note that when investigating suspected fraud, your bank should assess whether to file a Suspicious Activity Report regarding your customer’s transactions.

For resources related to our guidance, please see:

  • FDIC Suspicious Activity Report Rules, 12 CFR 353.3 (“A bank shall file a suspicious activity report with the appropriate federal law enforcement agencies and the Department of the Treasury, in accordance with the form’s instructions, by sending a completed suspicious activity report to FinCEN in the following circumstances . . . .”)