Federal Law 115: Reasons for blocking bank accounts and their essence

Contents:

• Functioning principles of Federal Law 115 and monitoring of banking operations
• Methods for checking operations and clients in the banking sector
• What to do if your account is blocked?
  
• How to avoid the risk of having your bank account blocked
• Key aspects of account blocking according to Federal Law 115 in four points

Since 2001, Federal Law No. 115-FZ has been in effect in the Russian Federation. It regulates measures to combat money laundering and the financing of terrorism. According to this law, financial institutions have the right to suspend any transaction if it arouses their suspicions and require the account holder to provide relevant documentation for confirmation.

Various financial transactions can raise suspicion. For example, this applies to cases where a person withdraws cash from a legal entity's account to pay salaries, as well as situations where they transfer 10,000 rubles from a personal account to a friend as a loan. We discussed this issue with a bank representative and asked them to explain how such transactions are monitored.

In this article from the Skillbox Media Business editorial team, you can find information on the following:

• Federal Law 115-FZ regulates activities related to combating money laundering and the financing of terrorism. Under this legislation, a number of financial transactions that may raise suspicions are monitored.

  First of all, transactions involving large sums of money are monitored, especially if they are carried out in cash. Attention is also paid to transactions that are inconsistent with the client's usual financial activity or occur under unusual circumstances. For example, these may include transfers of funds to accounts in jurisdictions with a high level of financial risk or transactions with highly liquid assets, such as jewelry or real estate.

  Furthermore, it is important to note that transactions conducted using anonymous payment systems or cryptocurrencies are also closely monitored. Financial institutions are required to conduct thorough due diligence on their clients and their transactions, and if any suspicious activity is detected, they are required to report it to the appropriate authorities.

  Thus, Federal Law 115-FZ serves as an important tool in the fight against money laundering and terrorist financing, ensuring the transparency of financial flows and economic security.

• The process of verifying banking transactions includes several stages, each aimed at ensuring the security and accuracy of the transactions. First, banks collect data on each transaction, recording information about the time, amount, and parties involved. This data is then analyzed using automated systems that use algorithms to identify anomalies and suspicious activity.After this, if any discrepancies are discovered, the transaction may be suspended for further investigation. Bank specialists conduct a more detailed analysis to determine whether fraud or an error occurred. If everything is in order, the transaction is confirmed and completes its cycle.

  Furthermore, the verification process also takes into account internal control rules and regulatory requirements, which helps minimize risks and increase customer confidence in financial institutions.

• If your account has been blocked, it is important to take several steps to resolve the situation. First, find out the reasons for the blocking. You will usually receive a letter or message notifying you of this. Then, contact your bank or financial institution's customer service. Prepare all the necessary documents and information that can confirm your identity and the legitimacy of the transactions.It is also worth checking whether you have any outstanding debts or other financial obligations that could be the reason for the blocking. If the problem is related to suspicious transactions, be prepared to provide an explanation and evidence.

  Remember to remain calm and act in accordance with the instructions provided by the bank. In most cases, after completing the necessary steps, the account will be unblocked.

• How can I prevent blocking?

The questions were commented on by Vyacheslav Andryushkin, Deputy Chairman of the Board of SDM Bank.

Vyacheslav Andryushkin, Deputy Chairman of the Management Board of SDM Bank, answered the questions asked in an interview.

The operating principles of Federal Law No. 115-FZ and monitoring of banking operations

Financial institutions conduct a thorough analysis of all their operations to identify suspicious payments and transactions that require mandatory control. It's time to understand this process.

Activities requiring mandatory control include all operations mentioned in Article 6 of Federal Law No. 115-FZ. Such transactions include, for example:

• transactions to deposit or withdraw cash from a legal entity's account;
• real estate transactions in excess of 5 million rubles;
• Transferring or receiving funds from partners located in countries that do not comply with FATF standards.

Information about such financial transactions is received by Rosfinmonitoring from banks. This service independently verifies the data. However, clients are not notified of this process - banks do not inform about the transfer of information, and Rosfinmonitoring does not disclose the results of its inspections.

If Rosfinmonitoring discovers suspicious elements in a transaction, it has the right to contact the bank with a request to provide additional materials to clarify the situation and initiate an investigation.

Each bank sets its own internal standards for assessing suspicious transactions. These criteria remain confidential and are not publicly available.

Here are a few examples. A bank may become interested in an individual entrepreneur's account if there has been no activity for a long time and then a significant sum is unexpectedly deposited. Also, cryptocurrency transactions involving significant amounts, transfers to partners that appear suspicious to the bank, and the practice of "splitting" payments may come under scrutiny.

Banks have the ability to scrutinize most of their clients' transactions that raise doubts, including transactions of up to 1 million rubles.

The bank makes its own decisions regarding suspicious transactions. He has several options:

• report information about the transaction to Rosfinmonitoring, even if it is not subject to mandatory control;
• stop the transaction in order to determine whether it poses a potential threat.
• refuse to perform surgical intervention;
• stop remote access to the account.

Closing access to the account is an extreme measure. Financial institutions compete with each other for clients and strive to make the process of interacting with them as convenient and transparent as possible. For this reason, banks rarely block access to funds without good reason—this happens much less frequently than, for example, checking specific transactions.

Let's consider the process that accompanies this check.

Methods of checking transactions and clients in the banking sector

In most cases, the bank follows a certain sequence of actions: first, it identifies a transaction that arouses suspicion, then suspends its execution and informs the client about it. After this, a thorough investigation is conducted, based on the results of which a decision is made.

A suspicious transaction is identified using an automated process that is used in most commercial banks. A computer program performs an initial assessment of all transactions using criteria set by the bank. If a suspicious transaction is detected, the program suspends its execution and transfers the information to a bank employee for more detailed analysis.

Information for the client. The Bank informs that this operation is temporarily suspended until further clarification is received. Typically, this information is transmitted via push notification in the bank's app.

Banks are trying to avoid using phone calls and SMS to communicate with clients, as the number of fraud cases has increased and clients have decreased their level of trust in such methods of communication.

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During the investigation, the bank requires confirmation of the legitimacy of the transaction, as well as confirmation that it was indeed initiated by the account holder. Depending on the specific circumstances, the institution may request, for example, a contract with the counterparty, a property sale agreement, payment documents, or correspondence with the recipient of the funds.

The user has the option of sending evidence via chat in the banking app or presenting it directly at the nearest branch.

The bank has the right to send inquiries not only about current transactions but also about those that have been completed previously. This may occur in situations where, for example, a client has begun regularly transferring funds from a corporate account abroad, withdrawing cash, or exceeding the limits set by the bank.

The bank's decision-making process. If the client has provided all the necessary documents and confirmed the legitimacy of the transaction, the bank continues processing it. The time required to complete this process can vary from several hours to several days after suspension, depending on the client's response time.

During the investigation, the bank may impose certain restrictions on transactions. For example, a company director may need to personally visit a bank branch to process transactions on the account, including settlements with partners. Alternatively, permission to perform transactions will be limited to essential payments, such as employee salaries, office rent, taxes, and other mandatory expenses.

What should I do if my account is blocked?

If a client delays responding to a request regarding the type of transaction being conducted, or if the transaction raises doubts about its legality, the financial institution has the right to temporarily suspend remote access to the account and terminate cooperation with the client.

To unblock remote access to your account, you must contact the banking institution and provide supporting documents that demonstrate the legitimacy of your payments and transfers. The most effective option is to visit the office in person, where you can present, for example, the relevant agreements. This is usually sufficient. After receiving all the necessary data, the bank will conduct its own review and make a decision.

How to avoid the risk of blocking your bank account

There are several simple recommendations that will help reduce the likelihood of your account being checked or remote access being blocked.

Follow the correct procedure when performing regular transactions with settlements of an individual entrepreneur or legal entity. It is extremely important to make wage payments on time, as well as pay for the services of contractors in accordance with concluded contracts and pay rent. If a client prefers to withdraw cash instead of paying invoices through the bank, this may raise suspicions among financial institutions.

When making payments to individuals, be sure to indicate their purpose. For example, you can write "on credit" or "birthday gift." However, if you intend to borrow a significant amount, it is recommended to additionally draw up a loan agreement and have it notarized.

Be sure to conduct due diligence on the counterparties you do business with. You can do this through various resources, such as the Central Bank of the Russian Federation's "Know Your Client" platform, as well as the websites of the Federal Bailiff Service or the Federal Tax Service.

It is possible that a company operates legally but is partnering with an unreliable partner. In such a case, the bank has the right to demand an audit of financial accounts to ensure that the organization is not involved in any illegal activities within its business structure.

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Counterparties are legal entities or individuals with whom an organization enters into business relations, When entering into contracts or agreements. Due diligence on counterparties is necessary to minimize risks associated with potential financial losses or legal consequences. This ensures the partner's reliability, solvency, and the absence of a negative reputation.

There is a rule prohibiting payments to counterparties exceeding 100,000 rubles without prior verification. This is due to legal requirements aimed at combating money laundering and terrorist financing. Compliance with these regulations helps avoid potential sanctions and protect the company's interests.

Respond to bank inquiries promptly. Even if an error was made in the documents, such as an incorrect account number, it can be quickly corrected if you promptly contact a bank representative.

The Central Bank of the Russian Federation has developed a number of guidelines intended for individual entrepreneurs and organizations. These recommendations contain detailed information on how to minimize the likelihood of attracting increased attention from banking institutions.

Key aspects of account blocking according to Federal Law No. 115 in four points

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