Asking Yourself ‘Why my Bank Account is Under Investigation?’ One of These Could be the Reason.
It can be scary when your bank account is under investigation. You’re wondering if you could be out hundred—or even thousands—of dollars. You’ve heard horror stories about cardholders who’ve literally seen their lives ruined by financial crime.
So…what’s going on?
If your bank account is under investigation, it’s likely because of five possible scenarios. If you’re a cardholder, it could be that they believe someone charged an unauthorized transaction to your account. If you’re a merchant, it might be because of chargebacks. In either case, the investigation might be tied to debts or suspected illicit activity.
In this post, we’ll explore the top 5 reasons why banks launch investigations, and what might lead your bank to take this action. We’ll also explore the potential consequences of each, and what you can do to move forward.
Do Banks Have the Right to Investigate My Account?
Yes, banks can investigate your account and examine your personal information. In fact, banks do what they do because of the law.
Banks are required to abide by a complex body of federal regulations. There are laws in place to try and prevent fraud whenever possible, and to ensure that consumers are protected and that both money and credit are able to circulate freely without issue.
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Banks can face serious consequences for failing to abide by these rules. They can be fined, and bank officers can even face prosecution if they don’t conduct due diligence. At the end of the day, these banks need to protect themselves. That means placing your bank account under investigation if they have any reason to suspect fraud.
Banks have some leeway in choosing whether to freeze or close cardholders’ accounts. The reasons they might do this were outlined in your customer agreement. In the next section, we’ll touch on some of the most common reasons they might do this.
Top 5 Most-Common Reasons for Bank Investigations
So, now you’re probably wondering “why my bank account is under investigation.” You’re looking for a specific reason to explain this irritating (and potentially very dangerous) situation.
Let’s look at some of the most common reasons why your financial institution might put your bank account under investigation. These can apply to individual consumers, or to businesses. We’ll also give you some information about what steps to take next if your account is frozen or closed as a result of one of these issues:
For Your Safety
If fraud actually took place on your account, you want to let the bank proceed with their investigation. The good news is that, under the FDIC, your account will be insured for up to $100,000 in the US, less your share of liability. If you report debit card fraud within 60 days, you’ll be liable for no more than $500. In cases of credit card fraud, your liability is capped at just $50.
If, however, the freeze was placed in error, you want to reach out to the bank immediately. A phone call with a bank official should be sufficient to clear up any confusion, end the inquiry, and get your account back.
If you owe the debt in question, there isn’t much recourse available to you aside from either paying or renegotiating the debt. We suggest you try to start by finding out who the creditor is (your bank should be able to give you this information). We also recommend seeking legal advice, and possibly credit counseling if you can’t pay the debt right away.
You're Considered too Risky
You can still do business, even if you operate in a high-risk vertical. However, you probably won’t be able to work with a standard bank.
You’ll need the services of an acquiring bank that specializes in providing accounts to high-risk merchants. The account will probably be more expensive, and come with more restrictions: after all, the bank needs to offset the cost of the increased chargeback risk. However, you can still do business just like before.
You Have too Many Chargebacks
Getting chargebacks under control is a challenge for a lot of merchants. Your first step should be identifying chargebacks by their source (merchant error, criminal fraud, or friendly fraud). You can then deploy the right strategy to address the issue and prevent disputes.
Seeking help from a qualified chargeback management specialist is a great option here. This will let you prevent chargebacks, thereby eliminating the reason why the bank account is under investigation. It will also allow you to spend your time and resources into growing your business.
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The Bank Suspects Illicit Activity
If you’re wrongly suspected of criminal activity, you want to clear this up with the bank—and with law enforcement—as quickly as possible.
We suggest reaching out to the bank immediately. They can give you some information about the investigation, and advise you whether it’s necessary at this point to contact the authorities. Contact a legal professional right away if you’re at all involved in a legal investigation. They can help you either resolve the situation, or give you counsel in case any charges are filed.
So, now you're saying "I know my bank account is under investigation, and I know why. What do I do about it?"
For cardholders these cases tend to be more isolated. If you're not implicated in any criminal activity, then simply addressing the problem in the manner outlined above should work. But, if you're a merchant facing the problem of having too many chargebacks, it could call for a longer-term, more protracted strategy.
At Chargebacks911, we offer a variety of expert-deployed tactics and machine learning-based technologies designed to identify—and eliminate—chargebacks at the source. Contact us today to see how much you stand to save.
How do I know my bank account is under investigation?
If your bank account is under investigation, the bank will typically notify you. You might receive an informal notification via email, but generally, you’ll also get a formal notification by mail. This is especially true if it necessitates the bank freezing your account.
Is my bank allowed to investigate my account?
Yes. Banks are actually required by law to investigate their customers’ accounts if they suspect criminal activity, regardless whether it’s perpetrated by or against the consumer. However, in cases of chargebacks, for instance, the bank might investigate as a matter of best practice if they see your chargeback rate approaching preestablished thresholds.
How long can a bank investigate your account?
There’s no formal legal criteria that sets a hard limit on the length of an investigation. In effect, a bank can investigate your account for as long as it needs to in order to determine whether they need to take action about fraud, abuse, or other issues.
Why is my bank investigating my account?
The reasons why a bank might investigate your account can vary. For consumers, it may be because they detected suspicious activity. For merchants, the most common reason is either to address suspicion of money laundering, or due to chargebacks.
How long can a bank legally freeze your account?
An account freeze resulting from an investigation will usually last for about ten days. However, there’s no set limit for how long a freeze may last. A bank can effectively suspend your account at any time for as long as they need to in order to complete a thorough investigation.
What should I do if my bank account is frozen?
Your first step should be to contact the bank to get the details of the situation. If your bank account is under investigation because someone tried to steal from you, they can advise you on steps to protect yourself and minimize the damage. If your account is frozen for some other reason, though, you should get what information you can, and possibly contact a legal professional (depending on the circumstances).