Financial institutions are permitted to freeze a customer's account if they believe that the account is at risk of being misappropriated or they suspect unauthorized activity. The institution's policies and customer agreements will discuss this option; for example, Bank of America's Deposit Agreement and Disclosures states, "If at any time we believe that your account may be subject to irregular, unauthorized, fraudulent or illegal activity, we may, in our discretion, freeze some or all of the funds in the account and in other accounts you maintain with us, and/or delay transactions, without any liability to you, until such time as we are able to complete our investigation..."
Financial institutions need to balance various federal and state consumer protection laws designed to protect account holders from wrongfully being denied access to their funds with fraud-prevention laws imposing various reporting requirements and restrictions on permitting illegal activity. Both federal and state laws protect financial institutions from taking affirmative action with respect to an account under certain circumstances. For example, Utah's Financial Exploitation Prevention Act provides states, "If a qualified individual reasonably believes that executing a requested wire transfer will result in financial exploitation, the covered financial institution may (a) delay the wire transfer; and (b) contact [authorities]..." Utah Code 7-26-201(2).
These laws and policies often become relevant in the case of financial accounts owned by elderly or otherwise vulnerable adults, and various laws and policies specifically address such specific situations. See, for example, Utah Code 7-26-301(1). It is not uncommon for an elderly account holder to be in the early stages of dementia or otherwise compromised such that a question arises as to their capacity to properly manage their finances. Such situations can lead to competing claims to an account among family members. Again, quoting Bank of America's Deposit Agreement, "We are not required to make payment from an account to [any] person claiming an interest in any funds in the account [if]... there may be a bona fide dispute between the signers, beneficiaries, payees, or other persons concerning their rights to the account proceeds..."
One tool available to advocates for vulnerable adults is to put financial institutions on notice of a dispute over an account or exploitation of their client. This may be all the bank needs to freeze the account until a proper investigation, settlement agreement, or court order can be obtained.
Financial institutions need to balance various federal and state consumer protection laws designed to protect account holders from wrongfully being denied access to their funds with fraud-prevention laws imposing various reporting requirements and restrictions on permitting illegal activity. Both federal and state laws protect financial institutions from taking affirmative action with respect to an account under certain circumstances. For example, Utah's Financial Exploitation Prevention Act provides states, "If a qualified individual reasonably believes that executing a requested wire transfer will result in financial exploitation, the covered financial institution may (a) delay the wire transfer; and (b) contact [authorities]..." Utah Code 7-26-201(2).
These laws and policies often become relevant in the case of financial accounts owned by elderly or otherwise vulnerable adults, and various laws and policies specifically address such specific situations. See, for example, Utah Code 7-26-301(1). It is not uncommon for an elderly account holder to be in the early stages of dementia or otherwise compromised such that a question arises as to their capacity to properly manage their finances. Such situations can lead to competing claims to an account among family members. Again, quoting Bank of America's Deposit Agreement, "We are not required to make payment from an account to [any] person claiming an interest in any funds in the account [if]... there may be a bona fide dispute between the signers, beneficiaries, payees, or other persons concerning their rights to the account proceeds..."
One tool available to advocates for vulnerable adults is to put financial institutions on notice of a dispute over an account or exploitation of their client. This may be all the bank needs to freeze the account until a proper investigation, settlement agreement, or court order can be obtained.
