Why payment systems block and close accounts

Digital banks (other names: neobanks, payment systems) have become significant players in the world of financial services in recent years, and in many respects even confidently pushed conservative banks. This became possible due to the fact that digital banks open accounts faster, do not need to immerse themselves in bureaucratic procedures, are quite client-oriented and, in addition, make payments quickly and at fairly low rates compared to banks. Digital banks have become a powerful tool for international business and it is now rare to find a company operating in the global market with a single account in a traditional bank. Often corporate clients have a set of accounts in a bank and a payment system, or several accounts in different non-banks.

But, sometimes in payment systems, client accounts are blocked / limited, and sometimes they are completely closed. In contrast to the limitation of the account, the closure is a non-returnable event and is the termination of the client’s cooperation with the financial institution. Why this happens and how to avoid it for the client – these are the questions we will consider with you in our article.

Suspicious operations and non-standard client activity on the account may be the reasons for limiting work. It is important to understand that the basis for blocking an account may be the triggering of one or more criteria for suspicious transactions:

• Client login to the online account from a new device;
• The payment system captures the entrance to the account through a non-standard location and a non-standard time of day for the client’s business activity;
• Payment system managers cannot contact the client using the stated contact information;
• The client makes an unusually large transaction amount (i.e. the payment amount differs from the standard average account transaction amount);
• Payment to a new counterparty without prior informing the financial institution;
• Or the client sends funds to a problem counterparty for which there is negative information;
• Client demands immediate payment from neobank;
• The client does not have full information about the business activities of his own company and is not able to provide explanations of the essence of the operations carried out;
• Client provides conflicting information;
• An insignificant account balance, when an incoming receipt is followed by an outgoing transaction in the same or slightly less amount (this indicator is generally considered an indicator of a shell company, which may lead to a complete break in business relations with the payment system).

For trouble-free and comfortable operation of your account, it is important:

1)Be in touch and in active communication with the payment institution. Make sure that your financial number is always with you and in touch. Remember to check your mail regularly. And certainly, do not ignore the letters in the online account.
2)Always be ready to document any transaction on the account. Do not postpone the documentary support of the transaction for later. Make sure that the entire package of necessary documents is at your fingertips, and you can immediately provide it to the payment order if you receive a request.
3)Promptly, calmly and fully provide answers to questions of managers. Excessive nervousness in communication, disagreement with the request and the requirement to make a payment will definitely not help, but will only aggravate the situation.
4)Be ready to provide all requested documents, as well as answers, no matter how unexpected the request may be for you. The bank fulfills the task assigned to it by the regulator to control and verify client transactions, and it needs help in this for further uninterrupted work on accounts.
5)Check your partners, especially pay special attention to new business counterparties. The imprudent choice of a new partner can lead to trouble for you, so you should make every possible effort to check the new counterparty.
6)Coordinate in advance with the payment system the beginning of work with a new counterparty. Prepare a complete package of documents, describe the scheme of future settlements with partners and submit it to the payment institution in advance.
7)Avoid non-standard and atypical payments. In standard work on accounts, it is important to adhere to one “rhythm” and payment amounts. By analogy with a cardiogram, sharp jumps should and attract attention. If you absolutely need to carry out such operations, notify the neobank in advance.
8)Timely notify about the new direction of your business before the start of the movement of funds within it. If you are starting work in a new business vector and this was not declared to the payment system at the time of opening the account, we highly recommend that you obtain the consent of the payment system to service such operations of your company before receiving and sending payments within the new direction.
9)Coordinate complex and atypical transactions for your business in advance. That’s definitely not worth relying on the fact that an atypical operation will pass without the attention of controllers. Always act on the warning and then there will be no problems in the work of the accounts.

Account blocking actually means that the time has come for active communication between the client and the financial institution. The further scenario of the development of events will depend on the quality of this work – either the account will be unblocked and you will be able to work again, or, in the case of a negative scenario, the account will be closed. Closing an account is often an irrevocable and unilateral measure of financiers. You should be aware that payment institutions terminate cooperation with the client only as a last resort, when the risks of continuing cooperation with the client significantly exceed the potential profit of the institution from the client. It would be easier for any financial institution to initially refuse to open an account for a client than to close an already working account.

Our key recommendation remains the advice to always have a plan B, namely at least two open and maintained accounts in payment systems and banks. We at Finance Business Service will be happy to help you open an additional account for the safe operation of your business!