Ramesh, the owner of a small vegetable shop near our house, said, “Sir, the police have frozen my bank account, please give me the cash,” when I went to pay through UPI. On inquiry, it was found that the police had frozen Ramesh’s bank account, in the name of some cyber scam. Such cases are increasing a lot now a days. The esteemed courts have given directions in many such cases that the entire account cannot be frozen, only the relevant amount should be frozen and the victim should be given a clear reason for the freezing and an opportunity to express his stand or defense against it. Indiscriminate freezing of bank accounts has several serious consequences such as financial ruin of small businesses, disruption of operations of corporate houses, loss of trust in the banking system, violation of due process and fundamental rights.
Here, looking at it from another perspective, most of the money seized in cyber crimes comes from debit freezes imposed on the bank accounts of cyber criminals. So, as soon as someone files a complaint about losing money to cybercrime, the cyber police immediately imposes a debit freeze on the transferred account, and the accounts to which the money was transferred from that account, and the accounts to which the money was transferred from there, and so on. This allows the officials to use the remaining money from that account and the money that is coming into that account to return it to the victim of cybercrime.
What are the reasons for freezing your bank account :-
- Unauthorized transactions, Identity theft or other types of financial fraud.
- Court or government agency or law enforcement agency orders
- Money laundering or financing of terrorism.
- Failure to comply with account maintenance requirements such as KYC updates or negative balances.
- For unusual account activity such as large or unusual transactions, sudden increase in account activity or unexpected changes in spending patterns.
- For recovery of unpaid government taxes.
- If there is no transaction in your bank account for a long time
- Sometimes, money is transferred to your account by mistake. If this money is linked to illegal activities, your account will be frozen.
To remove the freeze on your bank account, you need to :-
- First of all, if the police freeze your account due to any cyber crime complaint and you have not done anything wrong, there is no need to panic.
- Contact your bank and find out the real reason for the account freeze, so that you can get a solution.
- If it is due to KYC update or any suspicious transaction, remove the freeze by providing the appropriate document proofs.
- If the reason for the freeze is due to long-term inactivity, deposit some money and remove the freeze on your account.
- If the bank account is frozen as per the directions of the police or court or any government agency, contact a lawyer and as per their advice, resolve the issue legally with the appropriate document proofs and remove the bank account freeze.
- If the freeze is related to a government investigation or law enforcement inquiry, cooperate fully with the authorities and expedite the resolution of the issue and provide them with any information or documentation they request. Continue to consult your lawyer regularly and act on their advice only.
- Depending on your situation and legal advice, you may file a petition or representation with the appropriate court or authority to challenge the account freeze and seek relief and request the freeze on your bank account to be lifted.
To prevent your bank account from being frozen, you should :-
- Regularly review your account statements and transaction history for any unusual or unauthorized activity.
- Keep your contact information, phone number, and email address information up to date with your bank so that they can contact you promptly when needed.
- Respond promptly to any notices or requests from your bank.
- Avoid using your primary account for Bitcoin P2P trading, casual transactions, or linking it to your UPI.
- Avoid large transactions on unverified platforms
- Protect your account information and passwords and be careful when sharing bank information online or over the phone.
- Ensure that transactions are carried out in your account regularly.
What does Indian law say about bank account freezing :-
Under Section 106 of the Bharatiya Nagarik Suraksha Samhita (BNSS), bank accounts are considered “assets”, which allow authorities to freeze them during investigations. The Bharatiya Nagarik Suraksha Samhita (BNSS), under Section 318(4)[3], deals with fraudulent financial activities and this provision provides a framework for freezing accounts involved in such fraudulent activities to ensure that those responsible do not further misuse the financial system while investigations are underway. Money laundering bank accounts can be frozen under Section 17(1)(iv) of the Money Laundering Act, 2002 (PMLA). Under Section 66 of the Information Technology Act, 2000 (IT Act) which deals with hacking, phishing and Identity theft allows police to freeze bank account of the fraudsters or the accounts to which the fraud money is transferred to for further investigation and prevention of that money being en cashed or transferred out. you can read more about Indian cyber laws in my previous article.