What Is an Account Freeze?

An account freeze is an action taken by a bank or brokerage that prevents some transactions from occurring in the account. Typically, any open transactions will be canceled, and checks presented on a frozen account will not be honored. However, the account holder can still deposit money into the account.

Account freezes can also be initiated by either an account holder or a third party, such as a government, a regulatory authority, or a court order. Many banks and credit card providers are now offering a bevy of online and mobile banking options including the ability to freeze an account with the ‘click of a button.’ In the event of a lost or stolen card, a cardholder can quickly “freeze” the account without contacting directly or visiting client service locations in person. Mobile and on-demand banking services are increasingly popular with customers interested in self-service and enhanced cyber security features.

An account freeze more commonly may be known as “freezing an account,” as one might say in general conversation.

Understanding an Account Freeze

A government or regulatory authority may freeze an account because of suspicious activity, suspected criminal activity, civil actions or liens filed against the account. Furthermore, a bank or brokerage account may be frozen when the account holder dies. Once the appropriate documentation is presented, a new account will be opened in the beneficiary's name with access to the assets.

Multinational enterprises run the risk of having foreign direct investment accounts frozen or more specifically ‘blocked’ in international finance parlance. During times of political unrest, national governments may ‘block’ foreign entities from withdrawing assets. As a form of transfer risk, national governments might use these discriminatory tactics when their central banks are running short of foreign exchange, for instance.

No universal set of standards or practices can describe the many reasons an account can be frozen. It often comes down to account type (or purpose), local and national regulations, or unfavorable political and economic sanctions and blowback.