By Kristine Lazar
/ KCAL News
Bank customers report unexpected account freezes
A growing number of bank customers are having their accounts shut down without much warning or explanation, leaving them without access to their money.
The banks do this when they suspect some form of bank fraud. But experts say in the majority of cases, no fraud is ever found, leaving customers to wonder, Why Me?
When we met Elad Nehorai and his family, they had been at a Bank of America branch in West Los Angeles for hours trying to get access to their life savings. That morning, when Nehorai tried to log into his online bank account, he got an alert.
"Bank of America told me it was shut down. They refused to give me an explanation. They told me I would get my money after it was resolved," said Nehorai.
Which he says he was told would take 10 to 20 days.
"All of a sudden I find out I'm broke. I can't feed my family and I can't pay any expenses," said Nehorai.
Elad Nehorai, a writer with more than 43,000 Twitter followers, tweeted about his experience.
"It's another one of those situations where you just, How do you deal with this massive bank, this massive power that you have no control over?" said Nehorai.
His tweet has since gone viral.
"I was shocked to find out that this is actually relatively common," said Nehorai.
Last year, CBS News Chicago profiled a woman who had a similar experience, also with Bank of America.
Once we arrived to interview Nehorai outside the bank, he says the mood quickly changed and the bank decided to allow him to transfer all of his money into another account.
"So that's the part that hasn't been resolved. They literally will not give me any information," said Nehorai.
Banking expert J.D. Koontz says the reason banks shut down accounts is because the accounts have been flagged for suspicious behavior.
"And unfortunately, some good people are being caught in the net with the bad when they try to weed out who may be causing problems," said Koontz.
Banks are required to file Suspicious Activity Reports, or SARs, to regulators. In 2014, banks filed about 830,000 SARs. In 2021, that number jumped to more than 1.4 million.
"Banks are always under the watchful eye of the regulators, who will fine them for not doing their job or not protecting consumers," said Koontz. "And so by freezing or closing someone's account, they don't necessarily get penalized for that, and so they probably tend to err more on the side of caution, which, unfortunately does create hardships for individuals."
But a 2018 report by the Bank Policy Institute found that less than 5 percent of suspicious activity reports actually warranted follow-up by law enforcement.
After speaking to Bank of America, we learned that the FBI had flagged Nehorai's account. This was after he says he was the victim of "email masking," where a scammer pretended to be him and asked one of his clients for money. He reported that fraud to the FBI last week.
Our expert also recommends putting your money in multiple accounts at different banks, so if one account is closed down, you are not left without access to any money.
In a statement to KCAL News, Bank of America pointed out that its disclosures given to customers when they open an account inform them that they can shut down that account at any time and for any reason and that they can freeze your funds if they suspect fraud.
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As an expert in banking and financial systems, I can shed light on the alarming trend discussed in the article "On Your Side" by Kristine Lazar. The increasing incidents of bank customers experiencing unexpected account freezes reflect a complex interplay between financial institutions, regulatory requirements, and the rising threat of fraudulent activities.
Firstly, the article rightly points out that banks often resort to shutting down accounts when they suspect fraudulent behavior. However, the crucial insight here is that, as revealed by Elad Nehorai's case, a significant portion of these actions may not be justified. This is a matter of grave concern for account holders who find themselves without access to their funds, prompting the question: "Why Me?"
Elad Nehorai's experience, shared through social media, underscores the power dynamics at play when dealing with large financial institutions. His case is not an isolated incident, as highlighted by the acknowledgment that such account freezes are relatively common. This assertion is supported by similar cases reported in the media, such as the one involving a woman in CBS News Chicago's profile last year.
The article introduces J.D. Koontz as a banking expert who explains that accounts are flagged for suspicious behavior, leading to freezes. This is a critical aspect, and Koontz emphasizes that, unfortunately, innocent individuals may be ensnared in the net meant to catch fraudulent activities. The regulatory aspect is also crucial, with banks obligated to file Suspicious Activity Reports (SARs) to regulators. The staggering increase in SARs from 2014 to 2021, as mentioned, suggests a heightened vigilance by banks, possibly driven by regulatory pressures.
However, a significant revelation comes from a 2018 report by the Bank Policy Institute, indicating that less than 5 percent of suspicious activity reports actually warranted follow-up by law enforcement. This statistic raises questions about the effectiveness of the current system in distinguishing genuine threats from false positives.
The case of Elad Nehorai takes an unexpected turn when it is disclosed that the FBI had flagged his account after he reported being a victim of "email masking." This adds a layer of complexity, showcasing the challenges banks face in discerning legitimate customer actions from fraudulent attempts.
To navigate such uncertainties, the article suggests a practical solution endorsed by the banking expert: diversifying funds across multiple accounts at different banks. This strategy aims to mitigate the impact of an account closure, ensuring that individuals are not left entirely without access to their money.
In conclusion, the article highlights the intricate dynamics of account freezes, weaving together narratives of innocent customers caught in the crossfire of fraud prevention measures, the regulatory landscape, and the evolving tactics of scammers. This multifaceted issue requires a nuanced approach to strike a balance between protecting consumers and ensuring that legitimate account holders do not suffer undue hardships.
