Your account blocked after crypto transactions: what to do

People come to me saying "the bank has blocked everything without any explanation". Almost always there is an explanation; it is simply written in the language of banking compliance. Here is what lies behind the restriction, how superficially similar situations differ, and how people get out of them.

Three different things that all get called a block

Refusal to execute a particular transaction. The bank does not process the payment, but the account still works. The basis is clause 11 of Article 7 of Federal Law No. 115-FZ: the bank suspects that the transaction is being carried out for money laundering purposes.

Restriction of remote banking. Internet banking is switched off and payments are accepted only on paper. Formally the account is not blocked; in practice the business has stopped. This measure rests on the bank's internal control rules and on the contract.

Suspension of transactions and freezing of funds. The harshest scenario — applied where the person has been placed on a list or where there is a decision of the competent authority.

The difference matters: in the first two cases you are in dispute with the bank, in the third with a state body, and the route is different.

Why cryptocurrency transactions attract questions

Transactions in digital currency are not in themselves prohibited. The problem lies elsewhere: the payment comes not from a counterparty under a contract but from an individual or a payment aggregator, the stated purpose of the payment does not match the business activity, the amounts are broken up into smaller ones, and the money is withdrawn on the day it arrives.

For the bank this is a set of indicators drawn from the Bank of Russia's guidance: a pass-through character, no connection with the declared type of activity, a low tax burden on the account, and the absence of ordinary outgoings — rent, wages, taxes.

The second common cause is a counterparty who is on a list, or one about whom the bank has accumulated negative statistics. Here you suffer for someone else's behaviour, and that is the most galling part.

What the bank does and what you have to do

The bank sends a request: documents on the transactions, explanations of the source of funds, information about the business. The deadline is usually short, from three to seven working days.

You have to answer with documents, not with letters about what an honest entrepreneur you are. What works:

• contracts with the counterparties through whom the money passed, together with annexes and specifications;
• primary accounting documents: acceptance certificates, delivery notes, reports;
• confirmation of the source of funds in digital currency transactions: exchange statements, transaction history, documents on acquisition;
• tax returns and payment orders for taxes;
• an explanation of the nature of the business in plain language, describing where the money comes from and where it goes.

Separately: if part of the activity really was a mistake — for example, personal funds passed through the company account — it is better to say so directly, with an explanation. Trying to pass such a thing off as revenue falls apart at the first question.

If the bank refuses a second time

A refusal is recorded and goes into the interbank system. Other banks then see the flag and treat the client with suspicion. This is the very effect where, after a single refusal, nobody will open an account for you.

The rehabilitation procedure is set out in the statute: first an application to the bank with documents and a request to review the decision, which the bank considers within seven working days. If the refusal is confirmed, an application goes to the interdepartmental commission at the Bank of Russia, with a review period of twenty working days.

The commission works from documents, so everything depends on the quality of the file. In my practice what usually proves decisive is not the legal argument but the completeness of the primary documents: once the whole chain is visible from contract to delivery to tax, the question goes away.

What not to do

Do not rush to move the balance to another bank in small amounts — that is exactly the indicator that confirms the suspicion.

Do not close the account on your own initiative before the situation is resolved: the refusal flag will remain and the chance to argue will disappear.

Do not switch to a new legal entity and start with a clean sheet. The link between the companies through the founder and the address is visible, and a history of "one company a year" only heightens suspicion about the new account.

What reduces the risk in advance

An account with rent, wages, taxes and comprehensible expenses running through it looks alive. An account with nothing but receipts and withdrawals looks like a conduit.

It helps if the transactions match the declared activity codes, if written explanations of unusual payments are provided before any request arrives, if personal and business money are kept apart, if primary documents are retained for every large transaction, and if you are ready to explain any chain of payments in fifteen minutes.

This material is for information only and is not a substitute for advice on a specific matter.

If the bank has restricted your transactions and is demanding documents, write to us — the first consultation is free when an engagement is signed.

Vladimir Kovalev — lawyer, founder and managing partner of Kovalev & Partners LLC