Why a bank may stop a payment

A bank knows the usual nature of a client's settlements and pays attention to payments that require additional explanation under its financial monitoring rules. A request may be triggered by a new counterparty, an unusual amount, another country, a change in the type of payments, a complex ownership structure or information the bank lacks to understand the transaction.

Certain cases of suspension of financial transactions are expressly provided for by financial monitoring legislation. In addition, the bank complies with sanctions and currency requirements. The director receives a written or electronic request from the bank and answers the questions actually asked, attaching documents confirming the specific payment.

The funds remain under bank review until a decision is made on the specific payment. Further action depends on the reason stated by the bank and the applicable law. The director controls the response deadline, while the accountant and lawyer help confirm the amount, contract, delivery and other facts the bank asks to be explained.

When a bank stops a payment, the director first needs the exact reason: which transfer is being checked, what information the bank requests and by what deadline a response is required. The owner can then assess whether the contract and invoice are sufficient or whether documents are needed on the goods, service, source of funds or counterparty. Such a response addresses the bank's actual question and helps return settlements to normal operation more quickly.

The financial monitoring law gives a bank the right to suspend a suspicious financial transaction. Under NBU rules, such a suspension without prior notice to the client is imposed for two working days including the day of suspension; any further period depends on decisions taken in accordance with the law.

Which documents confirm a payment

For payment for goods, the contract, specification, invoice, dispatch or acceptance documents and the parties' details are usually important. For services, this means the contract, a description of the work actually performed, an acceptance certificate or other confirmation provided for by the agreement. Each document should relate to the same payment, amount and counterparty.

If the bank asks for the source of funds, the director provides documents explaining the receipt: revenue under contracts, an owner's contribution, a loan, repayment of a loan or another lawful source. For an international payment, the counterparty's country, delivery terms, transport and the connection of the goods or service with the company's activities may be relevant.

It is better to write the explanation briefly: who is paying, to whom, for what, under which contract, how the amount was determined and what the payer receives. Attachments should be arranged in the same order. This response helps the bank employee quickly see the connection between the payment and the documents.

For an international payment, the bank often compares the purpose of the transfer with the contract, amount and client's activities. The director explains the economic substance of the transaction: what is being bought or sold, at what price, when delivery takes place and who the counterparty is. A clear business basis for the payment is much more useful than a large set of documents with no connection to the specific transaction.

How to restore settlements and prepare the next payment

After sending the response, the director monitors messages from the bank and provides additional confirmation if required. If the bank allows the payment to proceed, the accountant stores the response and bank confirmation together with the transaction documents. These documents will be useful for the next payment to the same counterparty.

If the bank states what information will be needed for future settlements, the director takes this into account before the next payment. The contract and invoice should clearly state the subject, price and parties, and the accountant should have documents confirming actual performance. For a new type of business or significantly larger amounts, the owner can inform the bank in advance and clarify which confirmations will be required.

UBC can compare the contract and documents for a stopped payment, prepare an explanation and help the director respond to the bank's request. The client receives a prepared response to the bank and can continue settlements after its decision, using confirmation of the transaction for subsequent payments under similar contracts.

If the bank asks to confirm the origin of funds, the owner shows the source of the money: revenue, a contribution, a loan, sale of an asset or another lawful basis. For a company, supporting documents may include contracts, bank statements for previous payments, financial statements and primary documents. The director's task is to give the bank a clear answer specifically about the funds being used for this payment.

At the same time, the owner retains the ability to make other settlements in accordance with the banking service terms. For a business with a large number of payments, it is useful to have a reserve account with another bank so that one request does not stop work with all suppliers and clients. The director opens the reserve account in advance, during the normal operation of the business.

If the bank requests additional information after receiving the response, the director clarifies exactly which question remains open. It is important for the owner to keep the correspondence and the list of documents already provided: each subsequent response then supplements the previous one and the accountant does not waste time resending the same materials.

In a contract with a counterparty, it is useful for the director to have a clear subject, price, payment procedure and performance documents. When these terms match the invoice and payment purpose, the accountant can quickly explain the business substance of the transfer to the bank. A properly documented transaction helps both with ordinary accounting and with a bank request.

The response to the bank should be built around the specific payment, contract and actual performance. UBC will help the director prepare an explanation and supporting evidence according to the request. After the bank's decision, the client will be able to continue settlements and use the prepared documents for subsequent payments under this transaction. A short question can be sent through the quick contact form.