ACH debit return - OFAC frozen acct - now what?

Posted By: Madawaska

ACH debit return - OFAC frozen acct - now what? - 07/27/17 04:36 PM

Received ACH return notice that customer's account is frozen at other bank.

OFAC searches on our end do not reveal any reason for the frozen account. Should we contact other bank to disclose reason for frozen acct?

The frozen acct is the collateral on customer's loan. What is our bank's recourse on collecting on this loan?

As the transaction was rejected and returned to us, do we also have to report this to OFAC?
Posted By: rlcarey

Re: ACH debit return - OFAC frozen acct - now what? - 07/27/17 04:40 PM

How can an account at another bank that is ACH accessible be collateral for one of your loans.
Posted By: BrianC

Re: ACH debit return - OFAC frozen acct - now what? - 07/27/17 04:55 PM

The fact that an account is frozen may or may not have anything to do with OFAC. It could be that the depository bank received a garnishment or tax levy. You won't know unless you a) ask your customer or b) subpoena the other bank. You should be discussing with bank counsel what options you have available to you depending on what the legal proceedings are that impacted the account.

Lesson learned here, if you are going to hold cash as collateral, make sure it is on deposit at your bank.
Posted By: rlcarey

Re: ACH debit return - OFAC frozen acct - now what? - 07/27/17 04:59 PM

I highly doubt that they have a perfected interest in an ACH accessible account anyway. Perfecting an interest in a CD at another bank is hard enough to convince the other bank to do.
Posted By: BrianC

Re: ACH debit return - OFAC frozen acct - now what? - 07/27/17 05:02 PM

Agreed. This type of arrangement would be a new one on me.
Posted By: Madawaska

Re: ACH debit return - OFAC frozen acct - now what? - 07/27/17 05:08 PM

Thanks for the feedback. Still investigating; apparently the loan payment draw was not coming from the collateral account, but another account that the customer holds.
Posted By: BrianC

Re: ACH debit return - OFAC frozen acct - now what? - 07/27/17 05:30 PM

So it sounds like you need to ask the customer to provide an alternative means of payment.
Posted By: rlcarey

Re: ACH debit return - OFAC frozen acct - now what? - 07/27/17 05:35 PM

Sounds to me like a house of cards that is being subjected to a strong wind.
Posted By: Madawaska

Re: ACH debit return - OFAC frozen acct - now what? - 07/27/17 08:06 PM

What a mess! Verbally confirmed with returning bank that wrong reason code was used on the return. So I am requesting we return the return and have them fix the code!

There went my day.