The Wire Freeze Problem
Foreign investors face a unique challenge that domestic investors never encounter: US banks are required by law to scrutinize international wire transfers. Under the Bank Secrecy Act (BSA), anti-money laundering (AML) regulations, and OFAC sanctions requirements, every inbound international wire is subject to compliance review.
For legitimate investors, this creates a serious operational problem. Your wire arrives at the receiving bank. The compliance department flags it for review. They send you a letter requesting "source of funds documentation." You have 10 days to respond. If your documentation is insufficient, the funds remain frozen. Your real estate closing fails. Your business acquisition deadline passes. The seller moves on to another buyer.
Real Consequences of Wire Freezes
- Failed real estate closings and lost earnest money deposits
- Business acquisition deals falling through
- Investment opportunities going to other buyers
- Account closures and banking relationship termination
- Suspicious Activity Reports (SARs) filed with FinCEN
Bank Compliance Guides
Navigate the US banking system as a foreign investor. Each guide addresses a critical aspect of moving and protecting your capital.
Move Funds Without Freezes
Practical strategies to prevent your wire transfers from being frozen. Understand what triggers compliance holds and how to avoid them.
- Wire transfer red flags that trigger holds
- Pre-notification strategies with receiving banks
- Structuring transfers to minimize scrutiny
- What to do if your funds are already frozen
Source of Funds Documentation
Exactly what documentation US banks require to verify where your money came from. Prepare these documents BEFORE you wire.
- Employment income documentation
- Business sale and investment proceeds
- Real estate sale documentation
- Gift and inheritance paperwork
KYC/CIP Requirements
Understand what banks are legally required to verify about you under Customer Identification Program (CIP) rules.
- Four required identifying elements
- Documentary vs. non-documentary verification
- Enhanced Due Diligence triggers
- Third-party KYC provider reliance
Why Banks Freeze International Wires
Understanding why banks freeze funds helps you prevent it. US banks are not trying to harm legitimate investors - they are responding to legal requirements and real risks. Here is what triggers compliance review:
Regulatory Requirements
- Bank Secrecy Act (BSA): Requires banks to maintain AML programs, report suspicious activity, and verify customer identity
- OFAC Sanctions: Banks must screen all international transfers against sanctions lists - SDN, sectoral sanctions, and country-based programs
- CIP/KYC Rules: Banks must verify customer identity and understand the nature of the banking relationship
- FinCEN Expectations: Regulators expect banks to investigate unusual transactions, especially from high-risk countries
Common Freeze Triggers
High-Risk Red Flags
- Country of origin: Wires from FATF high-risk countries, sanctioned nations, or countries with weak AML controls
- Round numbers: Transfers of exactly $100,000 or $500,000 appear structured
- New account activity: Large wire to a recently opened account
- Inconsistent purpose: Wire description does not match account type or stated purpose
- Multiple small wires: Series of wires just under reporting thresholds (structuring)
- Third-party senders: Wire from a person or entity different from the account holder
The Compliance Review Process
- Initial Screening: Automated systems check sender/receiver names against OFAC lists and risk databases
- Transaction Monitoring: Algorithms flag unusual patterns based on account history and peer comparison
- Manual Review: Compliance analysts review flagged transactions and request documentation
- Enhanced Due Diligence: For high-risk cases, bank may conduct deeper investigation
- Resolution: Funds released, returned to sender, or (rarely) frozen pending law enforcement
Choosing the Right US Bank
Not all US banks are equally welcoming to foreign investors. Some have extensive experience with international clients; others treat every foreign wire as suspicious. Choosing the right bank can prevent problems before they start.
Banks with Foreign Investor Experience
- Major National Banks (Chase, Bank of America, Wells Fargo, Citi): Have international banking departments but also have strict compliance. Good for established relationships.
- International Banks with US Presence (HSBC, TD Bank): Often more comfortable with foreign clients and international transfers.
- Business Banking Fintechs (Mercury, Relay): Popular with startups and foreign founders. Generally more flexible but may have lower wire limits.
- Private Banks: For high-net-worth investors, private banking relationships often include dedicated compliance support.
Account Opening Considerations
Before Opening Your Account
- Ask whether they regularly handle international investment wires
- Inquire about their process for large incoming international transfers
- Request a dedicated relationship manager for business accounts
- Understand their documentary requirements for foreign clients
- Ask about wire limits and whether pre-approval is possible for large transfers
Business vs. Personal Accounts
For investment purposes, I generally recommend opening a US business account through your LLC or corporation rather than using personal accounts. Business accounts receive somewhat different treatment:
- Wire descriptions can reference legitimate business purposes (investment, acquisition, capital contribution)
- Banks expect larger transactions from business accounts
- Entity documentation (operating agreement, EIN confirmation) supports legitimacy
- Easier to establish banking history before making large transfers
Need Help Moving Investment Capital?
I help foreign investors prepare documentation, structure transactions, and navigate compliance issues. If your funds are currently frozen, I can help you respond to the bank's requests.
Sergei Tokmakov, Attorney — California Bar #279869
Quick Tips: Preventing Wire Freezes
Before You Wire
- Gather source of funds documentation (tax returns, bank statements, sale contracts)
- Send a test wire of $1,000-5,000 first to establish the banking relationship
- Notify your receiving bank in advance about expected large incoming transfers
- Use business purpose descriptions that match your account type
- Avoid round numbers - $247,500 looks more organic than $250,000
When Sending the Wire
- Wire from accounts in your own name (not third parties)
- Use detailed purpose descriptions: "Capital contribution to [LLC name] for real estate acquisition"
- Keep copies of the wire instructions and confirmation
- Consider splitting very large transfers across multiple days (not structured to avoid reporting)
If Funds Are Frozen
- Respond promptly to any bank requests - delays make things worse
- Provide MORE documentation than requested, not less
- Include a cover letter explaining the context and legitimate purpose
- Consider having an attorney respond on your behalf
- Document everything for potential regulatory complaints if needed