What a hold actually is
When a bank holds a payment, it has stopped processing it until someone resolves a concern. The funds have usually left your account and sit with one of the banks in the chain. They are not lost, and in most cases they are not frozen in the legal sense. They are waiting for a decision.
A hold can happen at your own provider, at a correspondent or intermediary bank, or at the beneficiary's bank. Each one runs its own checks under its own rules. A hold at an intermediary is often the most frustrating, because neither you nor your beneficiary has a relationship with that bank. All communication goes back down the chain, one bank at a time.
The bank that holds the payment will send a query, often called a request for information, to the bank that sent it the payment. That bank passes it on until it reaches whoever can answer, which is usually you.
Name and account mismatches
The beneficiary bank compares the name in the payment with the name on the account. If they do not match well enough, it may hold the payment and ask for confirmation, or return it.
Typical causes include using a trading name instead of the registered name, leaving off a suffix such as Limited or GmbH, misspelling a transliterated name, or paying a parent company's name to a subsidiary's account. Personal names cause trouble when the order of given name and family name is reversed or when a middle name is used inconsistently.
The fix is to collect the account name from a bank document and copy it exactly. If the beneficiary uses a different name in correspondence, ask which name the account is held in.
Sanctions screening and near-matches
Every bank screens the parties in a payment against sanctions lists. Screening software compares names, addresses, bank identifiers and sometimes free text with the lists it holds. Because names can be spelt many ways, the software is set to flag close matches as well as exact ones.
This produces false positives. A beneficiary whose name shares words with a listed person or company, a street name that matches a listed vessel, or a city in a sanctioned region can all trigger an alert. An analyst then has to decide whether the hit is real. If the payment does not contain enough information to rule it out, the analyst asks.
Full information is the best defence. A complete legal name, a full street address with town and country, and a date of birth or registration number where requested allow the analyst to discount a near-match quickly. Truncated names and missing addresses make it harder.
If a hit turns out to be genuine, the bank must follow the rules that apply to it. That can mean blocking the funds and reporting the payment. In that situation the outcome is no longer a matter of answering a query, and you should take legal advice.
Vague or inconsistent purpose
A purpose of "services" or "payment" gives a reviewer nothing to assess. A purpose that does not fit the parties is worse. Paying "consulting fees" to an electronics wholesaler, or "freight" to an individual, invites the obvious question.
Inconsistency between the payment and its documents is a close relative. If the invoice is from one company and the payment goes to another, or the invoice is in euros and the payment in dollars at an odd amount, the bank will want to understand why. There are often good commercial reasons, such as a factoring arrangement or a group treasury structure. They just need to be stated. The guide to payment references and purpose covers how to write descriptions that hold up.
High-risk corridors and activities
Some payments draw more scrutiny because of where they go or what they relate to. Banks assess risk by country, by industry and by type of transaction, and their appetite differs.
- Countries. Payments touching jurisdictions under sanctions, under enhanced monitoring by international standard setters, or close to conflict zones receive closer review.
- Goods. Dual-use items, electronics, chemicals and machinery can raise export control questions, particularly where the destination is sensitive.
- Industries. Gaming, adult entertainment, digital assets, defence and money services are lawful in many places but considered higher risk by many banks.
- Structures. Payments between offshore companies, through several intermediaries, or to parties unconnected with the underlying trade can attract questions about who is ultimately behind them.
None of this means such payments cannot be made. It means they need better documentation from the start, and a provider that understands the business well enough to present it properly.
Other common triggers
A few other patterns cause holds often enough to be worth knowing.
- Unusual size. A payment far larger than your normal activity, without warning.
- New beneficiary, large amount. A first payment to a new payee that is also unusually large.
- Round amounts with no document. Exact round sums without an invoice can look like transfers of value rather than payment for something.
- Third-party payments. Paying on behalf of someone else, or receiving funds from someone who is not your customer.
- Splitting. Several payments just under a threshold, which can look like an attempt to avoid scrutiny even when it is innocent.
- Missing data. Address, account or bank fields left empty or filled with placeholders.
How to respond to a query fast
The time a payment spends on hold is mostly the time it takes to get a complete answer back to the bank that asked. Each round trip through the chain adds days. The aim is to answer once, fully.
- Read the question carefully. Answer what was asked. If the bank wants the relationship between payer and beneficiary, a copy of the invoice alone does not answer it.
- Send documents, not just explanations. An invoice, contract, purchase order or bill of lading carries more weight than a paragraph of narrative.
- Make documents legible and complete. Full pages, readable scans, with names, dates and amounts visible. Translate key documents if they are not in English.
- Explain anything that looks odd before you are asked. If the amount differs from the invoice, say why. If a third party is involved, explain their role.
- Answer quickly. Banks set their own deadlines for responses. If no answer arrives, they may return the funds, often with charges deducted.
- Keep the tone factual. Analysts are doing a job the law requires. Short, clear and complete answers get the best results.
Ask your provider to tell you which bank raised the query and to send you the exact wording. Paraphrased questions lead to incomplete answers.
An illustrative example
A Canadian distributor pays a Hong Kong supplier 86,500 US dollars. The supplier's account is in the name of its trading subsidiary, and the purpose says "goods". The US dollar correspondent holds the payment and asks for the nature of the goods, the relationship between the parties and a copy of the invoice.
The distributor's first reply sends the invoice only. The invoice is from the parent company, and its total is 90,000 dollars. The correspondent asks again, this time about why the beneficiary is a different entity and why the amount is lower. Each exchange takes a couple of working days.
A complete first answer would have said: the goods are LED lighting components for resale in Canada; the invoice is issued by the parent and settled to its trading subsidiary under the attached letter of instruction; the payment is 86,500 dollars because a 3,500 dollar deposit was paid earlier, shown on the attached statement of account. One response, one review, one release.
Preventing holds in the first place
Most holds are cheaper to prevent than to clear. Use full legal names and addresses. Write a specific purpose. Keep the invoice consistent with the payment. Warn your provider before a payment that is unusually large, goes to a new country or relates to a new line of business. Store the UETR of every payment so it can be traced. The guide to payment tracking explains how.
Working with your payment provider during a hold
Your payment provider sits between you and the bank that raised the query. How you work with them affects how fast the hold clears.
Name one person in your business who handles payment queries and give them access to the documents they need: invoices, contracts, the beneficiary file and correspondence with the supplier. Queries often arrive at awkward times, and a reply that waits for someone to return from leave can cost the payment.
When you send your answer, send it in one message with all attachments, and label each file clearly, such as "Invoice 4471" or "Letter of instruction from supplier". A provider can forward a tidy package up the chain without reworking it. A string of separate emails, each answering part of the question, is harder to assemble and more likely to leave a gap.
Ask your provider whether the bank has set a deadline for the reply, and whether the funds will be returned if it is missed. If you cannot get a document in time, say so and say when you will have it. Silence is the one response that reliably leads to a return.
After a hold clears, note what was asked and what satisfied the bank. The same question is likely to come up again for similar payments, and you can include that information from the start next time.
General information
This article is general information and is not legal or regulatory advice. Each bank applies its own policies and may not explain the reason for a decision. To see how screening of remitters and beneficiaries fits into the process for business wires, read the CCYFX compliance page.
