San José, Costa Rica, since 1956

Bank Clients Baffled by Security Measures

Jim Hamilton had a savings account with the Banco de Costa Rica (BCR) for five years. Then one day, it was gone.

“I went online one day and it had completely disappeared,” Hamilton said. “My savings account just wasn’t there anymore. My first instinct was to panic. Had I been cloned or robbed? I didn’t know what was going on.”

Hamilton had not been robbed, but his account with the BCR had been frozen. When he called the bank to inquire about why access to his account had been denied, he was told that, under Law 8204, which reformed Costa Rica’s drug and money laundering legislation, he was “no longer in compliance” with bank standards.

When Hamilton asked about the reasons for his supposed “lack of compliance,” he received little clarity as to why his account had been invalidated. And soon after this, Hamilton’s other account, which he used for debit withdrawals and bill-paying, also was frozen.

“We banked with them for all these years, we hadn’t had any suspicious transactions and we hadn’t moved large amounts of money in or out of the account,” Hamilton said. “They had the history of the account, but refused to reactivate it. I don’t know what they wanted me to prove to them.”

The unexplained and sudden closure, or freezing, of bank accounts such as Hamilton’s has become an increasingly common practice in the past months. Increased bank security, in response to the revamping of Law 8204, has caused considerable distress among bank customers, who, aside from unexplained account closures, have had to renew their accounts by appearing at their banks to fill out an extensive form known as the Conozca a su cliente (Know your Customer) form.

Law 8204 attempts to attack drug trafficking, and aims to verify legitimate capital activities, which is the bank’s justification for monitoring accounts. The law, which was originally passed in 2002, states that a legitimate authorization of identity “will be granted for two years and, at the completion of that period, the registration will have to be renewed, with all the necessary documentation with respect to the requirements of the Superintendence of Financial Entities” (SUGEF).

When the law was re-evaluated by the External Financing Council (CONAFE) on Oct. 2, SUGEF directed that all banks enforce the terms of the law. This meant that, in just a matter of weeks, hundreds of accounts were suddenly frozen and hundreds of account holders had to show up at their banks to verify their identities and reactivate their accounts. On Oct. 12, the daily La Nación reported complaints of dozens of outraged customers who found their accounts frozen or closed when they tried to pay bills, make withdrawals or simply view their bank statements online.

“In response to the Law 8204, we were told to assure that banks administer a method to verify the identity of their clients,” said Lucrecia Villalobos, a SUGEF representative. “Each bank had to create something to satisfy the minimum requirements to meet the rules of identity outlined in the law.”

And, as if finding accounts frozen weren’t sufficiently stressful, bank customers have had to physically show up at banks to fill out the “Know your Customer” form. This form, depending on the bank, can be an expansive, personal three-to-four page document that asks for personal information – such as an explanation of the source of the account holder’s funds and the maximum withdrawals expected. It also requires that the customer agree with the terms of Law 8204.

For some clients, such as Hamilton, the unexplained closure of his accounts severed his relationship with the bank.

“In the end, we finally just closed the account with the BCR,” Hamilton said. “It took us a few days to get our money out, but when we did, we opened accounts with HSBC and Scotiabank. We had to fill out a form to open the account, nothing too intrusive, and we’ve had no problems since.”


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