What occurs when a credit union blocks a transaction?

What occurs when a credit union blocks a transaction?

• A. The transaction is automatically canceled
• B. Funds are accepted and frozen
• C. The funds are donated to charity
• D. The account is immediately closed

Answer: (B)

When a credit union blocks a transaction, it is typically an action taken as a precaution to prevent potentially fraudulent activities or suspicious transactions. In this scenario, the blocking of the transaction results in the funds being accepted but frozen, meaning that while the transaction is not completed, the funds are held and cannot be accessed by the account holder until further action is taken. This is a protective measure that allows financial institutions to investigate the nature of the transaction and determine whether it is legitimate or raises red flags that warrant further scrutiny. This approach allows for the appropriate compliance checks to be performed without immediately penalizing the account holder by canceling funds outright or closing their account, which would be more disruptive and could lead to complications for both the institution and the customer. It also preserves the possibility for legitimate transactions to be validated and completed once the institution is comfortable with the nature of the transaction.

When a credit union blocks a transaction, it is typically an action taken as a precaution to prevent potentially fraudulent activities or suspicious transactions. In this scenario, the blocking of the transaction results in the funds being accepted but frozen, meaning that while the transaction is not completed, the funds are held and cannot be accessed by the account holder until further action is taken. This is a protective measure that allows financial institutions to investigate the nature of the transaction and determine whether it is legitimate or raises red flags that warrant further scrutiny.

This approach allows for the appropriate compliance checks to be performed without immediately penalizing the account holder by canceling funds outright or closing their account, which would be more disruptive and could lead to complications for both the institution and the customer. It also preserves the possibility for legitimate transactions to be validated and completed once the institution is comfortable with the nature of the transaction.