Banks only do this because the Bank Secrecy Act/USA PATRIOT Act makes it exceedingly risky for them not to. In addition to the bank's regulatory risk there's also potential personal liability for the individual serving as Anti-Money Laundering Officer. That strongly incentivizes an AML program that's overly cautious.
It might seem like the bank is "judge, jury, and executioner" but that's really not the case. In addition to freezing your funds the bank has to alert the federal government of the account. The government then decides whether to move forward and try to seize the funds or whether the bank can release them to the account owner.
It might seem like the bank is "judge, jury, and executioner" but that's really not the case. In addition to freezing your funds the bank has to alert the federal government of the account. The government then decides whether to move forward and try to seize the funds or whether the bank can release them to the account owner.