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What to do if a bank closes your account

Can a bank close your account without permission? Learn the answer, plus what to do if you're debanked.

Nearly every part of modern life demands access to some form of banking solution. So, if you lose access to your bank account, it’s natural to feel worried and confused.  

According to the Financial Conduct Authority (FCA), bank account closures jumped to an all-time high in tax year 2021-2022, with more than 343,000 accounts closed during the fiscal year – a 729% increase from 2016-17. 

On the face of it, that’s a worrying upward trend. But could there be more to it than that – and what are your options if you get debanked? 

In this article, we’ll briefly explain why banks close accounts. Then, we’ll guide you through what to do if a bank closes your account.  

Why would a bank suddenly close an account? 

After the 2007-2008 global financial crisis, the Basel Committee on Banking Supervision (BCBS) published regulatory capital framework reforms, including anti-money laundering initiatives designed to make banks more resilient. Later, the Prudential Regulation Authority (PRA) published a list of proposed rules based on the Basel III framework, which came into force in January 2022. 

In layman’s terms, that means banks in the UK must be a lot more careful not to serve clients whose transactions look even a little bit like money laundering. While vital, the new PRA rules almost certainly account for many of the account closures in 2021-2022. 

“Banks have been under intense pressure to invest more capital into building anti-money laundering platforms that adhere to PRA and Basel III guidelines,” says Anoop Nair, “so they’re increasingly sensitive to client activities.” 

It's important to remember that PRA guidelines are designed to protect consumers as well as banks and reduce the chance of another Great Recession. They’re a sensible response to risk and should help safeguard assets and investments going forward. 

Setting aside money laundering, here are three other reasons banks suddenly close accounts: 

  1. Low account use. You simply don’t use your account very much, or at all, for an extended period. 

  1. Account misuse. You regularly dip into unauthorised overdrafts or fail to cover pre-arranged payments. 

  1. Increased risk. You’re a politically exposed person (PEP) vulnerable to financial risk, triggering expensive enhanced due diligence procedures. 

  1. Being unresponsive. You don’t send updated documents or identification in response to bank requests. 

Generally, banks give clients at least 60 days' notice before closing accounts. However, they can freeze funds and close accounts without warning if they suspect fraud. 

What to do if a bank closes your account 

You no longer have access to your account: now what? Industry experts suggest taking these three steps straight away... 

Step one: Contact your bank 

It’s important to get in touch with your bank as soon as possible after receiving an account closure notice or unexpectedly losing access to your account. If you think there’s been a misunderstanding, explain your reasons calmly. 

You can make an official complaint if the bank won't release funds or reopen your account. 

Step two: Go to the ombudsman 

If the bank doesn’t respond to your complaint in a satisfactory way, or if you’re not happy with the resolution it proposes, you can escalate your concerns to the Financial Ombudsman Service (FOS). You’ll need to wait eight weeks after submitting your formal complaint to the bank before contacting the FOS. 

Step three: Open a new account 

Thankfully, there's no need to wait to open another account. One option is to choose an alternative banking provider like Interpolitan rather than a traditional bank. An alternative account can help you spread risk, even if you regain access to your original account or later decide to open a new account with a private bank. 

Interpolitan takes a personal approach to alternative banking. We match clients with dedicated relationship managers who guide them through onboarding and provide ongoing support afterwards. Opening an account takes just 7–10 days, there are no minimum balance requirements, and funds are kept safe in segregated tier one bank accounts.  

Frequently asked questions 

Can my bank close my account without notice? 

Usually, banks provide at least 60 days’ notice before closing an account. If new Treasury guidelines are adopted, the notice period will increase to at least 90 days.  

There is one notable exception to the notice period requirements. If a financial institution suspects fraud, including money laundering and identity theft, it can immediately freeze funds or close an account.   

Can a bank close your account without giving a reason? 

Generally, banks do explain their decisions to close accounts. If you need clarification about the reason for your account closure, contact your relationship manager or your bank’s customer service department as soon as possible.  

Under the Treasury’s proposed new guidelines, banks must provide clients with an easy-to-understand explanation of the reasons behind any account closure. Again, the exception to this rule is fraud. When financial institutions suspect money laundering, for instance, they can’t legally discuss the reasons for an account closure with the client.  

How long can a bank legally freeze your account? 

Sometimes, when transactions are frozen, or accounts are placed under review, it’s because the bank needs more information to proceed. Often, it’s a waiting game, with business resuming as expected a few hours or days later. If you’re asked to provide additional information to explain a transaction, don’t delay.  

When banks suspect clients are involved in money laundering or other serious criminal activity, they’re legally obliged to freeze funds and report suspicious activity to the National Crime Agency (NCA) or HMRC.  

Investigations under the Proceeds of Crime Act 2002 (amended by the Criminal Finances Act 2017) can take a long time, particularly when client finances are complicated. Funds can be frozen for a maximum of two years and then released if there’s no evidence of illicit activity. 

Experience the benefits of Interpolitan 

One of the best ways to hedge against debanking is to spread risk over multiple accounts. Then, if a bank closes your main account, you can move seamlessly to another and rebound quickly.  

With an Interpolitan account, you can make and receive payments in more than 160 countries. You'll also benefit from dedicated round-the-clock support from a relationship manager via email or telephone. 

We regularly work with intermediaries, too. If you’re a lawyer, accountant or family office representative looking for an alternative banking solution for a third party, get in touch to learn how we can make life easier for you and your client.  

Ready to experience the benefits of Interpolitan? Learn more about us or open an account today. 

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