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High street UK banks are closing accounts with the help of vast online databases that scrutinise millions of transactions around the globe.
A bank can close anyone’s person’s account if it suspects they have committed, or been involved in fraudulent or illegal activity. But also if they violate the terms of the account, leave it dormant, or even for no specified reason.
Many banks use third-party databases and credit reference groups to gather information on people they suspect of illegal activities such as fraud or terrorism. The databases also detail those who could be under sanctions, or “politically exposed” people who are vulnerable to bribery.
These databases monitor British customers and hand information to banks so they can decide whether to close an account if someone is deemed to be too much of a risk to the bank and its reputation – or who has a bad credit rating.
It comes as Nigel Farage, a free speech group and a vicar who complained about a lender’s support of Pride have all made headlines in recent days after their bank accounts were shut down with little warning.
Although it is claimed that high-net-worth bank Coutts closed Mr Farage’s account because of inadequate funds, the closures have sparked a backlash with people accusing banks of refusing customers because of their political beliefs.
Who’s watching my bank accounts?
One third-party database banks use is World-Check Risk Intelligence, which is owned by Refinitiv, a member of the London Stock Exchange Group.
World-Check helps financial institutions with regulatory requirements, and passes information they hold on normal savers, potential terrorists and fraudulent and politically exposed people to banks so they can avoid being used to launder the proceeds of crime, or be associated with corrupt or criminal business people and practices. If a person is on a sanctions list world-wide, they will also be on the database.
If a saver has a bad banking record, or is suspected of a serious offence, it is likely that they are on the database and their bank’s compliance team will use that information to decide whether to shut their account.
World-Check would not disclose which British banks use its database to monitor and scrutinise people who they can potentially “unbank”, but it is understood some high street banks use its services.
Under privacy laws, savers can request information World-Check holds on them through their website, and see if they are in danger of having their accounts closed by their banks.
More often than not, banks’ compliance teams close accounts with little notice because people are suspected of criminal activity, fraud, money laundering or being politically exposed – and third-party databases help them pinpoint problem people and accounts.
Why can my bank close my account?
Banks can close an account for a long list of both serious and not-so reasons, and they do not have to tell savers why – they only have to give a minimum of 30 days’ notice.
This is because banks are subject to strict legal requirements, which in many cases does not allow them to reveal why an account has been closed – even to the account holder.
A person only needs to be suspected of fraud – and not convicted – for a bank to close their account. If this happens, then there is a good chance they will not be allowed to hold a bank account again with most British financial institutions.
For normal customers, if a bank needs to investigate an account it may be frozen, or further information requested, so the bank can satisfy itself that there is no risk of any improper activity taking place.
An account can be closed if the account holder has a bad credit history and loans or credit are not repaid.
When a bank closes an account, it generally does not affect a credit rating. But if there is an outstanding overdraft or loan when it closes, the bank may give these debts to a credit recovery agency for them to chase, which will affect the rating.
If too many payments “bounce” from an account because there is no balance, or an account seems dormant for too long, then that is also grounds for closure.
Furthermore, if the account has contained no money for several years, the bank may close the account if no one has replied to alerts or correspondence from the bank.
A notice on the Financial Ombudsman Service (FOS) website says banks can close accounts whenever they want, but they still have to treat their customers fairly.
“Businesses that provide bank accounts are generally entitled to close them – just as their customers are. But you should treat your customers fairly. You shouldn’t close an account because of unfair bias or unlawful discrimination,” it says.
What can I do if my account was closed?
There is not a lot that can be done when a bank closes an account, but there are some basic steps to take.
First and foremost: contact the bank, especially if you have been previously notified of the closure. Doing so means you have a greater chance of finding out why the account is closed, if it can be reopened or how you can retrieve any funds left in the account.
Making sure you keep all written and online communications with your bank is also important.
Unless under suspicion of a serious offence, you may be able to set up another account with a rival bank or speak to the bank about opening a new pre-paid or “second chance” account.
If an account has been closed or frozen because the account holder has been a victim of identity fraud, then contact the bank as soon as possible to alert them and they can begin to investigate.
The same goes for theft: for example, if a person steals someone’s bank details or cards and withdraws or spends money fraudulently.
According to Citizens Advice, a bank should refund any money stolen as a result of fraud and identity theft. They should do this as soon as possible, ideally by the end of the next working day after the problem is reported.
But a bank can refuse a refund if they find someone acted fraudulently or were “grossly negligent”: for example, if a person shared their Pin or password with someone else.
You can also complain to the bank, and to the FOS, if you believe the closure is unjust or unfair, but you generally have to prove it.