Why Did The Bank Close My Account For Suspicious Activity?

If your bank suspects identity theft, it may close your account to prevent further fraudulent activity.

The bank may also close your account if it suspects you of engaging in suspicious or illegal activity, such as money laundering. Large and frequent money transfers or withdrawals are examples of actions that could raise a red flag.

When your bank closes one’s account, they must notify you. However, they are not required to inform you in advance and will not always explain why. If you had a payment declined unexpectedly when you knew there was money in the account, it could take days for a notice to arrive in the mail. You require accurate information about what occurred.

Why Do Banks Close or Suspend Accounts?

Banks in the United States must follow a complex set of federal laws. Federal banking regulations require banking institutions to protect the security of their customers. Banks must assist with criminal investigations. Banks are also held accountable if one of their accounts is used for illegal purposes. Bank officers can be fined or imprisoned if they fail to report suspicious activity or stop it when they can. Banks will close accounts that may be involved in criminal activity to protect themselves, even if there is no proof.

The following are some of the most likely causes why your account may be frozen or closed by a bank due to suspicious activity. Some can be resolved with a phone call, while others will necessitate the submission of paperwork or the hiring of a lawyer. Unfortunately, there are some freezes or closures over which you may have no control.

Concerning Suspicious Activity

For suspicious activity, a bank can either freeze or close your account; the results will differ depending on which option the bank chooses. Federal banking laws require banks to report specific unusual behavior to the Treasury Department to avoid money laundering and terrorism. Most people have nothing to do with terrorists or organized crime, but distinct patterns of behavior or dollar amounts can trigger automatic red flags in the banking system.

Passing fake bills, receiving money from crimes, hiding or holding money for someone in trouble, dealing with questionable people, or being questioned or convicted of a crime are all examples of suspicious activity.

You may not have engaged in any suspicious activities, and the suspicious transactions may not have occurred in the same account with which you are dealing. You may be flagged for money transfers that “fit the profile” but are entirely legal. Check scam or hacking could happen to you. You may have a joint account with someone in legal trouble or who has had suspicious activity.

A freeze or closure can be caused by a variety of activities, including:

• Unknown source large transactions and withdrawals If you have a lot of money coming in and going out of your account that isn’t from a recognizable job, or if you didn’t list an employer when you signed the paperwork, it could appear suspicious.
• In your customer record, there is false or misleading information. When registering for an account, ensure you provide a valid phone number and address. If you move or your phone number changes, notify the bank.
• Withdrawals are made in response to a rejected check or a method of depositing returned checks. When receiving payment by check, exercise extreme caution. If you deposit a check that turns out to be pointless, your account may be frozen. If you decided to cash the check or decided to withdraw some of the cash, the bank may believe you intentionally committed fraud.
• Large money transfers, particularly from one country to another. Banks must monitor and report on particular dollar figures, such as $5,000, $10,000, $25,000, or $50,000. It’s a red flag if you make a transfer like that or if you make several money transfers that add up to one of those amounts.
• Accounts with the same name or frequent transfers The bank will wonder why you have so many multiple accounts, especially if you transfer money between them frequently. Federal law limits your monthly withdrawals from bank deposits to six. If you repeatedly exceed this limit, it may appear suspicious.
• High-risk purchasing items or making large cash withdrawals. Some people prefer to save up for large transactions and pay cash, but this may cause the financial institution to suspect you of money laundering. High-risk items such as firearms, coins, precious metals, or art raise the same concerns.

What Should You Do If Your Bank Closes Your Account?

You should take the following steps when your bank closes someone’s account.

Make contact with the bank.

Reaching out to the bank, especially if you haven’t already been notified of the closure, will allow you to learn why the account was closed and what you must do to receive your cash.

Keep a paper trail

Keep all written communication about the account termination, take notes on every phone call with a bank representative, and write down the name of everyone you speak with.

Check your account for any outstanding checks.

If any checks are still outstanding, contact the payees and arrange for a different payment option to avoid bounced checks.

Obtain a duplicate of your ChexSystems report

ChexSystems, which records savings and checks bank transactions, generates reports detailing your banking activities and explaining why any accounts were closed.

Make a formal complaint if necessary.

If you believe your account was closed in error, file a complaint with the federal Comptroller’s Office’s Customer Assistance Group.

Search for other options

If your bank closes your account, you may be able to open some other type of account at the very same bank (such as a prepaid or “second chance” account), switch to another financial institution, use a prepaid debit card, use a payment systems tool such as PayPal, or go without a bank account.

Put a stop to direct payments and automatic withdrawal of funds 

This saves you money and ensures you have access to direct-deposited funds.