Banks are closing customer accounts, with little explanation

A growing number of individuals and businesses are finding their bank accounts suddenly closed, with little to no explanation provided. This alarming trend stems from banks' heightened scrutiny of suspicious transactions, a response to recent high-profile money laundering cases and substantial fines imposed on financial institutions. Financial institutions filed 1.4 million Suspicious Activity Reports (SARs) in 2021, according to a bureau of the US Treasury Department. That was nearly 70 percent higher than the 839,314 filed in 2014, highlighting the intensified focus on potential money laundering activities.

The Hong Kong Monetary Authority (HKMA) recently fined four banks a total of HK$44.2 million, while Singapore uncovered its largest-ever money-laundering case, resulting in the confiscation of over US$2.2 billion in assets. These incidents have prompted banks to take stringent measures to combat money laundering, leading to abrupt account closures that leave customers in the dark.

Six common reasons why banks may close your account

1. Suspicious Money Laundering Transactions

   Banks must legally monitor and report suspicious activities indicating money laundering. A sudden spike in unusual international transactions in a primarily local small business account can raise red flags. To avoid legal risks and fines, banks may close such accounts.

2. Rapid Inflows and Outflows

   If your account exhibits a pattern of large deposits followed by immediate withdrawals, banks may perceive this as risky behavior. For example, depositing $100,000 one day, withdrawing $90,000 the next, and then repeating the process with even larger amounts can raise suspicions. Such rapid and frequent large transactions are often associated with money laundering, prompting banks to take action.

3. Third-Party Bank Transactions and Suspicious Crypto Trading

   Banks are particularly cautious when it comes to accounts that receive or send substantial payments to third parties, including transactions related to cryptocurrency trading. Traditional banks often view accounts with frequent or substantial transactions to and from cryptocurrency exchanges as high-risk. If your account shows a pattern of transfers linked to exchange accounts, your bank may consider this activity unsuitable for a personal account and take action to close it.

4. Inactive Accounts

   Also known as "zombie accounts," inactive accounts may be closed by banks to reduce management costs and potential risks. If you have a small savings account that you've forgotten about due to an extended stay abroad, your bank might terminate the account due to its dormant status.

5. Frequent Transactions from Business to Personal Accounts

   Banks are highly sensitive to frequent transactions from business accounts to personal trust accounts. Such activities can raise concerns about money laundering, misuse of account terms, and potential tax evasion. To maintain their reputation and customer trust, banks may choose to close accounts that exhibit these patterns to avoid any association with illegal activities.

6. Insufficient Revenue Generation

   Every account a bank opens involves significant human and economic costs. If the revenue generated by your account fails to cover these expenses, the bank may opt to close the account to minimize its losses.

   
   

What you should do to prevent your bank from closing your account?

To safeguard your financial interests and prevent account closures, consider the following steps:

a) Provide proof of fund source: Maintain clear records and documentation of your income sources to demonstrate the legitimacy of your transactions.

b) Update contact information regularly: Ensure that your bank has your current contact details to avoid missing important notifications or alerts.

c) Avoid lending your account to others: Refrain from allowing others to use your account, as this can lead to suspicious activities and potential account closure.

d) Keep your account active: Regularly engage in transactions and maintain a minimum balance to avoid account dormancy.

e) Diversify your funds across different banks: Take advantage of neo banks and virtual banks, which frequently have looser regulations and lower account opening requirements, to easily diversify your funds. Spread your assets across a mix of traditional banks and these innovative digital banking platforms to minimize the impact of any single account closure.

Banking alternatives - UTGL Trust Services

For those seeking a reliable and secure banking alternative, UTGL offers tailored solutions to meet diverse needs. Unlike banks that may unexpectedly close accounts, UTGL provides a stable platform for managing financial assets, emphasizing compliance and client satisfaction to ensure your trust account is maintained with utmost care.

Extended reading: Trust vs Bank

UTGL Trust Advantage: Beyond Traditional Banking

1. Legal Title: The trustee (trust company) holds the legal title to the assets, ensuring a higher level of asset protection.

2. Confidentiality: By signing the trust deed, a private legal arrangement has created, offering greater privacy compared to a bank account, which can be access by the judiciary

3. Autonomy: The trust company executes the settlor's instructions, while banks have the right to use client deposits for lending, potentially exposing depositors to default risk and personal losses.

4. Risk Isolation: Trust assets are protected from freezing and creditor claims, unless illegal activities are involved. In contrast, banks can freeze accounts for various reasons, and creditors have the right to claim from them.

5. Sustainability: In Hong Kong, trusts can exist indefinitely, allowing for multi-generational wealth planning and long-term strategic asset management. Bank accounts, however, may be frozen if the account holder faces an accident, requiring a lengthy probate process.

6. Privacy: Only the high court can request access to trust account information and assets under normal circumstances. Beneficiaries and others have no right to access trust asset information, whereas bank account information can be queried if there is reason to do so.

7. Flexibility: Trust accounts accept a wide range of assets, including cash, overseas properties, precious metals, and digital assets. Banks primarily accept cash and won’t deal with digital assets.

8. Services: UTGL offers global services such as offshore accounts, global investments, payments, and asset transfers. Bank accounts typically provide limited local services and investment choices restricted to the bank's own products.

9. Crypto-Friendly Banking Alternative: UTGL recognizes the growing importance of cryptocurrencies and aims to provide a more accommodating environment for users engaged in digital asset custody. With UTGL, you can benefit from our crypto-friendly approach and enjoy a banking experience that supports your involvement in the cryptocurrency market.

   
   

To ensure the integrity of your trust, UTGL advises against the following activities:

• Frequently cashing out using a credit card

• Using a credit card with merchants known for fraudulent transactions

• Using a credit card for crypto, casino chips, or other financial transactions

• Withdrawing or receiving large amounts of cash

• High frequency of manual card entry (e.g., 2 manual entries within 4 hours)

• Engaging in card or bank transfer transactions in high-risk countries

By leveraging the expertise of UTGL Trust Services and adhering to these guidelines, you can protect your financial assets and enjoy the benefits of a clean, compliant trust account.

Experience the UTGL Trust Advantage Today

Setting up a trust with UTGL is quick, easy, and cost-effective, taking just 15 minutes or less to complete entirely online! Our streamlined process ensures you can swiftly begin enjoying the benefits of a secure and flexible trust account.

Conclusion

In today's era of heightened financial scrutiny, it's vital to understand why banks close accounts and how to protect yourself. Stay aware of suspicious activities, maintain clear records, and keep your account active to minimize risks.

For a more secure and reliable option, consider UTGL Trust Services! With a strong focus on compliance and client satisfaction, UTGL offers a complied and trusted alternative for managing your financial assets without the fear of unexpected closures.