Why Banks Are Suddenly Closing Down Customer Accounts

The reasons vary, but the scene that plays out is almost always the same.

Bank customers get a letter in the mail saying their institution is closing all of their checking and savings accounts. Their debit and credit cards are shuttered, too. The explanation, if there is one, usually lacks any useful detail.

Or maybe the customers don’t see the letter, or never get one at all. Instead, they discover that their accounts no longer work while they’re at the grocery store, rental car counter or ATM. When they call their bank, frantic, representatives show concern at first. “Oh, no, so sorry,” they say. “We’ll do whatever we can to fix this.”

But then comes the telltale pause and shift in tone. “Per your account agreement, we can close your account for any reason at any time,” the script often goes.

These situations are what banks refer to as “exiting” or “de-risking.” This isn’t your standard boot for people who have bounced too many checks. Instead, a vast security apparatus has kicked into gear, starting with regulators in Washington and trickling down to bank security managers and branch employees eyeballing customers. The goal is to crack down on fraud, terrorism, money laundering, human trafficking and other crimes.

In the process, banks are evicting what appear to be an increasing number of individuals, families and small-business owners. Often, they don’t have the faintest idea why their banks turned against them.

But there are almost always red flags — transactions that appear out of character, for example — that lead to the eviction. The algorithmically generated alerts are reviewed every day by human employees.

Banks generally won’t say how often they are closing accounts this way, and they’re not tracking how often they get it wrong. But federal data offer clues.

By law, banks must file a “suspicious activity report,” known as an SAR, when they see transactions or behavior that might violate the law, such as unexpectedly large cash transactions or wire transfers with banks in high-risk countries. According to Thomson Reuters, banks filed more than 1.8 million SARs in 2022, a 50% increase in just two years. This year the figure is on track to hit nearly 2 million.

Multiple SARs often — although not always — lead to a customer’s eviction. Federal laws have little to say about the trigger for account cancellations.

But a New York Times examination of over 500 cases of this dropping of customers by their banks — and interviews with more than a dozen current and former bank industry insiders — illustrates the chaos and confusion that ensue when banks decide on their own to cut off customers.

Individuals can’t pay their bills on time. Banks often take weeks to send them their balances. When the institutions close their credit cards, their credit scores can suffer. Upon cancellation, small businesses often struggle to make payroll — and must explain to vendors and partners that they suddenly don’t have a bank account.

As if the lack of explanation and recourse were not enough, once customers have moved on, they don’t know whether there is a black mark somewhere on their permanent records that will cause a repeat episode at another bank. If the bank has filed an SAR, it isn’t legally allowed to tell you, and the federal government prosecutes only a small fraction of the people whom the banks document in their SARs.

As a result, you don’t know what you’re under suspicion for. “You feel like you’re walking around wearing this scarlet letter,” said Caroline Potter, whose Citibank accounts were shut down abruptly last year.

The banks, facing ever more aggressive regulators and examiners, offer a modicum of sympathy.

“We want to build long-term relationships with our clients, which is why accounts are closed only after appropriate review and consideration of the facts,” said Jerry Dubrowski, a spokesperson for JPMorgan Chase, the nation’s largest bank with 80 million retail customers and 6 million small-business ones. Former Chase account holders sent nearly 200 complaints to the Times.

“We act in accordance with our compliance program, consistent with our regulatory obligations,” Dubrowski continued. “We know that can be frustrating to clients, but we must follow those obligations.”

He added that “the vast majority of closures are correct, consistent with the regulatory obligations we are required to follow,” and that the number of closed accounts was a fraction of the bank’s overall business.

Federal data on the types of SARs that banks file show what they worry about most. Last year, banks filing SARs tagged categories including suspicious checks, concern over the source of the funds and “transaction with no apparent economic, business or lawful purpose” most often, according to Thomson Reuters.

To former bank employees, the bloodless data belie the havoc that banks wreak. “There is no humanization to any of this, and it’s all just numbers on a screen,” said Aaron Ansari, who used to program the algorithms that flag suspicious activity. “It’s not ‘No, that is a single mom running a babysitting business.’ It’s ‘You’ve checked these boxes for a red flag — you’re out.’”

What follow are profiles of customers who lost their accounts and an analysis of what behavior may have spurred their banks to shun them.

A Series of Unusual Deposits

Bryan Delaney has owned several New York City bars over the decades, and he and his business partner and general manager, Jennifer Maslanka, have a long-standing system for handling cash: It goes to the bank on Fridays and Mondays.

As card use has increased over the years, the size of the deposits has decreased. To make the accounting easier on new employees who started working during the pandemic, Delaney and Maslanka often rounded deposits down to the nearest thousand and kept the rest of the cash on hand to make change.

This year, Chase closed the bar’s account, plus personal checking and credit-card accounts for Delaney, his wife and Maslanka, giving them a handful of weeks to make other banking arrangements.

Federal law requires depositors to fill out a form if they’re depositing or withdrawing more than $10,000 in cash. Sometimes, in an attempt to avoid the gaze of authorities, account holders will engage in “structuring,” making a series of transactions just under $10,000. It’s one of the top reasons that banks file suspicious activity reports.

Dubrowski, the JPMorgan Chase spokesperson, said the bar’s series of deposits was indeed the problem.

“We must know our customers and monitor the transactions that flow through our bank,” he said. “That includes instances where we see a pattern of cash deposits that are just below federal currency reporting thresholds.”

Delaney said he had not been engaged in structuring when depositing money in round numbers. All the cash had come from the bars, he said, and he reported his income and paid his taxes as he was supposed to.

The bank’s explanation is especially maddening, given that he and Maslanka had filled out plenty of the $10,000 forms over the years. “What’s to gain from not filling it out?” he said. “What’s the risk of filling it out? I’ve done both when deposits warranted that.”

“I’m still so confused,” Maslanka said. “Do you think I’m part of some underground mafia, laundering money through my little beer bar?”

A Marijuana Connection

For Caroline Potter, the trouble began on the phone.

“There were these weird calls with a very mysterious customer care department, and they kept asking for our tax returns,” she said. “No one sees my tax returns except the IRS and my CPA.”

Potter and her husband moved to Idaho during the pandemic, selling their old house in New York and buying a new one. Some large chunks of money moved between their various Citibank accounts — the sale, the mortgage payoff, the down payment on the new abode — but nothing that the bank would not have seen before.

Then, suddenly, Citi shut down everything, including their checking accounts and credit cards. The couple’s attempts to get an explanation led to nothing but frustration.

“It felt like there was this secretive department, and anyone who wasn’t in that department didn’t even know about it,” Potter said.

Her hunch is that Citi didn’t like that her husband’s income comes as direct deposits from the cannabis company that recently acquired his employer. Is the company on some kind of do-not-engage list that Citi keeps?

Citi declined to comment, even though Potter granted the bank permission to speak about the couple’s accounts.

International Wires

Oore Ladipo, who is from Nigeria, was working as a data analyst at Morgan Stanley in New York — it was a contract job — while earning a master’s degree in quantitative method and modeling.

After Ladipo received his degree, he got an offer for a permanent position but couldn’t start until he received his employment documents from the federal government. It took a few months, so his parents — both civil servants at the time — wired him money from Nigeria, probably around $1,500 a month, to help him pay rent in 2018.

That summer, Chase sent him a letter saying his accounts would be shuttered. “They were aware of my study, work and family history but still closed my account after almost 10 years,” he said. Ladipo, now 30, had banked with Chase since he moved to Ohio in 2010 for college.

Ladipo felt confused and betrayed, but he believed that the Nigerian wires were the most likely culprit.

“And in this scenario, you can’t really negotiate,” he said. “You aren’t talking with a person who has the power to tell you what went wrong and what didn’t go wrong.”

Wires and suspicious electronic transfers are another common reason that banks file SARs. But in Ladipo’s case, the cause for suspicion was a third party — a suspected fraudster — that surfaced in his web of transactions.

“We must know our customers and monitor the transactions that flow through our bank,” Dubrowski said, who stressed that the bank was not accusing Ladipo of any wrongdoing. “That includes instances where we suspect that the transactions involve parties connected to potential scams.”

That explanation didn’t satisfy Ladipo, who said the lack of specificity left him wondering if even his rent check could have been cause for suspicion — or if his background might have caused his accounts to warrant a closer look.

“I can’t tell if being from a different part of the world makes me an increased risk for the algorithm or if there is bias against me in their decision-making process,” he said.

Unusual Cash Withdrawals

When Steven Ferker bought a house in New York in late 2016, he withdrew money from one of his Citi accounts in chunks of $7,000 to $12,000 to pay his contractor, who requested cash payments. He also used a Citi credit card with a 12-month, zero-interest offer to buy things for the kitchen in 2017.

He was surprised when the bank called to ask why he was making repeated cash withdrawals. Each time, he explained the situation. “I assumed they were calling to make sure someone was not stealing my money, and I was glad that they called,” he said. “But I never gave it two thoughts until they threw me out.”

Citi declined to comment.

Ferker was aware of banks’ wariness of large transactions in round numbers, but he was taking out his own money and immediately giving it to a contractor doing visible work. “Cash is legal tender in this country,” he said. “I understand that people hide their income, but I figured that was none of my business. It’s his business.”

As is the pattern, the Dear John letter from the bank offered no explanation. But when he went into the branch, the frustrated manager said more than he was supposed to. “The answer was: ‘Don’t ask me. Ask the computer that flagged you,’” Ferker said.

Criminal History

Nick Seidel, 42, of Chicago, has had his bank break up with him three times. Chase dumped him first. Then, after an 18-month relationship with Fifth Third, it, too, shut down his accounts.

At BMO Harris, Seidel struck up a relationship with his personal banker and told him about his banking troubles and his suspicion of what was behind them: He had served time in prison.

The banker assured him that it wouldn’t be a problem, until it was: The letter arrived roughly 18 months later. Seidel took it in to show his banker. “No way,” Seidel recalled him saying. The banker made a call, then typed something into his computer.

“I’m not supposed to tell you this,” the banker said. He turned his computer monitor around so Seidel could see it.

It was his mug shot from about 10 years before.

“I had never had any banking issues, no overdrafts or suspicious activity,” Seidel said. “Apparently some banks just run public searches of their clients and drop them if they are justice-impacted. It’s always a frustrating, inconvenient and embarrassing experience.”

In 2011, Seidel stole a 2002 BMW from a car dealership and used a counterfeit $20 bill, among other crimes. He served five years in prison, where he underwent cognitive behavioral therapy and earned several paralegal certificates.

Seidel saved money he earned from drafting legal documents for other inmates. After he was released in December 2015, a friend picked him up, and they headed straight to the bank so Seidel could start his life anew.

Using a state-issued identification card and a check from the Department of Corrections, he opened a checking account at Chase. “It wasn’t like they didn’t know,” he said. But the bank later shut down the account after learning that he had used counterfeit money.

“We believe in giving people with conviction histories a second chance, while we balance our obligation to mitigate potential financial crimes,” Dubrowski said. “So, customers who have prior convictions for financial crimes may not be able to open an account with us for a period of time.”

Fifth Third and BMO Harris declined to comment on Seidel’s case, even though he gave permission for them to do so.

Seidel, who has a mortgage through Fifth Third and was recently accepted into a master’s of legal studies program, is working as a paralegal under a contract with a federal regulator. The kicker: He helps investigate securities fraud, a job that required a four-hour background check.

But he still keeps two bank accounts open as a contingency plan.

Community Loan Pools

Banks dislike any patterns that look like scams and will shut down behavior that seems suspicious.

But bank customers often don’t get to explain themselves in the moment. When Rosanna Bynoe, who lives in San Francisco with her husband, opened a new Chase account, she told the representative exactly what they’d be using it for: a susu.

Susus are community savings and loan pools; they often have a person at the center of them collecting and distributing money. Bynoe’s mother and grandmother set money aside this way over the years, and Bynoe and her husband were trying to take part electronically. Each week, they sent the same amount of money via Zelle, an electronic payment platform in which Chase is a part owner, to the same person, who was a kind of susu captain.

One day in 2019, Bynoe and her husband lost access to their bank accounts and credit cards. Bynoe’s husband went to a branch banker, explained the susu and showed how the lump sum of savings had come back into the couple’s account each year for three years.

It did not help. “It was like he was speaking to a machine,” Bynoe said.

The whole situation was simultaneously baffling and infuriating, she said. Why does the bank get to tell her how often or how frequently and with what amount she can do things with her money? Why didn’t it tell her ahead of time that she might have a problem when she declared her intentions?

And given the long history of racism in the banking industry, did the fact that lots of Black people use susus have something to do with losing her account?

“What part of our profile tells you that we are doing fraudulent activity?” said Bynoe, who is mixed race, echoing the question that Chase’s branch bankers did not answer. “If people of color are disproportionately affected by this issue, then that needs to be looked at.”

Dubrowski said the overall movement of money didn’t appear proper. “We must know our customers and monitor the transactions that flow through our bank, including instances where the bank sees a pattern of activity that could be associated with a scam,” he said.

“We do not close accounts based on race, ethnicity or national origin, and we didn’t in this case,” he added.

Bynoe called a Chase credit card representative in April to see how long the company was barring her. The rep said it was for life. Dubrowski said that there were no lifetime bans and that the bank made decisions on a case-by-case basis.

Bynoe and her husband figured that Chase’s actions would create long-term repercussions for them in the financial system or even with the government. After all, Chase didn’t say there wouldn’t be further trouble. But Citi and Bank of America were happy to continue to do business with them.

This was a relief. It was also quite odd. “You’ve got one bank telling you that you’re essentially a fraudster,” Bynoe said. “But all of the rest of the world is good. I don’t understand.”

Having a checking account is a privilege, not a right, but most people forget this until they lose access to their accounts.

The security software that banks use to sniff out criminal activity is easily frightened. It sets off millions of alarms across the industry each year, and most of them are false.

Nevertheless, bank staff members following up on the warnings appear to be cutting an increasing number of innocent customers off from their accounts, The New York Times reported in a series of recent articles. They close down checking and credit card accounts in part to keep regulators, who are worried about money laundering and other criminal activity, out of their hair.

The closures often happen without warning, and chaos ensues when people lose access to their money for weeks and can’t pay their bills.

If you want to keep this from happening to you, it helps to keep your account activity from looking like that of a criminal’s.

Many of the tips that follow come from bank insiders who didn’t want to be named for fear of offending their employers — but who spoke anonymously because they are tired of their institutions kicking so many innocent customers out. Keep the advice in mind, and you might avoid being swept up in any future dragnet.

The Anatomy of a Typical Checking Account

Put yourself in the shoes of the fraud analysts at your bank. If it’s not a local credit union or single-branch community bank, they have no idea who you are. They often work on a kind of assembly line, where they must meet a daily quota of alerts that have to be adjudicated. The prompts frequently come straight from the surveillance software that banks use to monitor your transactions.

So how are you going to make it easy for those people to mark you, the innocent, as someone they shouldn’t mess with?

In a perfect world, your checking account balance looks like the teeth of a saw. A lump sum of income shows up on a regular schedule, you spend it over a period of weeks, and then the same amount repeatedly shows up. Ideally, the money comes by direct deposit from an employer that bank employees can look up in 10 seconds if they’ve never heard of it.

Plenty of people do not have neat and tidy financial lives like that, but algorithms have neither sympathy nor empathy. If your life is a bit messy, try to maintain some kind of pattern with your transactions, particularly if you tend to make or receive large payments with different parties or transfer large amounts of money to and from external accounts.

This extends to when you open a new checking account in the first place. Often, people open an account with a large deposit. While that is not necessarily suspicious on its own, if another red flag emerges — like the ones in this article or if you work for a cannabis company or have some kind of arrest record — the bank may cancel your account within days of your opening it. This has happened several times to Times readers, more than 1,000 of whom have submitted their stories.

Checks Are a Red Flag

Fraud involving mail theft and checks has roughly doubled in recent years. As criminals have focused on checks, banks have turned up the dials on their check-fraud algorithms.

One way to avoid trouble is to keep from falling victim to check fraud in the first place, lest the bank think you’re suspicious when you subsequently make a claim for money that a thief has stolen. If you don’t write checks at all — and destroy or hide any the bank sends you — fraud becomes more unlikely.

If you must use checks, don’t mail them. And if you have to mail a check, try taking it directly to a post office. Residential mailboxes and even the post office’s blue collection boxes are more vulnerable to theft, where thieves may try to wash out amounts or names of recipients on a particular check and then redirect a much larger sum to someone else. And try not to accept a check from individuals you don’t know, in case they are trying to rip you off.

Avoid Generating Suspicious Transactions

If you want to think like bankers, consider the types of suspicious activity that the American Bankers Association calls out in its course for industry professionals.

Many security tripwires involve cash and how you use it. For instance, one federal law requires bank customers to fill out a form when depositing or withdrawing $10,000 or more in cash. Many depositors don’t know about the rule — and don’t like it when a bank employee informs them in the moment.

From the ABA course materials: “A typical example of a suspicious transaction for a teller would occur when a customer begins to conduct a currency transaction that exceeds $10,000 but then reduces the amount of the transaction to below $10,000” when the bank tells that person about the form requirement.

Don’t do this. Just fill out the form, which does you no harm if you’re not breaking any laws.

Also on the list of no-nos is making a bunch of cash deposits at ATMs — say, after a shift as a server at a cash-only restaurant. To you, this is simply safety first. To the bank, it’s one of many signs that someone might be a drug dealer. Making four-figure deposits at different bank branches around a region might raise similar suspicions.

Big movements of cash — whether deposits or withdrawals — could also create problems. Imagine that you’re a fraud investigator and you arrive at work one day to find an alert about a semi-dormant savings account that got a $30,000 deposit eight weeks ago. Moreover, three $10,000 cash withdrawals have been made in the past six weeks, with one taking place every two weeks.

To you, this might be the sale of some stock shares to pay for the cash purchase of a used car for each of your teenage twins, plus $10,000 to pay a carpenter who doesn’t like checks. To the analyst, the transactions pattern is completely out of character.

Call Your Bank — and Call Your Bank Back

It can help to be both proactive and reactive.

If you’re selling your home, and six-figure amounts of money are about to start sloshing around, tell your bank. If you’re selling your car for cash and depositing the money, tell your bank. If your life is about to change — a move, a big shift in how and when you earn money, a six-month retirement road trip — tell your bank.

When JPMorgan Chase shut down the personal accounts of Bryan Delaney and his wife, and another for a bar they own in New York City, he interviewed new institutions carefully. Chase had pointed to a pattern of cash deposits as the reason for its concern.

“I told them that Chase had an issue with us being a cash business, and I wanted to make sure that we were in full compliance,” he said. “So I said to them, ‘I’m going to write down how we do what we do, how and when we make deposits,’ and I gave them old statements so it was all on the record.”

Relationships can help, sometimes, when alarms go off. Forge them with a branch banker when you open an account at a bank that has branches, and nurture them on a continuing basis. “The more you do in person, the better your shot is at someone at least advocating for you,” said Aaron Ansari, a former bank programmer.

When the bank calls you, answer the phone. If you don’t trust that it’s really the bank, call the number on the back of your credit or debit card and ask to be connected to whatever department was supposedly reaching out to you.

Open email and respond. If the communication seems suspicious, log into your account and send a secure message or call a number that is on the bank’s website to confirm that the inquiries are real.

Banks must follow so-called know-your-customer rules. And while you may not like it if they suddenly want pay stubs or other information from you, if you don’t comply, they may show you the door. Suspicious activity, according to the ABA course on the topic for bank employees, includes “customers who are reluctant to provide personal information or information about their businesses.”

Any standoff can result in the bank filing what’s known as a suspicious activity report with the federal government. Too many of those — or even one — can lead the bank to shut down your accounts.

If It Happens to You

When banks shut down accounts, they generally don’t email, text or call you. Instead, you get an old-fashioned letter in the mail. You open your mail each day, right?

If not, chances are you’ll find out about a closure when your credit or debit card stops working. You’ll call the bank, it will inform you of the shuttering, and the representative — who won’t know the exact reasons — will tell you that you can expect to receive your money by check within a few weeks.

If you can’t go for weeks without money, your next move might be to go to a branch, if your bank has one, to try to withdraw it all.

Don’t yell when you get there. Making a scene rarely helps your cause, and it might cause the bank to call the police. Crying might move the needle, though. If you can get your money after all, you might want to empty any safe deposit box too while you’re there.

Then there’s the approach that Elad Nehorai took at a Bank of America branch in Los Angeles in July. He and his wife had their business account shut down when he reported a fraud attempt to the FBI. According to the bank, it sometimes restricts accounts because of information it receives from law enforcement agencies.

Nehorai went to the branch and was flummoxed by the response of the staff. “There was something very systematic about the whole thing,” he said. “It was clear that their job was not to know what to do in this situation.”

He and his wife eventually decided to just sit there until the bank handed over the balance from the account. At the same time, he posted on Twitter about the standoff, and a local CBS reporter took interest.

After it escalated to that point, Bank of America disbursed the funds.

c.2023 The New York Times Company