Don’t let banks part you from your money

Thousands of bank customers are having their bank accounts suddenly closed and left with no access to money – often for months at a time.

It is one of the most frequent complaints I get from Financial Times readers.  There is usually no warning that their bank is suspicious about a transaction. But they can be left without access to their monthly salary or any other money in their account.

It comes as banks, both modern app-based ones and traditional ones with legacy technology, are worried that they may be accused of enabling money laundering or fraud. 

Under the Proceeds of Crime Act 2002 banks are required to identify any suspicious transactions.  And we all know that the pandemic has increased the amount of fraud  and the fraudsters need a “friendly” bank to handle their ill-gotten gains.

But what a bank regards as suspicious can involve payments of less than £50.  I have come across people who received the covid support payment  for the self-employed or other government loans to help them through the pandemic, who then found their accounts were frozen.

Another reader found an inheritance from his mother caused scrutiny and when he tried to pay £2,000 to his sister all his money was frozen for months. HMRC rebates and universal credit payments have also been deemed suspicious.

It is not surprising to hear that over 1,000 people have contacted Resolver, the free online complaints service, in the last 12 months to complain about their accounts being frozen without warning, shutting them off from their own money for months with little explanation. 

Like me, Resolver has been warning that banks are closing accounts with little reason.  Its analysis of the complaints has shown that few of these cases involve any transactions that could be considered indicative of money laundering or fraudulent activity.

Resolver said that when this problem first emerged, it was largely confined to some of the newer ‘digital’ banks – with complaints to these organisations accounting for almost three-quarters of those we analysed. But with a quarter of cases about the traditional, established banks, including some of the UK’s best-known brands, it’s clear that the issue is becoming more widespread.

  One person found a £40 transfer to their account from a friend immediately causing account suspension while another experienced a 13-week freeze at the time of their complaint after three innocent transactions (one of which was £50) from a relative triggered a red flag.

When a bank acts the customer then has to “prove” the payment is innocent.   While you cannot prepare for silly scrutiny if you are expecting any unusual payments into your account it is advisable to warn the bank in advance of where the money is from and providing evidence.  One person I helped came under scrutiny when he cashed in a National Savings and Investments account.

It may take a time to get through to your bank while so many people are still working from home, may be sick or may even be furloughed. It means we have to make it easy for the banks to open up our accounts again.

I can remember having to prove to my bank that the lump sum paid into my savings account was from selling my home, even though my mortgage had been with the bank itself.  It needed a letter from the solicitor handling the conveyancing to clear my name.