Why Are Banks Closing Accounts Without Explanation?

In recent years, there has been an increase in banks closing accounts without notice or explanation. For many, this sudden loss of access to their funds can not only be really inconvenient, but it can also cause a lot of panic and stress; after all, many of us have payments regularly coming out for things like groceries and household bills.  

So, why do banks close accounts, what can you do if it happens to you, and are they any steps you can take to prevent it? 

Why do banks close accounts? 

There are several reasons why a bank might decide to close an account. These can range from routine regulatory compliance to more serious suspicions of illegal activities. 

Misuse of personal accounts for business 

One common reason for account closure is using a personal bank account for business purposes. Most banks have clear terms and conditions stating that personal accounts should not be used for business transactions. If a bank detects regular business activity in a personal account, it may decide to close the account to prevent further misuse. 

Failure to respond to KYC requests 

Know Your Customer (KYC) regulations require banks to verify the identity of their clients periodically. This involves submitting updated identification documents and other relevant information. If you ignore these requests, it may lead to the bank closing your account. Many people overlook these emails or assume they are unimportant, but failure to respond can result in losing access to your account, so it’s really important that you do respond to them. 

Suspicion of money laundering 

More than ever banks are vigilant about monitoring accounts for signs of money laundering. Large, unexplained transactions, frequent international transfers, and other unusual activities can raise more than a few red flags. If a bank suspects that an account is being used for money laundering, it may close the account as a precautionary measure. 

Legal orders 

Banks are sometimes required to freeze or close accounts due to legal orders from authorities such as the HMRC (Her Majesty’s Revenue and Customs) or the police. This can happen if there is an ongoing investigation into criminal activity or if the account holder is suspected of tax evasion or other financial crimes. In cases like these, the bank is legally obligated to comply with the order without notifying the account holder. 

What to do if your account is closed 

If you find yourself in the unfortunate situation of having your bank account closed without explanation, don’t panic. There are several steps you should take to address the issue: 

Contact the bank immediately 

Of course, as soon as you discover that your account has been closed, contact your bank right away to find out the exact reason why your account was closed. While the bank may not be able to provide detailed reasons for the closure, they can inform you of the next steps you need to take. 

Understand the timeline 

The time it takes to resolve the situation and regain access to your funds obviously can vary quite a bit depending on the reason for the account closure. For routine matters such as KYC non-compliance, it typically takes 4-6 weeks to receive your funds, usually via a cheque. However, if the closure is due to suspicion of money laundering or other criminal investigations, the process can take much longer. 

Open a new bank account 

To help reduce any disruption, you should open a new bank account as soon as possible. Consider using an online bank such as Starling, Tide, or Anna, as these institutions typically have quicker setup processes. Many online banks can approve and activate a new account within a few hours, providing you with immediate access to banking services. 

Preventative measures 

While it is not always possible to prevent account closures, there are steps you can take to reduce the risk. 

Use accounts as intended 

This one should be pretty obvious, but make sure that you are using your bank accounts in accordance with their terms and conditions. If you run a business, open a business account rather than using a personal account, as this will help you avoid issues related to misuse. If you have any confusion about your account’s terms and conditions, have a chat with your bank and they’ll be happy to make sure you understand your account. 

Stay compliant with KYC requirements 

Regularly update your personal information and respond promptly to KYC requests from your bank. By staying compliant, you reduce the risk of your account being flagged for non-compliance. 

Monitor your account activity 

Always keep an eye on your account activity and be aware of transactions that might be viewed as suspicious. If you need to make large or unusual transactions, you may want to consider notifying your bank in advance to explain the nature of these transactions. 

Maintain clear records 

Keep clear and organised records of all your transactions. This can help you quickly provide any necessary documentation if your account activity is questioned. 

Final thoughts 

Having your bank account closed without notice is always a stressful experience. However, by understanding the reasons behind such closures and knowing the steps to take in response, you can manage the situation more effectively and get back up and running again as quickly as possible. 


If you have questions about any aspect of your finances, please get in touch with the Trinity team. We’d love to help!   

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