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Banks Shut Down Customer Accounts Without Explanation, Apparently Due to Rise in SARs

S.J. Steinhardt
Published Date:
Nov 6, 2023

GettyImages-474008420 Money Grab Cash Dollars

An increasing number of individuals, families and small-business owners are finding their bank accounts being closed, and they don’t know why, The New York Times reported.

These situations—what banks refer to as “exiting” or “de-risking”—are caused by any number of reasons, but the goal is to crack down on fraud, terrorism, money laundering, human trafficking and other crimes.

By law, banks must file a “suspicious activity report” (SAR) when they see a transaction or behavior that might violate the law, such as unexpectedly large cash transactions or wire transfers with banks in high-risk countries. Banks filed over 1.8 million SARs in 2022, a 50 percent increase in just two years, according to Thomson Reuters and that figure could come close to 2 million this year.

Because a bank is not legally allowed to tell a customer if it has filed an SAR, and the federal government prosecutes only a small fraction of the people whom the banks document in their SARs, those affected have no idea what the issue may be.

Last year, banks filing SARs tagged categories such as 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.

The Times noted that multiple SARs often—though not always—lead to a account cancellations.

The Times examined more than 500 cases of this dropping of customers by their banks and interviewed more than a dozen current and former bank industry insiders in reporting the story. The ensuing chaos and confusion of having one’s account closed can have numerous repercussions, such as individuals being unable to pay their bills on time, long delays in receiving their balances, and credit score downgrades.

“There is no humanization to any of this, and it’s all just numbers on a screen,” said Aaron Ansari, a former bank employee who used to program the algorithms that flag suspicious activity, in an interview with the Times. “It’s not ‘No, that is a single mom running a babysitting business.’ “It’s ‘Hey, you’ve checked these boxes for a red flag—you’re out.’”

Bryan Delaney and his business partner and general manager, Jennifer Maslanka, had their bar’s account, plus personal checking and credit-card accounts for Delaney, his wife and Maslanka, closed by Chase, due to the series of their deposits, which were in round numbers.

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

Steven Ferker bought a house in New York in late 2016, withdrawing money from one of his Citi accounts in $7,000 to $12,000 increments to pay his contractor, who requested cash payments.

He was surprised when the bank called to ask why he was making repeated cash withdrawals, he told the Times. 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.”

The letter from the bank offered no explanation, so Ferker went into the branch to ask the manager, who told him, ”Don’t ask me. Ask the computer that flagged you.”

Nick Seidel of Chicago was dropped by three banks before finding out why: He had served five years in prison for a 2011 car theft and use of counterfeit money. During his incarceration, he earned several paralegal certificates and drafted legal documents for other inmates.

He opened a checking account at Chase after his release, using a state-issued identification card and a check from the Department of Corrections. “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,” the Chase spokesman 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.”

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