Bank Closed My Account For Suspicious Activity

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Having your bank account closed is never a fun situation. After all, you may have direct deposits, automatic payments and apps linked to this bank account, which will all be interrupted if your account is closed. 

Plus, updating this information can be time-consuming and undoubtedly frustrating. But closing a bank account isn’t always something you will plan on doing before it happens. 

For instance, if your bank closes your account for suspicious activity, this is not only a huge inconvenience, but it can also be concerning as the fear of identity theft lingers. Let’s explore all of the reasons as to why the bank may close your account for suspicious activity. 

What happens when the bank closes your account due to suspicious activity?

Believe it or not, you may not be fully aware that the bank has closed your account. A bank might try to contact you prior to the bank account being closed, but each bank’s contact approach will vary. 

The bank may email you or send you a text. But if the information the bank has on file is outdated, you won’t receive the heads up. Likewise, if the bank tries to send you a letter, you may have moved and forgotten to update the bank with your new address, meaning the letter will not arrive either. 

Nonetheless, if the bank closes your account for suspicious activity, the bank must return the money in the account to you, minus any unpaid fees or charges. Generally speaking, the bank will release the money to you via check. If you happen to have another bank account with the bank, they may transfer the money into that account instead. 

What triggers a Suspicious Activity Report?

A suspicious activity report, also known as an SAR, is a report that flags activity viewed as out of the ordinary for the account holder. It’s important to note that suspicious activity is not only limited to suspicious transactions. 

A bank may deem something as being suspicious if they believe the account holder is trying to hide something or do something illegal as well. For example, if the account holder consistently deposits cash deposits, but has no record of depositing payroll checks, the bank may flag this account as being suspicious. 

You might question where all of this cash is coming from. But depositing cash consistently can be easily explained and justified, so if you have a legitimate and legal cash business, you should have nothing to worry about. 

Another example of suspicious activity may be having transactions at physical stores on the opposite side of the country in a short period of time. For example, if your card is used at a retail store in your hometown, yet 30 minutes later, your card information is then used at a retail store 1,500 miles away, that may trigger a suspicious activity alert on your bank’s end. It could indicate that someone may be trying to steal your identity. 

Reasons why the bank may have closed your account

If your bank account was closed, there may be a good reason for it. Most commonly, the bank will choose to close your bank account for one of the following reasons. 

Suspected identity theft

Unfortunately, identity theft can occur to anyone at any time. If the bank has suspected identity theft regarding your account, the bank may choose to close it immediately to prevent any further theft or damage on your end. 

If you plan to travel abroad or even just across the country, or you plan on making a purchase that is outside of your normal spending habits, give your bank a call proactively to inform them about your planned activity. They can update your account to ensure that it is not flagged for suspicious activity for a certain period of time. 

Too many transfers

Transferring money from one account to another may cause a bank to close your account. This is most common with savings accounts. A bank typically only allows you to transfer money from your savings account three times per month. 

Zero balance

A zero balance may also cause a bank to close your account. If you typically maintain the minimum account balance but you happen to drop to zero for a day or so, you shouldn’t need to worry about your account being closed. But if you maintain a zero balance for more than a few days or upwards of a week, the bank could very likely close your account. 

Account not in use

If your account is inactive for an extended period of time, your bank may close the account. Again, if you have money in it, you won’t be at a loss of this money. The bank may move the money to an account you use actively, or they may mail you a check. 

Too many bounced checks or overdrafts

Similar to the zero balance example, if your checks bounce often or you consistently overdraft your account, the bank will most likely close your account. You may be allowed a grace period of one or two bounced checks and overdrafts, but if this becomes a pattern, the bank will quickly put an end to the account. 

Criminal conviction

If you are a convicted criminal and you don’t disclose that to your bank, the bank will typically reserve the right to close the account in the event that they find out you are a convicted criminal. Additionally, if you become convicted of a crime after opening an account with a bank, you can usually expect your bank account to be closed as well. 

Bank-related mistakes

Banks can also make mistakes. They may close your account based on an assumption, but in reality, that assumption is not true. If you’re able to prove otherwise, you should expect to have your account reopened sooner than later. 

How long can a bank restrict your account?

Closing an account may be an extreme move on your bank’s part, but it may not be the bank’s first decision. Many times, a bank will restrict your account or put your account on hold instead of immediately closing the account. 

For example, if identity theft is suspected, the account may not be closed right from the start. Rather, the account may go on a freeze to prevent any further cash from leaving the account. 

The bank will make every effort to contact you, and if you approve the transactions, the account should be unfrozen. However, if you deny the transactions, the bank might have no other choice but to close your account, seeing as your information has been compromised. 

It’s important to note that there is no set limit for how long a freeze on your account may last. Every bank has their own policies so you will need to look at the specifics of your bank’s protocol. 

What to do if the bank closed your account

If your bank account was closed, you should follow these steps. 

Contact the bank

First and foremost, contact the bank. Seek to receive a solid understanding as to why your account was closed. Inquire about whether or not there is anything you can do to reopen the account as well. 

Record all communication in writing

It’s generally best practice to document any and all communication you have with the bank in writing. This will most commonly be done via email communication with the branch manager of banking professionals at your local bank. You will want to have a paper trail pertaining to this communication if you were in fact not at fault for the account closure. 

Pause direct deposits and automatic withdrawals 

Remember to pause any direct deposits and redirect automatic bill payments to a different bank account. You do not want your money to be stuck in limbo, and you also don’t want to receive any late charges for any bills that were not automatically paid. 

Even worse, you don’t want to receive any negative impacts towards your credit score. Be sure to transfer your direct deposit to another bank account and move all of your bills to a different account or credit card. 

Get a copy of your ChexSystems report

You should also obtain a copy of a ChexSystems report. This report details why a bank account was closed. This information can be useful to you at a later point in time. For example, it can come in handy if or when you apply for a loan as well as whenever you go to open a new bank account. 

Consider your options

It’s highly probable that you still need a bank account despite yours being closed, so you’ll want to consider all of your options. You may choose to continue banking with the bank you were familiar with if the bank will allow you to do so. If not, it’s time to find a new bank that can better suit your needs. 

File a complaint

If you believe your account was wrongfully closed, you should file a complaint with the Office of the Comptroller of the Currency’s (OCC) Customer Assistance Group. This is an important step that helps maintain accountability regarding the financial institution. 

A closed bank account can happen for many reasons 

It’s typically never a fun experience when the bank closes your account. Not only is it a hassle to update all of your billing and direct deposit information, but it can also have something to do with a larger identity theft issue. 

It’s important to actively monitor your bank accounts to ensure that you are meeting the minimum requirements that the financial institution has asked you to meet, such as a minimum account balance or staying below a certain number of transfers per month. 

Not only that, but you can also recognize any suspicious activity before the bank notices what has happened. Ultimately, be as responsible as possible and notify your bank about any suspicious activity as soon as you are made aware of it. 

FAQ

Do you lose your money if a bank closes your account?

You will not lose the money you have in your account, but the bank will charge you any fees that you owe them before writing you a check for the remaining balance in your account.

What amount triggers a Suspicious Activity Report?

 If the bank has already decided that the individual who deposited money is a known suspect, they are required to report deposits of $5,000 or more. If the depositor is not a known suspect, the bank is required to report aggregated transactions of $25,000 or more.

What happens if your bank account is under investigation?

If your bank account is under investigation, your account is most likely frozen. You won’t be able to use your debit card during this time period, and automatic payments may be delayed.

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