When banks can close accounts – and what to do if yours is affected


Banks and other financial institutions have to consider whether a politically exposed person is more susceptible to being involved in bribery or corruption because of their profession or position.

Under money-laundering regulations, banks are required to apply enhanced due diligence to politically exposed individuals to ensure that they are not using their institution for money-laundering or accepting cash from illegal sources.

If they can gather enough evidence to prove this, they can close a person’s account – but, again, they do not have to give this as a reason to the account holder.

In 2018, the Financial Conduct Authority, the City watchdog, said it was aware that “some banks no longer offer services to categories of customers they deem to be at high risk of money-laundering”.

There is very little recourse for a politically exposed person who finds their accounts have been closed. More often than not, they are not allowed to open another bank account with any institution in the UK again. 


Third-party investigative bodies and credit reference groups often work with banks to find and scrutinise account holders who they suspect have committed financial fraud.

A bank can close a person’s account if it, or a third-party, suspects they have committed, or been involved in fraudulent activity. 

Like most other reasons for closing an account, the bank does not have to tell you why your account has been closed, and you only need to be suspected of fraud – and not convicted – for a bank to close the account. 

If this happens, then there is a good chance you will not be allowed to hold a bank account again with most British financial institutions. 

If you suspect that you have been a victim to identity fraud (when someone opens an account and steals money in your name) then you must contact your bank as soon as possible to alert them and they can begin to investigate.

The same goes for theft: for example, if someone steals your bank details or cards and withdraws or spends money fraudulently.

According to Citizens Advice, a bank should refund any money stolen from you as a result of fraud and identity theft. They should do this as soon as possible, ideally by the end of the next working day after you report the problem.

But a bank can refuse a refund if they find you acted fraudulently or were “grossly negligent”: for example, if you shared your pin or password with someone else.

Alasdair Walker, a financial adviser and founder of forum UK Personal Finance, said: “As soon as there is any suspicion of fraud taking place by an account holder and someone is on their list and has a ‘fraud marker’ they are ‘unbanked’ and they can no longer get a bank account in the UK.

“If someone was declared bankrupt, they could still get a basic bank account. But if a person gets a fraud marker, they are unable to get a bank account again. People don’t need to be convicted of fraud, they just need to be suspected of fraud to lose the ability to get an account. 

“Some people inadvertently become entwined in fraud, with money being transferred from family or friends and can still lose their accounts if it’s suspected fraud. That’s it, no bank accounts from then on.”


A bank can close your account if you have failed to repay loans or credit, and/or have a bad credit history.

When a bank closes an account it generally does not affect your credit rating. But if there is an outstanding overdraft or loan when it closes, the bank may give these debts to a credit recovery agency for them to chase, which will affect your rating. 

If too many payments “bounce” from your account because there is no balance, then that is also grounds for closure. 

Banks can also close an account if it seems it is dormant for too long. Generally, it deems an account as “abandoned” if the account holder fails to use the account, or does not contact the bank, for several years. 

Furthermore, if the account has contained no money for several years, the bank may close the account if you have not replied to alerts or correspondence from the bank. 

What can I do if my account is closed?

To put it simply: not a lot – especially as a bank does not have to give you a reason why your account has been closed.

If you have been suspected of fraud, money laundering or being a politically exposed person, it is likely you will either not be able to open another account, or will have to wait a very long time to be able to. 

But, there are some simple steps you can take if you believe your account has been closed for the wrong reason, or you do not agree with the decision. 

First and foremost: contact your bank, especially if you have been previously notified of the closure. Doing so means you have a greater chance of finding out why the account is closed, if it can be reopened or how you can retrieve any funds left in the account. 

Making sure you keep all written and online communications with your bank is also vitally important.

Second, halt all direct deposits and withdrawals set up on your account soon after you receive notice about the closure. 

Unless suspected fraud or another serious offence is the reason the bank closed your account, you may be able to set up another account with a rival bank or speak to the bank about opening a new pre-paid or “second chance” account.

You can also complain to the bank, and to the Financial Ombudsman Service (FOS), if you believe the closure is unjust or unfair, but you generally have to prove it.

The ombudsman can award compensation if you can prove the bank did not provide notice of the account closure, if you were treated unfairly or you lost money due to the account being closed incorrectly.

A notice on the FOS website says banks can close accounts whenever they want, but they still have to treat their customers fairly. 

“Businesses that provide bank accounts are generally entitled to close them – just as their customers are. But you should treat your customers fairly. You shouldn’t close an account because of unfair bias or unlawful discrimination,” it says.