Your Bank Might Lock You Out of Your Own Account

In the last few years, banks have been falling over themselves to get rid of “undesirable” customers. Basically, if your bank isn’t making enough profit servicing your account, it will close it.

Of course, banks won’t admit they’re doing this. Instead, they’ll blame laws and regulations. Compliance with money laundering rules is their favorite excuse.

This process has become so common that a term has come into use to describe it: de-risking. In the US, tens of thousands of gun sellers, coin dealers, fireworks suppliers, dating services, US citizens living abroad, Muslim students, money services businesses, diplomats, and even porn stars like Teagan Presley have had their accounts closed due to the de-risking phenomenon.

It even happened to me. The Lifeboat Strategy Nestmann, Mark Best Price: $45.58 Buy New $145.95 (as of 09:40 UTC - Details)

About a year ago, EverBank (now TIAA Bank), with whom I had a nearly 20-year relationship, notified me that all four accounts I had with them were being closed. The first paragraph of the notification read:

We regret to inform you that EverBank is unable to continue a customer relationship with you at this time, therefore, we are requiring closure of the above referenced accounts within 30 days from the date of this letter.

So much for 20 years of customer loyalty. Fortunately, I had other accounts, so I wasn’t locked out of the financial system.

Out of a mix of curiosity and outrage, I called EverBank and managed to speak to a due diligence official. While he told me that he couldn’t comment on the reason for the bank’s decision to close my accounts, he confirmed that it was because of certain transactions in one of them.

I think the suspect transaction was a wire transfer to the Federation of St. Kitts & Nevis, where the Nestmann Group is an international marketing agent for the country’s citizenship-by-investment program. It took weeks to get the transfer credited. EverBank officials made several phone calls to the receiving and intermediary banks to trace the payment. Naturally, EverBank needed to pay the employees who followed up on the transaction. Their involvement probably triggered an alert that all my accounts should be closed, because the bank’s relationship with me no longer met its profit targets.

EverBank did have the courtesy to allow me to transfer the balances of my accounts to other banks. But I’ve recently learned of two incidents in which non-US banks blocked the accounts of thousands of customers, leaving with them with no access to their money.

In 2018, Spain enacted stricter money laundering laws requiring banks to gather more information on their clients than previously needed. For Spanish citizens, the process was simple. In many cases, they just needed to present an ID card or passport.

But the process was much more convoluted for foreign persons living in Spain. They were required to produce copies of work contracts, paychecks, and other evidence that the funds deposited into their accounts were legitimate.

The problem is that when you immigrate to Spain, in many cases, you’re not allowed to work there. In that situation, there’s no way you could produce a work contract or pay stub. Thus, in early 2019, thousands of bank customers – mainly Chinese citizens and the Spanish-born children of Chinese citizens – lost access to their money in accounts at three of the country’s biggest banks: BBVA, Caixabank, and Bankia. Many of them received no warning that they were about to lose access to their money.

Some customers who produced the required documentation still couldn’t regain access to their funds. A typical case was an accountant with Chinese ancestry who had moved to Spain as a child and had proof of employment. Despite showing the bank this evidence, he still was unable to get his account unfrozen.

Something similar is happening on the other side of the world in Hong Kong. A few weeks ago, I received an email from an attorney I know asking if I was aware that a Hong Kong-based money platform called i-Account had frozen the accounts of its US customers.

i-Account bills itself as “the most accessible international account.” Only now, it isn’t.

I emailed the customer service department at i-Account to find out what was going on. They sent me this response:

We are extremely sorry that the processing of transactions has been prolonged due to compliance policy and monitoring of multiple financial institutions. We require clients to provide supporting documents/information to process the transactions as requested by our partner banks. I understand that this request must be time-consuming on our clients’ end and we are really sorry for the inconvenience. To control the risk and make sure that we can have the amount sent successfully to the beneficiary account, we need to carefully confirm as many details with the banks. This is to reduce the risk of declined remittance.

I followed up with the attorney who alerted me to the situation. She informed me:

The funds are still frozen in all accounts … Hong Kong has passed a new law requiring all foreign accounts to be investigated by the Police Joint Financial Intelligence Unit (JFIU) … When a bank or financial institution notifies the JFIU that a funds transfer has been requested by a foreign account holder, the request is treated as a suspicious transaction and an investigation is launched. The funds are frozen for the duration of the investigation. The JFIU is backlogged and investigations take a long time to complete. i-Account has no control over the investigation or the length of time the funds are frozen…

[I have learned that] the US was mainly responsible for pressuring HK into legislating such laws in an effort to track anti-money-laundering violations and all other financial transactions.

There are some important lessons here:

  • Reduce your dependence on bank accounts. Wherever possible, use cash or cryptocurrencies like Bitcoin
  • Keep an ample supply of cash available so that you can pay expenses if your bank accounts are closed or frozen.
  • Maintain small balances in banks. If your account is frozen, at least all your money won’t be tied up. And don’t forget that if your bank becomes insolvent, thanks to the bail-in phenomenon, you might never get your money back.

Fortunately, technology makes it possible to bypass banks altogether. Need a loan? You no longer need to go to a bank to borrow money; peer-to-peer services such as Lending Club instantly match borrowers with investors who have money to lend. Need to make or receive payments? Blockchain technology used by Bitcoin and similar digital payment systems allows you to securely send and receive payments without a bank.

Thus, if you receive a letter from your bank notifying you that your account has been closed or frozen, try to smile. In the not-too-distant future, banks will be obsolete.

Reprinted with permission from