Banks Close Customer Accounts as Part of Suspicious Activity Monitoring

As fraudulent banking activity has increased, banks have been closing customers’ accounts without much explanation, according to The New York Times.

Under an obligation to report unexplainable suspicious activity to regulators and law enforcement, banks regularly monitor the financial transactions of customers. Individual financial institutions are required to alert the Financial Crimes Enforcement Network, a bureau of the Treasury Department. They are on the lookout for such crimes as money laundering and terrorism financing, which would make themselves known in transactions the banks could track. That’s to say that banks play a critical role in surveilling and collecting data.

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If they fail to file a Suspicious Activity Report (SAR) for an account that proves problematic for the bank or the individual, they are responsible for that failure. That potential liability may be increasing the number of account shutdowns, according to the Bank Policy Institute (BPI).

In 2021, banks filed 1.4 million SARs, according to the Treasury Department, 70% more than they filed in 2014.

In addition to a better-safe-than-sorry sentiment, other factors may have caused an uptick in reporting. Government alerts of questionable transactions, increasingly sophisticated detection technology, and heightened regulatory scrutiny may have led to more closings, The Times reports.

But just a small number of SARs uncovered any wrongdoing. Only 4% of 640,000 reports were followed up on by law enforcement, according to research by BPI, which investigated 16 million alerts.