Debanking: What to do if your business account is closed by the bank

One moment you’re sending and receiving payments and the next, you’re locked out of your business bank account. You feel bewildered. What’s happened, and why? 

Debanking – when banks offboard customers – is a hot topic. According to data gathered in 2023, high street banks close more than 1,000 accounts in the UK every business day, leaving a trail of bewildered ex-clients looking for answers. 

So, what can you do if it happens to you? In this guide, we’ll explain why banks sometimes close business accounts and guide you through next steps if your business account is closed by your bank. 

What is debanking? 

In short, debanking is when banks – sometimes without ceremony or notice – close accounts because they believe clients pose financial, reputational, regulatory or even legal risks. Account holders lose access to vital banking services, preventing them from holding funds and making or receiving payments. 

Can a bank just close your business account?   

You might wonder, “Can my bank close my account without my permission?” Unfortunately, the answer is a resounding, “Yes.” Banks, like other businesses, are under no obligation to provide service and can close accounts if they feel clients no longer qualify for the products they’ve been given access to. 

“Don’t I have the legal right to a bank account?” Again, no. According to the Financial Conduct Authority (FCA), neither businesses nor people are entitled to bank accounts. Banks can base service decisions on commercial risk factors. 

However, the nine largest financial institutions in the country must provide basic personal accounts to people who wouldn’t otherwise qualify for services. They can’t discriminate based on things like nationality, age, sex, race or any other protected quality listed in article 21 of the charter of fundamental rights of the European Union.  

Sadly, the provision for a basic personal bank account doesn’t extend to business banking. Because of this, businesses left without bank accounts face tremendous difficulty operating. 

Why would a bank close my business account? 

According to industry experts, banks close existing accounts or decline financial services for four main reasons. 

Trigger 1: Account misuse or low use 

If you haven’t used your business bank account much – or haven’t used it at all – your bank might classify you as a “low use” customer and debank you.  

Frequently dipping into unauthorised overdrafts or repeatedly failing to deposit funds to cover pre-arranged payments can also trigger offboarding.  

Trigger 2: Enhanced due diligence costs 

Politically exposed persons (PEPs) hold prominent positions and often have influence over government decisions, making them more susceptible to financial risks. As a result, banks have to pay special attention to accounts held by PEPs. 

Enhanced due diligence is an ongoing process and costs the bank significant money over time. Because of this, financial institutions take a risk-versus-reward approach to PEPs, sometimes offboarding clients they believe are at increased risk of bribery or vulnerable to corruption. 

Trigger 3: Enhanced money-laundering or crime risk 

When clients receive funds from unconnected third parties, make odd payments or transact with high-risk countries, banks take notice. In fact, they’re legally obliged to flag suspicious activity. 

If banks believe that account holders represent a greater risk of money laundering or terrorist financing, they may apply additional due diligence. Again, because this can cost the bank a lot of money over time, they sometimes choose to debank clients. 

Trigger 4: Client responsiveness issues 

When clients don’t send updated identity documents, proof of address or information about their businesses, banks can’t fulfil their Know Your Customer (KYC) obligations. 

Financial guidelines can change, so your bank may request updated documents from time to time. If you don’t provide them in a timely manner, your account could get suspended or closed. 

What happens if my business account gets closed by the bank? 

Most of the time, banks let customers know if their accounts are at risk of closure. So, if you receive a letter from your bank requesting additional documentation, do reply promptly. Similarly, banks generally provide notice before proceeding with account closures, giving clients time to prepare for financial change. 

However, if banks suspect account holders are involved in fraud, money laundering or other illegal activities, they may freeze funds or close accounts without notice. In that scenario, they can’t legally discuss account suspensions or closures with the clients in question.  

If you’re debanked, the bank will usually refund your account balance via cheque. Again, procedures vary if the bank suspects illegal activity has taken place. In that case, funds may be frozen pending the outcome of an investigation. 

What should I do if I get debanked? 

Whether you receive notice or not, losing access to your business bank account unexpectedly is both distressing and inconvenient. If you find yourself debanked, here’s what to do... 

1. Contact your bank 

If your business account gets closed by your bank and you think there’s been a misunderstanding, get in touch with your bank’s customer service team as soon as possible. Your bank may not reopen your account, in which case you can make a formal complaint.  

2. Complain to the Financial Ombudsman Service (FOS) 

You’ll need to wait eight weeks after filing your official complaint before getting in touch with the FOS. If you don’t receive a reply or you’re unhappy with the bank’s response in that time, you can escalate your complaint. 

3. Open a new account 

You don’t need to wait to open another account. One option is to choose an alternative banking provider rather than a traditional bank. This approach can help you spread risk, even if your original business bank account gets reopened or you open a new account with another high street bank. 

Opening an account with Interpolitan takes 7–10 days and can help keep business transactions flowing in more than 160 jurisdictions. Every account comes with a relationship manager as standard, making it easier to get started. 

Stay in control with Interpolitan 

Losing access to your business account can be bewildering and stressful – but there are viable alternatives. If your business account gets closed by your bank, opening an Interpolitan alternative bank account can give you access to the multi-jurisdictional payments you need to continue doing business all over the world. 

At Interpolitan, we work with a wide range of intermediaries as well as business owners. So, if you’re an accountant, a lawyer or a family office representative looking for an alternative multi-currency account on behalf of a third party, get in touch with us. 

Ready to take control? Learn more about us or open an account today.