What is debanking?

Losing access to your bank account is confusing and stressful. Suddenly being unable to make or receive payments isn’t just inconvenient: it’s disruptive and can feel very embarrassing.  

Debanking – when banks offboard clients, sometimes without notice – is big news. According to the Financial Conduct Authority’s (FCA) own data, banks closed more than 1,000 accounts every business day during fiscal year 2021-2022. 

While debanking can happen to anyone, high-net-worth individuals often face a higher account closure risk. In this article, we'll explain what debanking is, why it could affect you and how you can spread risk and stay financially flexible – even without a traditional bank account. 

What is debanking? 

Also known as de-risking, debanking is when banks close accounts because they believe customers pose regulatory, legal, financial or reputational risks to the institution. After being debanked, people can no longer make payments, receive deposits or benefit from other vital banking services. 

What “reputational risk” means from a practical perspective is ambiguous. Recently, numerous high-profile individuals have been debanked for seemingly arbitrary reasons, triggering a media furore and much speculation.   

In 2023, the FCA began investigating whether banks were offboarding people because of their political views. Ultimately, however, the financial regulator found no evidence that clients lost accounts because of their ideological perspectives. 

The FCA debanking investigation led to a series of proposed Treasury reforms, including a call for banks to provide clients with at least 90 days’ notice before closing accounts. Under the new Treasury proposals, banks will also need to explain account closures in a clear way.  

Why would a bank close my account? 

Being independent businesses, banks can offboard clients for various reasons, some of which are harder to explain than others. Reputational risk, for example, might include any action taken by an employee or associate of the bank that reflects poorly on the financial institution itself. 

Reputational risk management shouldn’t include any infringement on a client’s right to free speech, including affiliation with any legally established political party. On the other hand, banks may cite reputational risk when severing association with clients convicted of certain crimes. 

Customer behaviour can also trigger debanking. If clients are repeatedly rude to bank staff, behave inappropriately or make discriminatory comments, they may find themselves “left out in the cold”, so to speak. 

Setting aside reputational risk and impolite behaviour, there are four other common reasons why banks close accounts.  

Reason one: You don’t use your account 

Banks raise revenue in various ways, including account fees, interest payments on loans and revolving credit, and returns on client fund investments. Conversely, they spend money on account maintenance, staffing and other business-related expenses. 

If you don’t use your bank account very much – or at all – you may be costing your bank more than it makes from your activities. In that case, your account might be closed to save the bank money. 

On the other hand, if you regularly dip into unauthorised overdrafts or fail to deposit funds to cover pre-arranged payments, your bank might offboard you for misusing your account. 

Reason two: You’re a politically exposed person 

Politically exposed persons (PEPs) are people in high-profile public positions whose statuses make them potentially vulnerable to corruption. In layman’s terms, they’re powerful individuals – change-makers with links to the government and other large and influential organisations.  

PEPs include heads of state, ministers, members of parliament (MPs), ambassadors, bank board members, high-level members of the judiciary and other prominent people. Relatives and close associates of PEPs are usually also classified as PEPs. You can find a full definition of a foreign or domestic PEP in the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. 

Because they’re more likely to be targeted for bribery and other forms of financial crime, banks apply enhanced due diligence to PEP accounts. Enhanced due diligence is expensive, so financial institutions often take a risk-versus-reward approach to PEPs, debanking clients they feel may be especially susceptible to financial risk. 

Reason three: Your activities trigger red flags 

High-net-worth individuals often move large amounts of money between countries – and high-value transactions are nearly always subject to additional scrutiny. UK banks use strict anti-money laundering (AML) and counter-terrorist financing (CTF) policies to ensure payments and deposits are legal. 

Suppose you (or an intermediary acting on your behalf) buy property or make substantial investments overseas. In that case, you will almost certainly be asked for documentation to satisfy bank due diligence procedures – especially if you're sending or receiving payments via partners in high-risk countries.   

Odd payments and deposits made by unconnected third parties can indicate money laundering, terrorist financing and other forms of financial crime. Overall, banks err on the side of caution and prefer to reduce risk by offboarding customers whose transactions trigger frequent red flags. 

Reason four: You don’t respond to requests for information 

To fulfil Know Your Customer (KYC) requirements, banks have to check their clients’ identities and review proof-of-address documents. In other words, they must make sure that you are who you say you are and that you live where you claim to live. 

Because financial regulations change from time to time, your bank might occasionally ask for updated documents. Your account could be suspended or closed if you don't provide them promptly.  

Frequently asked questions about debanking 

Do I have the legal right to a bank account? 

Neither people nor businesses have an enshrined legal right to a bank account in the UK. However, banks in the UK can’t discriminate against customers because of nationality, place of residence or any protected characteristic listed in Article 21 of the Charter of Fundamental Rights of the European Union (CFR). 

The nine biggest high street banks do need to provide basic accounts to people who aren’t otherwise eligible for bank accounts. Individuals are still subject to AML and KYC checks, though – so if they don’t pass due diligence screening, they could still be denied an account.  

Can I reopen my bank account? 

If your bank account is frozen or closed and you believe there’s been a misunderstanding, contact your bank as soon as possible. You may be able to provide an explanation or documentation to satisfy the bank’s due diligence requirements and regain access to your account or open a new account. 

What happens to my money if the bank closes my account? 

If you get debanked, you will generally receive the balance in your account via cheque. You can then deposit the cheque into another account held in your name. 

However, if your funds are frozen because the bank suspects illegal activity (money laundering or another type of financial crime), they’ll be held pending the outcome of an investigation.  

Protect yourself with Interpolitan 

If you find yourself without a bank account, you can open another one immediately. One option is to choose an alternative provider like Interpolitan rather than a traditional bank. 

You'll feel at home here if you're used to personal service. At Interpolitan, we match clients with dedicated relationship managers who guide them through onboarding and provide ongoing support afterwards. Opening an account takes just 7–10 days, so you can access the tailored financial solutions you need to rebound quickly.

We also work with a range of intermediaries, including lawyers, accountants and family office representatives. So, if you’re looking for a bespoke alternative banking solution on behalf of a third party, we’d be delighted to speak with you. 

To learn more about how an Interpolitan account can help you spread risk and hedge against debanking, get in touch with us today.