How Account Closures and Freezes Threaten Your Financial Freedom—and What to Do About It
What would you do if your bank closed your account tomorrow without warning? It’s happening more often than you might think. Banks are 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.
What Is De-Risking?
Of course, banks won’t admit they’re doing this. Instead, they’ll blame laws and regulations. Compliance with anti-money laundering (AML) rules is their favorite excuse.
This process has become so common that a term has come into use to describe it: de-risking.
- De-risking refers to the practice where banks eliminate customers perceived as risky or unprofitable, often citing compliance with AML laws.
The Impact of Account Closures on Everyday Customers
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.
In 2018, EverBank, 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.
Why Your Account Could Be Closed: The EverBank Example
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 it was because of certain transactions.
I believe 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 involved, which likely triggered an alert that I was no longer profitable enough for them.
EverBank did allow me to transfer my funds to other banks. But other customers, both in Spain and Hong Kong, haven’t been as lucky.
Case Study: De-Risking in Spain
In 2018, Spain enacted stricter money laundering laws requiring banks to gather more information on their clients. For Spanish citizens, the process was simple—they just needed to show an ID card or passport.
But for foreign residents, it became much more complicated. They were asked to provide work contracts, paychecks, and other evidence that the funds were legitimate. The problem? Many foreign residents aren’t allowed to work under Spanish immigration laws.
In early 2019, thousands of accounts—mostly belonging to Chinese citizens and their children—were frozen without warning at BBVA, Caixabank, and Bankia. Even some customers who provided the requested documents couldn’t regain access to their funds.
A typical case involved an accountant of Chinese descent who moved to Spain as a child. Despite showing proof of employment, he still couldn’t get his account unfrozen.
Hong Kong’s i-Account: More Frozen Funds
The situation is just as grim in Hong Kong. Recently, an attorney I know alerted me that i-Account, a Hong Kong-based payment platform, had frozen the accounts of its US customers.
I contacted i-Account’s customer service and received this reply:
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.
When I followed up with the attorney, she shared this troubling information:
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.
Lessons from De-Risking: What You Can Do Now
- Reduce your dependence on bank accounts. Use cash or cryptocurrencies wherever possible.
- Keep an ample supply of cash available. This ensures you can cover expenses even if your accounts are frozen.
- Maintain small balances across multiple banks. If one account gets frozen, at least all your funds won’t be tied up. And don’t forget that bail-in laws can also jeopardize your savings if your bank becomes insolvent.
- Consider offshore accounts for greater flexibility and protection. If your domestic accounts are frozen, accounts in jurisdictions like Switzerland can provide a financial lifeline.
- A second citizenship from another country can act as an insurance policy. It allows you to leave a country quickly if you face financial restrictions, without being dependent on just one nation’s banking system.
The Growing Threat of Bail-Ins
In a financial crisis, bail-in laws allow banks to convert customer deposits into equity to recapitalize themselves. This makes depositors unsecured creditors, meaning you could lose access to your money permanently.
For more information, read: How do you protect against bank bail-ins?
How Technology Is Making Bank-Free Solutions Possible
Peer-to-peer lending platforms offer loans without involving banks. Blockchain technology and cryptocurrencies enable secure payments without relying on traditional financial institutions.
Recommended Reading:
The Future of Finance Is Changing—Are You Ready?
Don’t wait until you get a closure notice. Start exploring alternative banking solutions, offshore accounts, and diversification strategies today to safeguard your financial freedom.
Planning ahead is the key to staying one step ahead of economic turmoil. Book your free consultation with one of our Associates and learn how we can help protect your wealth.
