Bank account closures have a serious impact on business.
Ask any business owner and they’ll tell you that cash is the fuel that keeps a business alive. Without it, you can’t purchase supplies or pay employees. But a lot of the time, the most important consideration about your cash goes unnoticed. And that’s how you actually access it.
We’ll tell you how to protect yourself (and your business) below.
Bank accounts provide businesses with the ability to send and receive cash. It allows business owners to pay their employees and suppliers. And more than that, it allows businesses and individuals to actually receive payment. After all, in order to pay your people, you need to get paid as well.
This article focuses on the needs of people who are already banking overseas and need information on why a bank may close their account.
Feel free to use the table of contents to jump ahead to the sections most relevant to you.
Table of Contents
- What Should I Know About Bank Account Closures?
- Reasons Why a Bank May Close a Bank Account?
- How Do Banks Protect Themselves?
- How Can I Avoid the Bank From Closing My Account?
- How Can You De-Risk Your Banking Profile?
- Frequently Asked Bank Account Questions
- Do You Want Help Opening Bank Accounts?
What Should I Know About Bank Account Closures?
Just because you’ve managed to set up an account for your business doesn’t mean that you are out of the woods just yet. The truth is, the bank account you have today, might not be available to you next week or next month.
Below are four questions you should ask yourself before opening a bank account.
- Have you ever considered what would happen if you experienced a bank account closure?
- What is your backup plan in place if a bank account closure happens?
- How you would pay your people if you had an account closed?
- Where would you ask clients to send payments?
Unexpected account closures happen a lot more frequently than you might expect. It’s something that happens every day.
The question is, what will you do when it happens to you?
The fact is, a bank can close your account for whatever reason they want. But in practice, there are only a handful of reasons why a bank account closure can happen.
In the following section, we will cover some of the main reasons financial institutions close accounts. This will include strategies that you can use to make sure this doesn’t happen to you.
Do You Want to Explore All Your Offshore Banking Options?
Reasons Why a Bank May Close a Bank Account?
Your bank is a business. And to continue operating they need to protect two important relationships. That’s why bank account closures happen.
Hint: These two groups do not include their clients.
The first of these groups are the bank regulators that govern them. And the second are the correspondent banks that grant access to global markets.
Your bank’s future can be radically changed by the decisions of its bank regulators. That’s how much power these two groups have.
In other words, if your bank upsets either the regulator or their correspondent banks, they could be in trouble. In bank terms, this means getting fined, shut down, or drastically impaired. Anything (or anyone) that could potentially damage a bank’s relationship with either of these two groups is a risk. That’s why bank account closures happen.
How Do Banks Protect Themselves?
To put things into perspective, the bank’s duty is not to serve you as a client. Their duty is to serve their shareholders. So they need to protect those relationships that allow them to do business.
One way that financial institutions keep bank regulators and correspondents happy is by “de-risking” their client’s bank accounts. Another word for de-risking is bank account closure, but we’ll get to that in a moment.
Banks can de-risk client bank accounts in one of two ways. First, they can avoid risk altogether by simply not accepting new bank customers. So they avoid those that bank regulators or correspondents might view as risky. Their second option is to execute bank account closures of current clients as soon as they find something that raises flags with compliance.
This heightened sensitivity and extreme aversion to perceived risks is happening because the laws and regulations governing financial institutions are increasingly strict and very vague. Additionally, there is very little guidance on bank account closure procedures, even in the United States.
If a bank thinks you or your business could be a problem for them, you are a risk. And, they’d prefer to move forward with closing the account than deal with headaches.
What Is My Bank Looking For?
With this in mind, your bank is keeping a close eye on activity that could be reflective of criminal activity, money laundering, or someone participating in illicit activities. All of your banking activities are constantly scrutinized.
Similarly, your bank’s correspondent bank has the same concerns. They tend to be in a different jurisdiction than your own bank. For example, a bank in Panama will have a correspondent bank in the United States to settle accounts in USD.
In the same way that your Panama bank doesn’t want to upset their bank regulators or their correspondent bank in the United States, the correspondent bank in the United States doesn’t want to upset their regulators either.
As you can see, it all comes down to making sure that banks, whether your local bank or the correspondent banks that they clear through, can continue operating profitably. And for that to happen, they need to stay on the right side of regulation by enforcing the policies and procedures that authorities impose on them. And that means closing customer accounts if they don’t fall in line.
To understand more about how banking regulations can impact you and hurt your business, read our recent article that discusses how regulation is making banking difficult for all of us.
Why Does My Bank Take Action?
To recap, your bank will close your account because they don’t want to damage their relationships with correspondent banks or bank regulators. So, when financial institutions choose to close an account, it is less about you and your business and more about the bank’s own activities.
For this to happen, all it takes is one overexcited compliance officer to flag a $647 payment to a contractor that appears “high-risk”, for the bank to move forward with a bank account closure.
The cost to close an account, or even have your accounts frozen, can be extremely high. If you don’t have a backup plan in place, you could find yourself unable to pay contractors, yourself, or even receive payment.
But, if instead, you have a backup plan, you can always have access to your money and never lose the ability to withdraw funds.
How Can I Avoid The Bank From Closing My Account?
This header is intentionally misleading. You see, the real question isn’t how to avoid having your account closed, it’s what are you going to do if the bank closes it.
Don’t get us wrong, there are things that you can do to de-risk your own client profile and make yourself more attractive to banks.
GlobalBanks IQ members get de-risking strategies and recommendations from our client profile reports and from specific information in our country reports. We will also list specific tactics for you below.
But more than de-risking your own profile, you need to manage your expectations and realize that there will always be a risk that your bank may close or freeze your account.
With the above in mind, you should prepare yourself and your business by having additional backup bank accounts.
Finding alternative bank accounts is the only way that you are going to be able to protect your business, increase your wealth, and ensure that you can always access your funds.
It’s always smart to have a few backup bank accounts for you and your business. And, when done correctly, it won’t cost you a thing.
How Can You De-Risk Your Banking Profile?
The first thing that you should know is that there is a lot of information out there that claims to help you open international bank accounts.
A lot of that information focuses on how to obfuscate your information, lie, or generally do things that are ethically and morally wrong, or downright illegal.
You won’t get any of that from GlobalBanks.
The strategies and tactics that we share are 100% legal, help you navigate the offshore banking world, and focus on finding the right account for your situation.
We’ll also arm you with the information you need to avoid expensive pitfalls and traps that dishonest service providers will set for you, so you save money and solve your banking problems faster.
We help GlobalBanks IQ members access the banking solutions they desperately need. By making account opening easy, we help you find and open great accounts at financial institutions that actually want to bank with you.
But, as mentioned, there are strategies that you can use to increase your chances of opening (and keeping) bank accounts.
As a GlobalBanks IQ Member, you will learn how to effectively open accounts on your own.
Frequently Asked Bank Account Questions
Below are two of the most common questions we receive from people exploring bank account closures. If you have further questions you would like answered, don’t hesitate to get in touch with us directly.
What Happens When the Bank Closes Your Bank Account?
When the bank chooses to close your account, you will no longer be able to send money to and from the account. You will need to retrieve or transfer the account balance to another account and stop any direct or authorized payments. That said, if you have any outstanding fees owed to the bank, the bank will withdraw the amount owed immediately.
Why Are Banks Suddenly Closing Checking Accounts?
Banks choose to close customer accounts for many different reasons. This may include failing to follow banking regulations, suspicious third-party transactions, account inactivity, and more. That said, the reason the bank closes accounts could also be because the bank itself is unstable, is not financially sound, or has been flagged by banking regulators.
Do You Want Help Opening Bank Accounts?
If so, you can get access to GlobalBanks IQ in just a few clicks.
GlobalBanks IQ is our flagship international account opening solution. It gives you instant access to the…
+ Expert insights on which banks to choose & why
+ Step-by-step reports to open accounts in the best banking hubs
+ GlobalBanks international bank database & detailed bank profiles
+ Tried & tested banks for high-risk, offshore, & non-resident clients
+ Plus, get YOUR most pressing account opening questions answered by our team!
And “yes!” GlobalBanks IQ helps foreigners and non-resident individuals open an account.
In fact, GlobalBanks IQ even helps non-resident, foreign & offshore entities open a bank account.
To learn more about opening accounts with GlobalBanks IQ, just click here now. Or, contact us directly with any questions!