Banks wrongly freeze accounts and won’t say why

Hundreds of innocent people have had their bank accounts frozen or closed down in the past 12 months because of overly sensitive security systems.

Reactive anti-fraud and anti-money laundering safeguards have resulted in at least a thousand people losing access to their day-to- day money over the past year, consumer advocate Resolver found. The true figure is likely to be far higher as many customers complained to banks directly.

Consumers who turned to the resolution firm for help said accounts were shut down after transactions from even the most reputable sources raised red flags.

This included Universal Credit benefit payments, rebates from HM Revenue & Customs and salary payments. One in 10 were cut off from their money for at least two weeks, it found.

Banks have come under pressure from MPs to justify their use of “derisking” measures. Providers are under no obligation to explain why they have closed an account. They argue doing so would tip-off criminals, which has added to the frustration of innocent customers.

Resolver’s Nikki Stopford said banks were failing to balance robust fraud protections with treating innocent customers fairly.

“The irony is it’s incredibly easy to solve this problem. All banks need to do is have well trained and empowered staff on the front line with the power – and common sense – to identify why the account has been frozen, confirm the origins of the transaction and unfreeze the account,” she added. Last week Telegraph Money reported that NatWest had been forced to pay a number of its customers up to £ 500 in compensation for poor treatment after closing their accounts. Some were left unable to buy food. The taxpayer-owned bank attracted particular attention after thousands of affected customers spoke out.

A spokesman for banking trade body UK Finance said: “If a bank needs to investigate suspicious activity, a customer’s account may be frozen or further information requested so the bank can satisfy itself that there is no risk of money laundering.

“At the same time, banks must adhere to legal requirements which may stop certain information from being shared with the customer.”