A consumer group has expressed concern over banks wrongfully closing customers’ accounts due to fraud suspicions and flagging them in a data sharing system that can hinder their ability to open accounts elsewhere. Which? Money’s deputy editor, Sam Richardson, acknowledged the importance of banks closing accounts promptly to prevent fraud but emphasized the need for fairer reviews of these decisions and ensuring that customers are aware of their options for challenging them.
Banks have the freedom to close accounts without providing explanations, but they are generally expected to give at least 30 days’ notice unless there are specific circumstances such as customer threats or suspected fraud. However, in some cases, banks proceed to mark customers as potential fraudsters in the National Fraud Database (NFD) maintained by Cifas, a member-based fraud prevention service, without informing the customers.
Cifas members, including banks, insurers, and financial service providers, make their own decisions regarding applications, but a Cifas marker can result in rejections for bank accounts, loans, or insurance for up to six years, further damaging credit ratings. Unfortunately, some customers may be wrongfully suspected of fraud or inadvertently involved in fraudulent activities.
For instance, in one case, Metro Bank closed Mr. H’s account and lodged a marker with Cifas after a customer complained about fraud. However, it was later determined by the Financial Ombudsman Service (FOS) that the delay in receiving the purchased item was due to a delivery issue, not fraud. In another case, Santander closed Mr. H’s account after he unknowingly received funds from a fraudulent source. Mr. H, believing the bank’s call to be suspicious, ended the conversation, resulting in the closure of his account and a marker with Cifas.
According to data obtained by Which?, the FOS received a minimum of 1,389 new complaints about current account closures in 2022–23, upholding a quarter of them due to unfair actions by the banks. Additionally, there are currently 375,000 “misuse of facility” markers on the Cifas database, with 70,000 added just last year. Cifas claims that these markers prevented £1.6 billion worth of fraud in 2022.
Sam Richardson expressed concern over the distressing experience of having a bank account abruptly closed without warning. Which? is worried about banks wrongly closing accounts or placing customers on Cifas markers, impacting their access to financial products for years. They advocate for improved communication with customers, informing them of their options to challenge decisions, and fairer decision reviews by banks rather than relying on the Ombudsman as the final recourse.
Which? advised customers who have had their accounts closed to examine the status of their funds, file a complaint, and escalate the issue to the Ombudsman if the bank fails to respond satisfactorily within eight weeks. They also suggested checking for a Cifas marker by making a data subject access request to Cifas and challenging it with the organization responsible for recording it, escalating to Cifas and the Ombudsman if necessary.
A spokesperson from UK Finance stated that protecting customers from the risks of fraud is a top priority for the banking and finance industry. They emphasized that account closures are only decided after thorough review and analysis of the account activity and each case is handled individually. UK Finance runs a consumer education campaign called “Don’t Be Fooled” to raise awareness of the signs and dangers of being involved in money laundering.
Cifas also responded by explaining that their members file individuals to the national fraud database based on evidence of fraudulent conduct. While they acknowledged that mistakes can occur, they have established processes for individuals to appeal and investigate incorrect markers without involving the Ombudsman. They highlighted that all Cifas members provide a Fair Processing Notice to customers, explaining how personal data is processed and the consequences of being filed in the database.
In conclusion, the consumer group and industry representatives are engaged in a debate over the fair and accurate closure of bank accounts due to fraud suspicions. While the prevention of fraud is critical, banks need to ensure that their decisions are just and transparent, providing customers with the opportunity to challenge these decisions. Additionally, the impact of Cifas markers on individuals’ access to financial products needs to be carefully considered and balanced with the need to deter fraudulent activities.