Bank too hasty in deciding customer was complicit in fraud

Categories:

Fraud & scams, Bank accounts, Closing/Freezing accounts,

Summary:

In December 2025, $475 was deposited into one of Jared’s personal accounts. The next day, he transferred $450 to another personal account and spent it at an electronics retailer. The bank later received a report from another bank that the funds came from an online marketplace scam. The bank emailed Jared asking for information about the source of the $475, and why he had received and spent the funds. It later tried to call him and when it could not reach him, it froze all his personal and business accounts, gave him 14 days’ notice of its intention to close all his accounts, and reported him as a complicit money mule.

Jared complained that the bank did not fairly review what had happened and wrongly accused him of knowingly taking part in fraud.

Published:

July 2026

Our investigation

We found the bank’s terms and conditions entitled the bank to close Jared’s accounts. It had received information suggesting one of his accounts had received the proceeds of a scam. It therefore had reasonable grounds to suspect the account had been used to facilitate fraud. That said, we considered the bank should not, in the interim, have frozen all of his accounts (including his business accounts), but rather only the account that received the money and the account into which he then transferred the money. It had no justification for freezing his other accounts because its terms and conditions required it to have a reasonable suspicion that any particular account had been used to facilitate fraud. His other accounts had not been used to receive or transfer the money.

We also found that the bank failed to follow a fair process before making the decision to close his accounts. It did not give Jared a fair opportunity to explain how he came to receive the $475 or supply information to support his explanation. The bank sent one email and made one phone call. It did not send a follow-up message or leave a voicemail. Given the consequences for Jared, the bank should have made more effort to get his side of the story.

When Jared contacted the bank after it closed his accounts, he explained that he believed he was doing legitimate online work and did not know it involved fraud. He said he was willing to send the bank messages that supported his version of events, but the bank did not ask him for them. We found the bank had no firm evidence that Jared knew about, or was involved in, the fraud. Instead, Jared had been the victim of a scam himself. In short, the bank should not have reported him to the fraud data exchange as complicit in the fraud.

Jared suffered no direct financial loss from the bank’s various failings, although the wrongful freezing of his business accounts caused him stress and inconvenience, as did the bank’s reporting of him as complicit in the fraud. He also had to contact the bank repeatedly to keep his business operating. We recommended that the bank correct its report about Jared on the fraud data exchange and pay him $1,500 in recognition of the stress and inconvenience it had caused him.