Bank’s accusations of illegal conduct caused unwarranted stress

Closing accounts,
In September 2022, a person who had been the victim of a scam complained to Uma’s bank that Uma had received stolen funds into her account. The victim had lost $3,000 in a bank impersonation scam, and the money had been taken from their account, passed through another person's account and ultimately transferred to Uma.
May 2024

The bank saw there had been two previous complaints about fraudulent behaviour by Uma, both involving the sale of goods on Trade Me and a refusal to deliver the goods to the buyer. The bank decided to close Uma’s accounts, leaving a $700 overdraft to be repaid. It gave Uma 14 days' notice to find another bank.

Uma was outraged her bank had accused her of fraud. She said the $3,000 had come from her daughter, who owed her the money. She said the bank had already confirmed the payment had come from her daughter, so it had no basis for concluding she was involved in any fraud.

Our investigation

A bank can end its relationship with a customer at any time, provided it gives enough warning for the customer to make other arrangements. If several allegations of fraud have been made against a customer, a bank can conclude it does not want to bear the risk associated with the customer's accounts, even if none of the fraud complaints were borne out. The bank was therefore entitled to end its relationship with Uma.

In this case, however, the bank had not closed Uma’s accounts because it had received a series of complaints about her. The bank went a step further, telling Uma it had grounds to believe she was allowing her account to be used for illegal purposes. We did not consider the bank had strong evidence for this claim. Stolen funds had been put into her account, but there was little evidence she knew the money was stolen or was involved in the scam. We did not consider the earlier fraud complaints to be strong evidence. These were very unsophisticated, and it seemed unlikely Uma could have moved immediately from a basic Trade Me fraud to a successful impersonation of a bank fraud team involving the funnelling of stolen funds through a mule account.

The bank was certainly entitled to close Uma’s accounts, but we considered it had caused Uma unnecessary stress and frustration by accusing her of illegal conduct.


The bank offered to waive Uma’s $700 overdraft to settle the complaint. Uma accepted the offer.

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