Bank entitled to close customer’s accounts despite her innocence in fraudulent transaction

Categories:

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

Summary:

In November 2024, Bianca opened three accounts with the bank. She did not use them for the next six months because she was awaiting a restructure of her home loan at another bank. Once that happened, she planned to start using them. On 14 May 2025, a payment of $1,756 was deposited into one of the accounts. The money came from an overseas construction company where a business colleague of hers worked. The sender of the funds told the bank the money had been put into the account under false pretences. The bank froze Bianca’s accounts and began an investigation, which led to its decision to close the accounts and end its relationship with Bianca.

Published:

February 2026

Bianca complained that the bank’s actions were unjustified. She said she was innocent of any wrongdoing and had co-operated fully with the bank in returning the money to the sender. Closing all the accounts was, in her view, a gross overreaction. She said the bank could have simply closed the account used for fraudulent purposes and opened another one its place.

Our investigation

The terms and conditions of the accounts entitled the bank to suspend or close Bianca’s accounts at any time and without notice if it had good reason to do so. One such reason could be if it believed or suspected she or someone else was using an account for fraudulent purposes or money-laundering. The $1,756 payment was the result of fraud. We appreciated that Bianca was innocent of any involvement in the transaction, but her innocence did not limit the bank’s discretion to close the accounts. Nor did her innocence make the bank’s decision unreasonable or erroneous. We also found the bank met its obligations under the Code of Banking Practice to act fairly, reasonably and in good faith when it closed the accounts. The bank gave Bianca notice, as well as an opportunity to respond, which it considered, before finalising its decision. The bank could have given Bianca a warning instead of closing her accounts, but it was not obliged to do so.