Don’t be blindsided by this. Maintain more than one checking and credit card account.
Surprised individuals and small-business owners can’t pay rent or make payroll, and no one ever explains what they did wrong.
By Ron Lieber and Tara Siegel Bernard, The New York Times, Nov. 5, 2023
The reasons vary, but the scene that plays out is almost always the same.
Bank customers get a letter in the mail saying their institution is closing all of their checking and savings accounts. Their debit and credit cards are shuttered, too. The explanation, if there is one, usually lacks any useful detail…
These situations are what banks refer to as “exiting” or “de-risking.” This isn’t your standard boot for people who have bounced too many checks. Instead, a vast security apparatus has kicked into gear, starting with regulators in Washington and trickling down to bank security managers and branch staff eyeballing customers. The goal is to crack down on fraud, terrorism, money laundering, human trafficking and other crimes.
In the process, banks are evicting what appear to be an increasing number of individuals, families and small-business owners. Often, they don’t have the faintest idea why their banks turned against them.
But there are almost always red flags — transactions that appear out of character, for example — that lead to the eviction. … By law, banks must file a “suspicious activity report” (SAR) when they see transactions or behavior that might violate the law, like unexpectedly large cash transactions or wire transfers with banks in high-risk countries… [end quote]
The article describes various types of transactions that could trigger an SAR to the government. These often include repeated large cash transactions of different types.
The scale of the problem isn’t large enough to have a Macroeconomic impact but individuals and businesses could be devastated.