Some banks are wrongly closing customer accounts in an attempt to prevent fraud and comply with anti-money laundering rules, Which? has found.

With around three in 10 cases referred to the Financial Ombudsman Service (FOS), Which? looked at data from the organisation which it said shows that banks are not taking sufficient steps to avoid closing the accounts of innocent customers.

In the year 2022-23, the FOS received more than 1,380 new complaints about the closure of current accounts and upheld a quarter of these.

Which? added that customers could receive a mark against their name in the Cifas National Fraud Database if their account is suspected of fraudulent activity.

People with Cifas markers against their name can struggle to obtain mortgages, bank accounts and phone contracts for the six-year period of the market.

Many customers are not told that they have received a marker unless they make a subject access request.

To assign a Cifas marker, firms need to be able to prove reasonable grounds for believing fraud was committed or attempted and that the evidence was clear and relevant.

But Which? says that this is not happening due to the number of cases overturned by the FOS.

TSB was the most complained about bank and it had the highest proportion of complaints upheld against it in four of the previous five years. The FOS upheld 39 per cent of customer complaints against TSB in 2022 – 2023.

Responding to the findings a spokesperson for TSB said: “We make a number of important decisions every day aimed at reducing fraudulent activity and preventing criminals from operating accounts – and we have one of the lowest numbers of reported cases from the institutions listed. Our close work with Cifas plays a vital role in reducing the incidence of fraud and an incorrect judgement is highly exceptional. We have acted on guidance from the FOS and our referrals in 2023 continue to improve.”

Sam Richardson, deputy editor of Which? Money said that the consumer champion is concerned that some banks are wrongly closing customers’ accounts or handing them Cifas markers which can affect their ability to access other financial products for years.

“Which? recognises the importance of banks having the ability to close accounts quickly in the fightback against fraud, but wants to see better communication to customers on what they need to do to challenge decisions, and fairer reviews by banks of these decisions – rather than leaving customers to have to take their claim to the Ombudsman,” he continued.

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