Bank closed customer's accounts

A client's small business received notice that its accounts were to be closed by the bank in two weeks. The client was shocked, saying he had a long-standing and satisfactory relationship with the bank and that the bank would not provide reasons for the termination of the relationship. The business owner, originally from a Middle Eastern country, claimed that racial profiling was a factor in the bank's decision.

The business owner approached other banks to open an account but was refused by every one of them. As his business involved cheque cashing and sending money overseas for customers, not having a bank account meant he could no longer stay in business. He felt that the banks were deliberately putting him, and similar operations, out of business.

OBSI reviewed the correspondence from the bank and confirmed the two-week notice of account closure and the lack of explanation provided for the bank's action.

OBSI's Terms of Reference do not include reviewing a bank's general business or risk management decisions. This includes a decision to end a banking relationship with a customer. However, we were concerned with the short notice period provided. In these cases, OBSI will seek to confirm that a customer was provided with sufficient time to make

alternate banking arrangements. Generally, one month's notice is considered sufficient. In this case, by the time the bank actually closed the account, over two months had passed from the date of the original notice letter.

We concluded that the bank had terminated the relationship and closed the account based on a general business or risk management decision. We also concluded that, in the end, sufficient notice had been provided to make alternate banking arrangements.

We made no recommendation for compensation.

The reason for the account closure was later confirmed when OBSI was informed that changes had been made earlier in 2008 to federal anti-money laundering and terrorist financing laws. These changes prompted some banks to reassess their risk management policies concerning business and personal customers engaged in transactions to or from certain “high-risk" countries.

The client was referred to the Canadian Human Rights Commission to address his accusation of racial profiling. The client was also referred to the Minister of Finance to raise the public policy issue of banks either closing or refusing to open accounts for a certain class of businesses thereby forcing them to close.

(2008)