How To Recover From Debanking
Thousands of people have lost their bank accounts over "suspicious" activity. Here's what to do if it happens to you.
New York bar owner Bryan Delaney makes regular cash deposits and keeps a positive balance. So he was shocked in 2023 when his bank closed his accounts and deactivated his credit cards. Not even the ATM worked for him anymore.
Delaney and his wife were cut off financially through "debanking." They are not alone. Thousands of people have lost their accounts this way with little warning. Perhaps the same thing has happened to you.
Why Do Banks Close Accounts?
The answer starts with spying. Federal law requires banks to monitor customers and report anything suspicious to law enforcement. Too many reports on the same account can trigger debanking.
Most people have no idea about this surveillance program, by design. The same federal law that mandates bank surveillance also prohibits banks from telling customers about the results of that surveillance. What counts as "suspicious" is a moving target, and law enforcement agencies have expanded the definition over the years.
Delaney's bank dinged him because he made regular deposits under $10,000, just below the federal reporting threshold. When people do this intentionally to avoid scrutiny, they might be guilty of "structuring"—parceling what would otherwise be a large financial transaction requiring reporting into smaller transactions that don't require it by the letter of the law—but Delaney was not trying to hide anything. His deposits regularly fell under $10,000 because that was the revenue his bar regularly generated.
Federal agents have also flagged many basic activities, including regular cash deposits or withdrawals, overseas transactions, donations to controversial nonprofits, and transactions at gun shops or sporting goods stores such as Dick's or Cabela's.
Debanking is just one possible outcome. Federal agencies have used "suspicious" activity reports to identify high-value accounts for civil forfeiture, a law enforcement maneuver that allows the government to seize and keep property permanently. Iowa restaurant owner Carole Hinders lost nearly $33,000 this way in 2014. She fought back and recovered the full amount. But she received no compensation for attorneys' fees, court costs, or interest.
What To Do If You Are Debanked
1
Contact your bank. Sometimes you can resolve misunderstandings through direct communication.
2
File a complaint with the Consumer Financial Protection Bureau (CFPB). For all its faults, the CFPB has advocated for victims of debanking.
3
Cash is anonymous and can't be closed like a bank account. Still, in today's world, you will probably need to open a new account. You may have better luck with a credit union than with a traditional bank. Consider whether cryptocurrency alternatives are right for you.
4
If the government seeks to keep your money permanently through civil forfeiture, you must act fast to defend yourself. Learn more about the forfeiture process and seek assistance at endforfeiture.com. If you miss a deadline or fill out a form incorrectly, you can lose your property administratively without ever seeing a judge.
5
Ask for help in your fight for financial privacy. My public interest law firm, the Institute for Justice, is fighting to restore financial privacy as part of our Project on the Fourth Amendment. If your bank account has been closed, or you have otherwise been affected by federal bank surveillance, drop us a line.
