"Debanking" refers to a bank closing or refusing to open an account for a customer. Historically, account closures were most often associated with financial crimes such as fraud or money‑laundering because banks risk large penalties if they allow illicit funds to flow through their systems. Risk‑based compliance programs require banks to identify high‑risk customers and file suspicious activity reports. In practice, this can mean abruptly severing relationships with customers who are under investigation, even when the customer has not yet been convicted.
Financial institutions are private businesses. Their deposit agreements usually allow them to close accounts at their discretion, with or without cause. This authority is not absolute; closures cannot be discriminatory, but banks have broad leeway to protect themselves. In the 2010s the Department of Justice’s Operation Choke Point pressured banks to cut ties with businesses deemed to pose elevated risk (such as payday lenders and firearms dealers), and some banks over‑complied by “debanking” law‑abiding customers. Though the operation ended, its legacy persists: banks are still wary of customers who might expose them to regulatory scrutiny.
Why debanking is happening to defendants in non‑financial cases
The Law Office of James R. Snell has written about organized retail crime and theft‑related offenses, reflecting the traditional link between financial wrongdoing and banking repercussions. Recently, however, people accused of non‑financial crimes have reported that their bank accounts were closed soon after their arrest. Several factors help explain this trend.
Banks use third‑party databases and "early warning" systems to screen customers. The Consumer Financial Protection Bureau notes that banks often review reports from Early Warning Systems or ChexSystems containing information about accounts closed due to unpaid fees or suspected fraud. If a person has had accounts closed in the past or appears in public arrest records, the bank may classify the customer as high‑risk. Many banks also monitor news reports and law‑enforcement databases for the names of their customers. An arrest for any offense can trigger an internal alert. To avoid accusations of facilitating crime, some banks choose to end the relationship rather than monitor it.
Regulatory pressure also plays a role. Banks are subject to the Bank Secrecy Act (BSA) and Anti‑Money‑Laundering (AML) regulations. Failure to file timely suspicious activity reports or to sever relationships with potentially illicit actors has resulted in multi‑billion‑dollar fines against banks. Anticipating such penalties, banks sometimes adopt overly cautious policies, closing accounts when there is even a whiff of criminal activity. Financial institutions also worry about headlines; a national bank may decide that continuing to serve a high‑profile defendant exposes it to reputational harm, regardless of the presumption of innocence.
Why criminal courts cannot force banks to reopen accounts
When an account is closed, people naturally ask whether a judge can order the bank to restore it. In most cases, the answer is no. Criminal courts adjudicate criminal charges; they do not have jurisdiction over private contractual disputes between a bank and a customer. A deposit account agreement is a civil contract. If a bank violates its own contract or discriminates illegally, the remedy is a civil lawsuit or regulatory complaint, not a motion in a criminal case.
The U.S. Constitution protects the right to free speech and due process, but it does not grant citizens a guaranteed relationship with a private bank. Courts generally recognize that banks may choose whom to serve so long as they do not discriminate on the basis of race, gender or other protected characteristics. Banks are legally barred from telling customers whether they have filed a Suspicious Activity Report. Therefore, even if a closure is triggered by an arrest, bank employees cannot discuss the details with the court. Judges cannot order banks to ignore federal reporting requirements. Losing a bank account after an arrest is considered a collateral consequence, similar to difficulties obtaining housing or employment. The Snell Law blog has highlighted other collateral consequences, such as the inability to obtain a nursing license after a DUI. Courts do not see these consequences as part of the criminal sentence.
What can defendants do?
Although the criminal court cannot intervene directly, defendants can take steps to mitigate the harm of debanking. Begin by asking the bank why the account was closed. The bank may provide a generic reason such as “suspicious activity.” While federal law prevents disclosure of SARs, a customer service representative should be able to tell you whether the closure was due to negative account activity or an internal policy. Community banks and credit unions often have more flexible policies than large national institutions, and the CFPB notes that some offer “second chance” checking accounts to help people rebuild their banking history. These accounts may have higher fees but can provide access to basic financial services.
It is wise to keep emergency funds in alternative forms, such as a second bank or credit union account, so that a sudden closure does not leave you without access to cash. Working with your defense lawyer remains important: an attorney cannot compel the bank to reinstate the account, but they can help you address the underlying criminal charge swiftly. Getting charges dismissed or reduced may persuade financial institutions to reconsider.
Conclusion
Debanking is an unsettling development for people who have merely been accused, not convicted, of a crime. It stems from banks’ regulatory obligations and risk‑averse policies, not from any presumption of guilt. The criminal courts lack authority to order banks to keep an account open, so the onus is on defendants to seek alternative banking arrangements, monitor their credit history and, if necessary, pursue civil or regulatory remedies. Understanding why debanking occurs, and knowing it is outside the criminal court’s control, can help defendants make informed decisions and mitigate the financial fallout from an arrest.
If you're facing a criminal investigation or an arrest in South Carolina, the Law Office of James R. Snell, Jr., LLC, can assist. We regularly represent clients in criminal cases, including DUI, domestic violence, Internet Crimes, and other felony charges. We offer free consultations, and same-day appointments are typically available. To speak with us about your case call (803) 359-3301.