You Be the Banker: Would You Close This Bartender’s Account?

In a series of articles in recent weeks, we have documented what appears to be a growing phenomenon: Banks shutting down customer checking accounts with little warning, explanation or opportunity for recourse.

Innocent people and small business owners are baffled — and then enraged — as the banks clam up and say nothing, pointing to user agreements that allow them to shut down your accounts for any reason, anytime they want.

The banks don’t relish having these tales of eviction told. But they face a challenge that customers often don’t understand: Regulators are constantly looking over their shoulders, sniffing out signs of money laundering or fraud, and evidence that banks aren’t taking crime prevention seriously enough.

It’s how strictly the banks interpret the laws enforced by regulators that ultimately determines whether customers are unceremoniously dumped. They also have some discretion, even if they often err on the side of eviction. This is true whether the bank suspects an international criminal ring may be at work (a growing problem) or that an individual customer is trying to pull a fast one on the institution, a perennial concern.

With the help of banking insiders across the country, we tried to get inside the heads of the employees making these decisions, using a true story as a case study. At each turn, bankers face a number of choices. Below, we’ll put you in the bank’s position and let you decide what you would do.

A Bartender’s Tale

Shortly after finishing her bartending shift in Chicago late one night, Daniela Gallegos walked to a Chase A.T.M. across the street to deposit a paycheck of about $100 plus $290 in cash tips. She had deposited cash in the middle of the night on other evenings, to avoid being robbed on the way home and to avoid overdrawing her account — which she had done a few times.

Cash deposits during the wee hours can sometimes seem fishy to a bank, particularly if an account holder has exhibited other troubling behavior.

Later that day, she called Chase for an explanation and went to a branch. By then or soon after, things were happening in the background that call center employees or branch bankers would probably not be privy to.

The banks are constantly monitoring for criminals perpetrating fraud or money laundering. In this case, the bank had concerns about fraud. But if someone else had made a series of questionable late-night deposits — in combination with other suspicious behavior, for example — the activity may have been flagged as possible money laundering.

The banks have to follow a variety of laws. Regulations emerge from the laws, and many of the regulations are open to interpretation. That means lawyers for the bank — both in-house and outside counsel — are regularly handing out instructions to even the most junior bankers. Regulators then follow up, constantly, often questioning specific decisions and transactions.

Bankers must know who their customers are and what they’re doing with their money. Staff have to track the daily drumbeat of communications from regulators and law enforcement agencies, and keep track of who has landed on government lists of criminals and suspects.

Analysts must also stay on top of which illegal schemes are new or on the rise. Maybe it’s Russian oligarchs, human smuggling or the ever-present elder fraud.

Bank employees can see and hear only so much. That means software has to do most of the work of detecting suspicious activity.

A junior-level analyst might review a pile of warning pings each day and then consult with others to decide if a follow-up is necessary. The apex of this process is the “suspicious activity report,” which banks and other institutions file to the federal government.

And paranoia abounds. According to Thomson Reuters, banks filed more than 1.8 million SARs in 2022, a 50 percent increase in just two years. This year, the figure is on track to reach nearly two million.

And really, why wouldn’t a banker send one along? There is no penalty for overfiling, though each one does take time to complete. Missing something important, however, can derail a career and cost a bank millions of dollars in fines.

Doug Keipper, a certified anti-money laundering specialist teaches an instructional course for bank employees on writing the reports. He said: “When I tell people what I do for a living and they ask me, ‘Well, do you have a badge? Do you have a gun?” the answer he gives them is “No and no. I have an Excel spreadsheet. I don’t know that what these people did is necessarily illegal. My job is a suspicious activity report — it is not a guilty activity report.”

Nobody wants to be in a federal database for suspicious people. But was Ms. Gallegos?