When a bank tells your company it will close the account, it is usually a decision the bank has already made, and it may not tell you why. Under MAS Notice 626, a bank that cannot complete its customer due diligence must not continue the business relationship, and the notice reminds banks of the tipping-off offence in the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act. That is why closure letters are often short. Your priorities are practical: confirm the closure date, move every payment in and out of the account before then, download statements, open a replacement account honestly, and find out whether something behind the closure needs attention.
Treat a closure as a warning, not just an inconvenience. If the bank asked questions you did not answer fully, or saw transactions it could not understand, the same issues will come up at the next bank, and sometimes with the authorities. Use the notice period to put the company’s records and explanations in order. Do not mislead a new bank about why the old account closed.
Why banks close company accounts
Banks close accounts for commercial reasons too, such as dormancy, low balances or a change in which customers they serve. But closures that arrive without warning usually come from anti-money laundering rules. Under MAS Notice 626:
- A bank must carry out customer due diligence periodically, and again when it doubts information it was given earlier.
- It must monitor accounts on an ongoing basis and check that transactions are consistent with what it knows of the customer’s business.
- Where it cannot complete those measures, it “shall not commence or continue business relations” with the customer, and must consider whether to file a suspicious transaction report.
- A customer who is reluctant or unable to provide requested information is one of the situations in which the bank must consider a report.
MAS’s guidelines to the notice add that where a bank cannot corroborate a material source of wealth or funds, it should consider whether to end the relationship. In practice, typical triggers for a company are unanswered review requests, unexplained large or round-sum transfers, payments from or to third parties with no visible link to the business, a mismatch between declared business and actual activity, and changes in directors or owners that were not reported.
Why the bank will not explain
Banks are cautious about explaining closures because a bank that has filed, or is considering, a suspicious transaction report must not tip off the customer. A refusal to give reasons does not by itself mean a report was filed or that the company is under investigation. It does mean that arguing with the relationship manager is unlikely to change the outcome.
What you can reasonably ask for is the effective closure date, how the remaining balance will be paid out, whether pending incoming payments will be returned, and whether there is any information the bank would still consider before the date. Ask in writing and keep the replies.
A checklist for the notice period
- Diarise the closure date and work backwards. Allow time to open a new account.
- Download statements for every month you still need. Tax and accounting records generally have to be kept for at least five years, and you will lose easy access after closure.
- List every regular flow: customer payments, PayNow and GIRO arrangements, payroll, CPF, IRAS and GST GIRO, rent, suppliers, card settlements and loan repayments.
- Tell customers and payers of the new account in writing, and warn staff to expect fraudsters to exploit the change. See invoice fraud and changed bank details.
- Settle facilities. Overdrafts, loans and trade lines with the same bank may be affected. Read the facility letters.
- Update the board and the books. Record the closure in board minutes, close the bank ledger in the accounts and keep the closure letter.
Opening a replacement account
A new bank will carry out its own due diligence and may ask whether the company has had an account closed. Answer truthfully. Prepare the same evidence the old bank probably wanted: the business model, main customers and suppliers, contracts and invoices for large transactions, source of the company’s funds, and up-to-date ACRA and controller records. Our guide to opening a corporate bank account explains what banks look at. Do not open an account through a nominee or a related company to hide the history; that can create far more serious problems than the closure itself.
When the closure is linked to something bigger
- Funds are frozen, not just the account closing. A police freeze or court order is a different process. See company bank account frozen by the police.
- The account received money you now doubt, for example from a customer you cannot verify. Do not move it on. Take advice: directors who operate corporate accounts can be liable for rash or negligent money laundering.
- The company collects or forwards money for others. That may be an unlicensed payment service. See unlicensed payment services.
Frequently asked questions
Can we stop the closure?
Sometimes, if the closure arose from information the bank lacked and you can now provide it before the closure date. If the bank has made a final decision, it is unlikely to reverse it. The better time to act is when the bank first asks for information. See responding to a bank KYC review.
Is a bank account closure reported to ACRA or IRAS?
The bank does not file anything with ACRA because an account closed. But keep the company’s own filings and records accurate, including any change in its registered controllers.
Does a closure affect the company’s directors personally?
A closure does not by itself create legal liability for directors. Whether there is any personal exposure depends on what passed through the account and what the directors knew, so take advice if the account received money you cannot explain.
More on the company law hub.
Bank closing your company’s account?
If your company, or you as a director or shareholder, has received a closure notice from its bank, contact the Raffles Corporate Services team at [email protected] or on WhatsApp at +65 8501 7133 or +65 9018 0072. We will help you understand the letter and its dates, put the company’s records, controller register and transaction explanations in order, and prepare the documents for a replacement account. Where your matter needs a lawyer, for example because funds are frozen or questioned, we will refer you to a firm on our panel of Singapore law firms that regularly handles banking and money laundering matters. Raffles Corporate Services is a corporate services provider, not a law firm, and this article is general information, not legal advice.
The Raffles Corporate Services Editorial Team