Debanking in Australia: protecting your business before it happens

Debanking occurs when a bank refuses, withdraws or closes a customer's banking services. This includes transaction accounts, merchant facilities or the ability to send and receive funds. Debanking can affect businesses of all sizes, particularly where a bank considers a customer high risk or cannot verify how the business operates.

Losing access to banking services is more than an inconvenience. It can disrupt payroll, supplier payments, settlements, contracts and reputation. Understanding why it happens and how to respond can make a significant difference to business continuity and governance.

Why debanking occurs

Banks are required to comply with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act). This requires them to:

• identify customers and beneficial owners

• understand the nature and purpose of a customer’s business

• assess the risk of money laundering or terrorism financing

• monitor transactions and report suspicious activity to AUSTRAC

Banks are expected to make risk-based decisions, not automatically close accounts. However, if a bank believes it does not have sufficient information, or cannot verify financial flows or business structures, it may choose to withdraw or refuse banking services.

Banks are not always required to provide detailed reasons for debanking decisions. While the AML/CTF Act does not prohibit them from giving reasons, they may choose not to do so to avoid breaching their ‘tipping-off’ obligations under section 123 of the Act, which prevents disclosing whether a Suspicious Matter Report has been lodged.

This can leave businesses in a difficult position, unable to respond or correct misunderstandings. Businesses should still request clarification in writing where possible. It is also important to understand that a bank’s internal risk assessment is not a finding of misconduct or unlawful behaviour.

Upcoming legal changes

In late 2024, the Federal Government passed reforms to modernise the AML/CTF regime. 

From 1 July 2026, additional professions will become reporting entities under the AML/CTF Act. This includes lawyers, accountants, real estate agents and trust and company service providers (known as Tranche 2 entities). This expands the number of sectors that must carry out customer due diligence, report suspicious matters and maintain anti-money laundering controls.

How debanking affects businesses

Debanking can create a range of commercial, operational and governance challenges, including:

• Business interruption: Account restrictions or closures can affect payroll, supplier payments, card facilities, merchant processing and incoming funds.

• Contract and settlement consequences: Banking disruptions may lead to breaches of supply agreements, delayed settlements or issues with trust account obligations.

• Reputational impact: When a bank withdraws services, third parties may incorrectly assume wrongdoing, even if no allegations have been made, which can lead to reputational harm.

• Implications for directors and boards: For companies and organisations with formal governance structures, loss of banking access can raise issues around risk management and directors’ duties. Directors are expected to act in the best interests of the company and ensure the business can meet its financial obligations.

• Legal disputes and public judgments: Some businesses choose to dispute a bank’s decision in Court, which is a valid option, but can result in the dispute becoming public. In cases such as Human Appeal International Australia v Beyond Bank (Australia) Ltd [2023] NSWSC 1161 and Merciful Group Incorporated v Norfina Pty Ltd [2025] NSWSC 841, the Court examined the reasons for account closures. Documents filed in such cases, including financial records, correspondence and decision-making materials, can become part of the public record.

What to do if your business is affected

If your bank gives notice of closure or raises concerns:

1. Respond quickly: Confirm the closure date, whether funds will be held or transferred, and any opportunities to provide further information.

2. Request clarification: Banks may not always provide detailed reasons but businesses can still request written explanations or general risk concerns. This can help inform your response and assist with reputational management.

3. Provide information: Offer documentation showing ownership, structure, source of funds, financial flows and any internal compliance procedures. Clear and organised information can assist a bank in reassessing risk.

4. Review your contracts: Account closures can trigger breaches under finance agreements, leases or supplier contracts. Legal advice can help you identify exposure and negotiate arrangements while you transition.

5. Use dispute resolution channels: You may escalate the matter within the bank. Individuals and small businesses may be eligible to complain to the Australian Financial Complaints Authority (AFCA). Complaints may also be made to ASIC or the Banking Code Compliance Committee, depending on the issue.

6. Consider legal action carefully: You may have grounds to dispute a debanking decision, such as where the bank has not complied with its contract or code obligations, or acted without reasonable basis. However, litigation can also make private information public and so legal advice should be sought before proceeding.

7. Protect your reputation: Communicate with key stakeholders early. A short statement confirming your business remains compliant can prevent damaging speculation.

How to protect your business before problems arise

• Get your compliance house in order: Keep copies of AML/CTF policies, corporate documents, source of funds records and transaction monitoring procedures accessible. If your sector is considered higher-risk, proactively offer this information when opening or maintaining accounts.

• Consider multiple banking relationships: Having multiple banking relationships can protect you from sudden disruption. Even a secondary account with a smaller institution can give you breathing room.

• Understand your risk profile: Each industry carries different levels of perceived AML/CTF risk. Knowing how banks see your business allows you to address red flags before they become a reason for closure.

• Seek legal advice early: A lawyer can help you understand your rights, prepare documentation, and liaise with banks and regulators if things escalate. Early involvement often prevents closures from taking effect.

How we can help

We work with businesses that have been debanked or want to minimise the risk of it happening. We can:

• Prepare clear documentation for banks on ownership, source of funds and compliance

• Liaise with banks or regulators (where appropriate)

• Advise on contractual and legal obligations following a withdrawal of services

• Assist with complaints, risk mitigation strategies and dispute resolution

If your business operates in a high-risk sector or has experienced debanking, we can help you respond and put safeguards in place.

Authors: Gavin Stuart & Christina Cavallaro

This publication is intended as a source of information only. No reader should act on any matter without first obtaining professional advice.