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The Facts
Escort agency notified of imminent closure of bank
accounts
An Australian company ran an escort agency which operated openly
and legally. The enterprise was licensed by the state
government.
The company operated four business bank accounts with a major
Australian bank. It had access to internet and telephone banking
services as part of that arrangement.
In November 2019 the bank sent the company a letter, titled
"Notice of accounts and services closure", in which the
bank set out its intention to close the company's accounts,
providing it with 45 days to make alternative banking
arrangements.
Bank's policy to exclude escort services and brothels
The bank told the company that it regularly reviewed the
industries and activities for which it provided banking services.
It explained that it had established a policy of excluding escort
services and brothels because of the higher risk of money
laundering and human trafficking.
Consequently, the company's business was now outside its
risk parameters.
Industry association highlights impact of Covid-19
pandemic
The company requested that the business accounts remain open and
its industry association wrote to the bank about its policy change
regarding provision of banking services to the adult services
industry, pointing out the impact of the Covid-19 pandemic on the
bank's business customers.
The bank conducted a review of the company's request, but
decided to maintain its position that it would close the
company's accounts in line with its new policy.
The company complained to the financial ombudsman, the Australian
Financial Complaints Authority (AFCA), claiming that the bank
was acting improperly and unfairly. It was up to the ombudsman to
determine whether the bank had the right to enforce its policy and
close the escort agency's business bank accounts.
case a - The case for the bank
case b - The case for the escort agency
The terms and conditions of the bank accounts permit us to
close them by notice in writing for any reason we deem
appropriate.
Under the Banking Code of Practice, we may close an account
with reasonable notice, which we have given.
We regularly review the industries, sectors and activities to
which we provide banking services and have introduced a policy
excluding escort services and brothels, due to the higher risk of
money laundering and human trafficking.
The company's business is therefore outside our risk
parameters. It is also at odds with our corporate values.
We conducted a review of our decision to close the accounts and
did not decide to close them arbitrarily.
We have extended the time for closing the accounts several
times, most recently until 30 September 2020, given the Covid-19
pandemic and its impact on business in general. This gives the
company around ten months to make alternative banking
arrangements.
We should now be able to exercise our right to close the
accounts.
We dispute the bank's policy to exclude the adult services
industry, because it does not differentiate between legal and
illegal participants in the industry.
Ours is a legitimate business which is licensed by the state
government.
We are subject to stringent probity checks to be able to
continue to operate.
The bank seeks to rely on the terms and conditions which refer
to "unsatisfactory conduct" of the accounts, such as
where a business bank account is being used for personal purposes.
There was no such unsatisfactory conduct on our part.
The bank's position is discriminatory, unfair and causes
considerable loss to our business and reputation.
The bank should be prevented from closing our business accounts
and we should be compensated for the impact the bank's decision
has had on our business.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
Did the bank have the right to close the escort agencys business bank accounts? Which case won?
AustraliaFinance and Banking
Contributor
Stacks Law Firm is a leading Australian legal service provider with more than 250 people operating locally in many Australian communities.
We are committed to supporting the legal needs of everyday Australians and businesses across every stage of life.
