According to a press release from the Hong Kong Monetary Authority (HKMA) dated July 22, 2025, the Monetary Authority has taken disciplinary action against three banks for breaching the Anti-Money Laundering and Counter-Terrorist Financing Ordinance. The actions include public reprimands, orders to conduct reviews of past transactions, and fines of HK$4,000,000 and HK$3,700,000 respectively.
According to HKMA guidelines, in addition to conducting customer due diligence (CDD) during account opening, banks are required to continuously monitor customers, verify background information, and report suspicious transactions. Therefore, both individual and commercial customers may receive customer due diligence inquiries from banks.
A corporate business account is an essential tool for doing business. We repeatedly emphasize that you must comply with the bank’s requirements; otherwise, your bank account may be frozen at best, or blocked at worst. This article will explain the main reasons for bank account freezing in simple terms and teach you how to avoid having your account cancelled by the bank.
Why Is a Bank Account Blocked?
The most serious reason for a bank account being blocked is suspicion of criminal behavior and money laundering activities.
In addition, common reasons for blocking include failure to reply to bank inquiries, ignoring due diligence, using personal accounts for business, the account being “red-flagged” by the bank, and loss of contact. If the holder still fails to respond to the bank’s questions after the account is frozen, the account will eventually be blocked and cancelled.
Taking corporate business accounts as an example, banks regularly conduct due diligence on customers. However, if there is no response to the due diligence or the CDD is not passed, the bank may, in addition to “freezing the account,” believe that you or your company pose a money laundering risk and report suspicious transactions to financial intelligence agencies. This not only leads to the freezing of the company account but may also leave a negative record, affecting your ability to open accounts or apply for loans at other banks in the future.
To learn more about customer due diligence, please refer to another article: KYC and CDD Complete Guide: Understanding the Difference Between Know Your Customer and Customer Due Diligence
Why Is an Account Cancelled for Using a Personal Account for Business?
This is because it violates the purpose of opening the bank account; personal accounts are intended for personal daily financial management. Furthermore, doing business requires applying for a Business Registration Certificate (BR). Receiving payments or purchasing business goods using a personal account actually constitutes unlicensed operation.
Example: A freelance computer technician provides hardware and software repair services through an online store without opening a company or a business account. They receive payments from customers into a personal bank account and use that account to purchase computer software from suppliers.
Banking systems monitor personal accounts for frequent transactions that are inconsistent with daily financial management. Personal accounts should not have frequent incoming and outgoing business transactions. Moreover, operating a business without a BR violates Hong Kong law. To do business in Hong Kong, one must incorporate a limited company or set up an unlimited company. Unlicensed operation also harms the tax revenue of the Inland Revenue Department. Please do not flout the law.
Furthermore, entrepreneurs starting a business can apply for a business registration fee waiver if their turnover is small. Learn more about the conditions and procedures for applying for a BR waiver.
10 Major Reasons for Bank Account Freezing
Every bank has its own anti-money laundering measures and due diligence systems, so the reasons for freezing accounts vary between banks. Here are 10 common reasons for bank account freezing:
1. Failure to Reply to Bank Inquiries Within the Deadline
Banks occasionally review the number of accounts, transaction volume, and amounts of their customers. If there are doubts, they will inquire about transaction details via phone, email, or letter. Many customers believe they have done nothing wrong and therefore do not reply to or ignore the bank’s inquiries. However, if a customer fails to reply within the deadline, the bank will freeze the account first for security reasons.
Please note that if there is no response to the bank’s due diligence, it may be regarded as a money laundering risk, leading to the reporting of suspicious transactions to financial intelligence agencies.
2. Failure to Cooperate with Bank Due Diligence
Banks continuously monitor customers and conduct due diligence based on customer risk and anti-money laundering measures. For example, commercial customers are required to provide identification for directors and shareholders, audit reports, NAR1 forms, and tax returns; individual customers are required to provide copies of ID cards, proof of address, profits tax returns, or proof of income.
Based on past experience, bank accounts are often frozen because customers do not take the bank’s due diligence requirements seriously and fail to submit relevant supporting documents within the deadline.
Source: Hong Kong Monetary Authority – Ordinances and Statutory Guidelines: Hong Kong Monetary Authority – Ordinances and Statutory Guidelines
3. Using Personal Accounts for Commercial Activities
Operating a business with a personal account without applying for a BR or opening a corporate bank account.
For example, operating an online store and using a personal account to receive payments and purchase goods violates the terms of use for personal bank accounts, leading to the freezing or blocking of the account.
Banking systems monitor frequent, large-value deposits in personal accounts. If these are identified as being for commercial use, they may trigger the “red flag” system.
4. Declared Business Inconsistent with Actual Transactions
When opening a corporate business account, customers need to provide a business plan including the nature of the business, income, expenses, and estimated transaction volume. If actual operations do not match the plan, the bank may take action. Similarly, personal accounts should be for private use; if used for business, receiving payments, or purchasing goods, they face the risk of being frozen.
5. 5. Frequent Large Fund Movements Being "Red-Flagged"
Banking systems are equipped with functions to monitor the flow of funds. If an account frequently has large fund movements and transactions, it may be marked with a “red flag” by the system, indicating the possibility of money laundering, which triggers the freezing of funds.
If there are sudden large transactions that differ from normal account operations, all transaction-related information should be retained in case of bank inquiries.
6. Long Periods of Inactivity
Whether it is a personal or company account, if there are no transactions for a long time, the bank will treat it as a “dormant account” and freeze its incoming and outgoing functions.
7. Loss of Contact with the Account Holder
Banks usually contact account holders via letter, email, or phone. If the bank consistently fails to reach the account contact person, the account may be frozen. A common example is when a company changes its address but fails to notify the bank, resulting in bank letters being undelivered.
8. Company Has Been Dissolved
After a company successfully applies for deregistration, the Companies Registry will strike it off the register. Banks conduct regular company searches; if they find a company has been struck off, they will freeze the bank account and hand over the funds to the government for safekeeping.
Therefore, the bank account should be properly handled before the company is dissolved.
Extended Reading: Cancellation of Business Registration | Guide to Closing Company Bank Accounts and Asset Handling
9. 9. Bank Account Suspected of Money Laundering or Criminal Activity
If a bank account is suspected of illegal activities, such as receiving proceeds of crime, the bank will freeze or even block the account.
10. Transactions with Suspected Money Launderers or Sanctioned Individuals
If a bank account’s transaction counterparts include accounts suspected of money laundering or sanctioned individuals, the bank may also believe your account is associated with criminal groups.
How to Avoid Having Your Account Cancelled by the Bank?
In response to the 10 common reasons for bank account freezing mentioned above, here are practical solutions to avoid account cancellation:
Reply to Bank Inquiries on Time
When receiving inquiries via phone, email, or letter from the bank, be sure to provide transaction information within the deadline. However, please note that due to frequent online scams, you must confirm the inquiry is from the bank before providing any information.
Cooperate with Due Diligence
Due diligence is an extremely important procedure under anti-money laundering regulations. You should actively cooperate with the bank’s requests, providing correct business information, background documents for directors and shareholders, and transaction information requested by the bank.
Do Not Use Personal Accounts for Business
To do business in Hong Kong, the law requires that regardless of the scale of the business, you must apply for a Business Registration Certificate and open a corporate bank account to operate the business.
This is the most fundamental step to avoid account freezing.
Proactively Report Business Changes to the Bank
If there are changes in the company’s business operations, you should proactively report them to the bank to avoid discrepancies between actual operations and the information declared at the time of account opening.
Retain Proof of Large Transactions
If there are large fund movements in the account, all transaction-related information should be retained for bank inquiries.
Keep the Bank Account Active
Even if you are abroad or rarely use the account, you should perform small transactions through online banking to avoid the account being treated as dormant and frozen by the bank.
Proactively Contact the Bank to Update Information
If the account holder’s information changes, such as a change in company name, shareholding structure, registered office, or correspondence address, you should proactively contact the bank to update the information to avoid account freezing due to loss of contact.
Extended Reading: What is the Difference Between a Trade Name, Company Name, and Business Name?
Do Not Lend Your Bank Account to Others
In an era of frequent online scams, never lend your account to others for receiving payments for financial gain. If the source of funds is proceeds of crime, or if the recipient is an account suspected of money laundering or a sanctioned individual, the account holder may be suspected of a crime, leading to the account being frozen or blocked.
Cancel the Bank Account Before Dissolving the Company
Before applying to dissolve a company, you should set a date for cancelling the bank account, clear the account balance, and then proactively cancel the business account with the bank.
Extended Reading: Company Deregistration | Cancellation of Business Registration
Can a Bank Account Be Unfrozen After Being Frozen?
Generally, yes. If it does not involve crime or money laundering, you can explain the reasons to the bank, provide the required proof, cooperate with due diligence, declare correct information, or keep the account active. The final decision on whether to unfreeze the account rests with the bank.
What Are the Consequences of Having an Account Cancelled by the Bank?
You may be left with a negative record, making it difficult to open accounts in the future. For example, if an account was cancelled due to using a personal account for commercial purposes, the bank may keep a negative personal record, making it difficult not only to open an account at the same bank again but potentially even to apply for credit cards, loans, or business accounts.
Frequently Asked Questions
If an Individual's Account Is Cancelled by the Bank, Will It Affect Their Business Account?
It is possible. There have been cases where after a customer's personal account was cancelled, their business account was also cancelled by the bank shortly after.
If an Account Was Previously Cancelled by a Bank, Can a New One Be Opened?
Yes, but it is very difficult. You must first understand why the account was originally cancelled and ensure that the cause of the cancellation has been resolved. It is recommended to contact the bank first to discuss the possibility of reopening an account to avoid wasted effort.
Will an Account Be Frozen if There Are Large Fund Movements?
If an account frequently has large fund movements and transactions, it may be marked with a "red flag" by the banking system, indicating the possibility of money laundering, which triggers the freezing of funds.
Conclusion
Having an account cancelled or frozen by a bank undoubtedly causes great distress for individuals and businesses. However, as detailed in this article, most reasons for bank account freezing or blocking are related to non-compliant account usage habits. To avoid having your account cancelled by the bank, you must proactively cooperate with the bank’s due diligence, keep the account active, and ensure all transaction behaviors are legal and transparent. Remember, properly managing your bank account not only ensures the safety of your funds but also maintains your good record in the financial system, avoiding difficulties when opening accounts and applying for loans in the future.
Further reading:
Sources:
1. HKMA – Press Release
https://www.hkma.gov.hk/eng/news-and-media/press-releases/2025/07/20250722-4/
2. Hong Kong Monetary Authority – Ordinances and Statutory Guidelines
https://www.hkma.gov.hk/eng/key-functions/banking/anti-money-laundering-and-counter-financing-of-terrorism/ordinances-statutory-guidelines/
3. HKMA – Guideline on Anti-Money Laundering and Counter-Terrorist Financing
https://www.hkma.gov.hk/media/eng/doc/key-information/guidelines-and-circular/guideline/Guideline_on_AML-CFT_(for_AIs)_eng_May%202023.pdf
