Two recent cases have considered when financial institutions have declined, withdrawn or limited banking services to customers in certain industry sectors due to factors such as commercial considerations, reputational risk and regulatory risk exposure (“debanking”).
Although Austrac has issued guidance to reassure banks that there is no requirement in the AML/CTF Act or Rules to decline to provide designated services to whole industry sectors, notwithstanding a financial institution’s assessment of the industry sector’s relative risk, the courts have upheld debanking decisions which comply with customer contracts and banks’ risk appetites.
In Merciful Group Inc v Norfina Ltd t/as Suncorp Bank [2026] NSWCA 155 the NSW Court of Appeal dismissed an appeal from the NSW Supreme Court decision upholding a bank’s closure of a customer’s account following concerns raised through its AML/CTF risk assessments that the account was involved in money-laundering or terrorism financing activities.
Merciful is an Australian registered charity which provides aid to conflict-affected countries including Syria, Lebanon and Yemen. Suncorp’s internal systems had identified Merciful’s account as being of high AML/CTF risk.
Suncorp advised that Merciful’s account would be closed in accordance with cl 15.2 of the terms applicable to the account.
Clause 15.2 provided: “We [Suncorp] can close your Account immediately if… (c) to protect our legitimate interests; (d) we need to by law or to meet our prudential requirements.”
Merciful sought declarations that Suncorp was in breach of the agreement and an injunction restraining Suncorp from closing the account.
The Court of Appeal rejected the submission that it was not reasonable for Suncorp to close the account as it presupposed an obligation only to exercise the power to close the account if no lesser step is available.
The closure decision was supported by evidence of compliance with Suncorp’s AML/CTF program, its risk alerts and senior management review.
In Puleo v Bendigo and Adelaide Bank Ltd [2026] VSC 513 the Supreme Court of Victoria rejected a claim by the owners of a licensed brothel that in closing their accounts, the Bank:
(a) engaged in discrimination and breached the Equal Opportunity Act 2010 (Vic);
(b) breached the terms and conditions governing the operation of the accounts; and
(c) breached s 912A(1)(a) of the Corporations Act 2001 (Cth) as the decision to close the accounts was not made efficiently, honestly or fairly.
The customers also alleged that the clause permitting the Bank to close the Accounts under the Business Accounts Terms and Personal Accounts Terms was an ‘unfair term’ for the purposes of s 12BG(1) of the Australian Securities and Investment Commission Act 2001 (Cth) and should be declared void.
The Bank said that it decided to close the accounts to protect the Bank’s legitimate interests as it considered the customers to be outside the Bank’s risk appetite, as it could not adequately mitigate and manage the level of risk presented by continuing to provide banking and financial services to the customers.
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Author: David Jacobson
Principal, Bright Corporate Law
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About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.
