Let’s talk about the difference between inactive, suspended, dormant, and closed customer accounts.

• An inactive account is an account that cannot transact. This may happen for a number of reasons. For example, some accounts can be inactive when they just registered and have not provided the full set of information you need. It could be that they have exceeded their limit and you are waiting for them to pay back the overdraft or top up their account. It could be that you locked them and are waiting for explanations from the customers or are investigating suspicious activities. In summary, an inactive account is an account that cannot transact temporarily. Sometimes these accounts are called suspended or locked. In most cases, those are the same.

• Dormant accounts are accounts that have not had any transactions, interactions with your service, or log-in instances during the specified time (usually between 1 and 5 years). Dormant accounts may or may not have balances on them. Typically after a prolonged period of inactivity, you would require the customer, if they ever come back to reset their password and potentially even re-verify themselves, before they can transact again, but this happens mostly due to security concerns, to ensure that these accounts cannot be hacked or taken over by fraudsters.

• The difference between the inactive account and a dormant account is that with inactive accounts you actually expect a follow-up, new document submission, case resolution, or some other action either by you or by the customer. In most cases, you or your automated systems proactively locked this account to enforce some rules or trigger certain controls. With dormant accounts, things happen passively. Customers don’t transact for a long period of time and then you categorize them as dormant. In most cases, it is highly likely that these customers won’t ever come back. 

• The full set of compliance obligations is applicable to dormant and inactive accounts – you must scan them for PEP and sanctions, you must protect them from fraud and security breaches, you must include them in your reporting. Those are your customers, regardless, whether they have a balance with you or not.

• Because maintaining inactive and dormant accounts is costly, I would actually recommend closing (e.g. terminate) them and exit this business relationship after 1-2 years of inactivities, so that you don’t have to incur compliance costs related to them.

• A closed account means that this person or entity is no longer your customer. From the termination date, you don’t have to scan these accounts against sanctions or PEP lists and you don’t have to report them. Obviously, you have to safely keep necessary customer information about them during the data retention period.

If you’d like to learn more about best practices for customers onboarding, download my FREE DIGITAL ONBOARDING GUIDE.