Bills
| 3.23.22

Protecting Bank Customers from "Operation Choke Point" — Unless They’re Linked to Terrorism (H.R. 2706)

Do you support or oppose this bill?

What is H.R. 2706?

(Updated January 14, 2019)

This bill seeks to protect bank customers that otherwise might have had their accounts targeted by Operation Choke Point by preventing federal banking regulators from forcing the termination of a business' account because of its "reputational risk". Operation Choke Point was an Obama era initiative launched by the Dept. of Justice (DOJ) in 2013 to target businesses suspected of fraud and money laundering activities. The program was criticized for targeting legitimate businesses and was ended by the Trump administration in August 2017, but could be re-instated under current law. This bill aims to block that from happening. 

Federal banking agencies would be prohibited from formally or informally suggesting or ordering a depository institution (like a bank or credit union) to terminate a customer's accounts, groups of accounts, or restricting relationships with groups of customers unless:

  • The agency has a material reason to do so;

  • The reason is not based solely on reputation risk related to that customer or group of customers.

The “material reason” criterion would be satisfied if a federal banking agency believes that customer or group of customers in question poses a threat to national security, including involvement in terrorist financing.

Federal banking agencies would be required to notify the depository institution about a customer’s account restriction or termination — but wouldn't have to notify the customer. Any notice to the customer would be prohibited if the federal banking agency requests or orders the termination or restriction of a customer account if the customer is believed to be a threat to national security.

This bill also revises requirements for summoning witnesses and requiring the production of books or other records deemed relevant by the Attorney General for a civil investigation that may result in civil penalties for specified violations.

Argument in favor

This bill would put a stop to the abuse of legitimate business owners under Operation Choke Point, while still allowing regulators and banks to cut off accounts that they believe are linked to funding terrorist activities. That’s an appropriate balance.

Argument opposed

The Obama administration and the DOJ are right to target businesses that they view as being at high risk for fraud or money laundering. These reforms would impede investigations into those activities unless there’s a connection to terrorism.

Impact

Individuals and businesses whose bank accounts might have been scrutinized due to Operation Choke Point, financial institutions, federal banking agencies, and the DOJ.

Cost of H.R. 2706

The CBO estimates that this bill would cause no change in federal spending.

Additional Info

In-Depth: Sponsoring Rep. Blaine Luetkemeyer (R-MO) introduced this bill to make changes made by the Federal Depository Insurance Corporation (FDIC) aimed at preventing legitimate customers from having their bank accounts cut off due to Operation Choke Point into law:

“Last Congress, the House of Representatives took the first step in putting an end, once and for all, to Operation Choke Point by passing my legislation. Although there is a new Administration and Department of Justice in place, this legislation is necessary to ensure that no future Administration will have the opportunity to negatively impact individuals and legal businesses through this unprecedented initiative. We must continue to demand greater transparency and end the practice of allowing government bureaucrats to use personal and political motivations to block financial services to licensed, legally-operating businesses.”

The FDIC admitted that legitimate businesses had been wrongly targeted under Operation Choke Point in January 2015. Among the types of businesses targeted by the DOJ and FDIC operation are firearm and ammunition dealers, pawn stores, cigar shops, and payday lenders. It was formally ended by the Trump administration's DOJ in August 2017, but Congress hasn't moved to prevent those policies from being re-imposed in the future by the DOJ in a different guise.

This bill was passed by the House Financial Services Committee by a vote of 59-1, and currently has 19 cosponsors in the House, all of whom are Republicans. During the last Congress this legislation passed the House on a 250-169 vote but didn't receive a vote in the Senate.


Media:

Summary by Eric Revell
(Photo Credit: Flickr user Steve A Johnson)