How a “Politically Exposed Person” Can be “Debanked”

​Sam Brownback – the former U.S. Senator, Kansas governor, and ambassador – describes the day in May 2022 when Chase Bank refused to allow him to make a deposit on behalf of the nonprofit organization he now leads, the National Committee for Religious Freedom. He was told that account had been cancelled.  
 
When Brownback asked why, he was only told that the decision was made by “corporate.” Two weeks later, Brownback and his nonprofit received a formal notification from Chase that the account had been formally closed. Brownback then undertook a prolonged attempt to persuade Chase to explain its decision. He received multiple answers. At one point the bank asked Brownback to disclose all of his committee’s donors.
 
“You don’t require that of other people,” he replied to a bank official. “We’re not going to do that.”
 
A few months later, Sam Brownback was told that something about this organization had crossed the bank’s tripwires indicating a possible domestic threat of terrorism. Brownback himself was, he was told, defined as “a politically exposed person,” a legal term in international finance that could involve a government official connected to corruption, money-laundering, and terrorism financing.
 
Brownback’s experience is one of the most prominent cases in a disturbing trend in financial services: “debanking” law-abiding organizations that strike some people as too ideological, too controversial, or in someone’s eyes “hateful.” These actions seem to emerge from an overwrought emphasis on the “reputational risk” of serving groups ideologically disfavored by Fortune 500 C-Suites. The list of debanked organizations runs the gamut from conservative activist groups to traditional Christians to companies that extract oil and gas, make guns and ammunition, and run private prisons.
 
Why is this happening? Banks, large and small, and other financial institutions are being jawboned by NGOs about the reputational and other risks of serving controversial groups and businesses. Some of the jawboning comes from the government.
 
Sen. Tim Scott, (R-SC) in a letter earlier this year to U.S. Treasury Secretary Janet Yellen, wrote about Treasury sending guidance to financial institutions “instructing them to search and filter Americans’ transaction-level financial data using specific keywords, search terms, and particular merchant category codes.” These keywords include common political slogans, the legal purchase of firearms (making “Dick’s Sporting Goods” one such term), as well as “the purchase of books (including religious texts) and subscriptions to other media containing extremist views.”
 
“Bank executives hear a lot of noise in their left ear,” Sen. Kevin Cramer (R-ND), who sits on the Senate Banking, Housing and Urban Affairs Committee, told a recent Federalist Society discussion. “Conservatives are not good at making noise.”
 
Regardless of your personal views about conservative ideas or traditional morality, demonizing and isolating the traditional beliefs of virtually every major world religion seems more like a First Amendment violation than a smart way to filter out people who are truly dangerous. Little wonder that Brownback says these decisions feel like they are being made “to suffocate people of faith.”
 
What can be done in response? Sen. Cramer is gathering a large number of cosponsors for his Fair Access to Banking Act, which forbids discrimination on the basis of “subjective political reasons, bias, or prejudices.” Cramer also suggests that an effective response is to make noise in the other ear of bank executives.
 
Brownback is doing just that. He says he is working overtime to persuade smaller organizations, often embarrassed and frightened at being debanked, to find comfort in numbers by joining other debanking victims in public. The more groups that come forward, the more banks and other financial institutions will have to give up on using access to the financial system as a way to bully ideologically disfavored groups.
 
Consider the group of debanked organizations that sued to force Chase to allow a vote on a shareholder proposition in 2023 against ideological debanking. That move did the trick. Soon after, WePay, which processes payments for Chase, removed its “social risk” policy which applied “hate” and “intolerance” standards against Christian and conservative organizations. J.P. Morgan pledged to provide “financial services for individuals and industries across geographies – regardless of political, social, or religious viewpoints.”
 
The threat against disfavored groups mirrors a recent case of direct government bullying, National Rifle Association v. Vullo, that was resolved by the U.S. Supreme Court. In that case, a government regulator in New York strongarmed financial and insurance companies to debank the Second Amendment advocacy organization. The Supreme Court ruled against the government regulator. Perhaps the justices will get the chance to declare that it is no more acceptable for big financial institutions to band together to exclude, and thereby financially harm, groups whose viewpoints they dislike.
 
You don’t have to be a conservative or an evangelical Christian to be offended by this institutional effort to bully nonprofits over speech. As liberal Justice Sonya Sotomayor wrote in the Vullo decision:
 
“At the heart of the First Amendment’s Free Speech Clause is the recognition that viewpoint discrimination is uniquely harmful to a free and democratic society.”
 
That principle logically applies as much to private banking decisions as to governmental discrimination.