Operation Choke Point

Operation Choke Point

Operation Choke Point was a controversial initiative introduced by the Obama Administration’s Department of Justice in 2013. 

It sought to target businesses that engaged in fraudulent or illegal activity by discouraging banking institutions and lenders from extending services to businesses deemed as problematic. It also actively pursued banks with threats, investigations, and charges if found to be aiding the illicit activity of the business. 

The initiative was ended in 2017 by the Trump Administration. 

What Businesses were Affected? 

Third-party payment processors, banks, and loan institutions all faced pressures to terminate their services with a variety of industries. 

Some such industries that were discouraged included gun and ammunition manufacturers, pornography, coin dealers, and payday loans. 

This was problematic as businesses cannot operate without banking services and would be put out of business without access to these critical services. 

Payment processors already recognize many of these industries as high risk and put measures into place to mitigate risk and curb fraud.

It is important to note that the vast majority of these businesses operate lawfully but the financial institutions were encouraged to terminate accounts even without any evidence of unlawful activity. 

It was unclear what criteria an industry would have to meet to be considered a target under Operation Choke Point.

Other controversial industries such as abortion clinics were not targetted. Likewise, the cannabis industry was also not amongst the list of what was considered a problematic industry. 

Lawmakers raised concerns due to the lack of transparency and targeting businesses operating lawfully. There were fears of uncontrolled and undue pressure by the DOJ to deny lawful businesses the ability to engage in commerce.

Recent Developments 

Discussions were resurrected in early 2021 when the Fair Access to Banking Act was introduced in the US Senate by Senator Kevin Cramer of North Dakota. 

The Fair Access to Banking Act is a direct response to prevent a variation of Operation Choke Point from happening in the future.

This bill seeks to restrict large banks, credit unions, and payment card networks from refusing to do business with a person or business who is following the law. 

Unfortunately, this bill has not passed the Senate.