ATR Leads Coalition Letter Opposing Debanking by Regulators  

On February 5^th, 2025, ATR led a coalition letter addressed to Senate Banking Committee Chairman Tim Scott and ranking member Elizabeth Warren urging them to address how federal agencies have politicized and weaponized to target certain industries and pressure banks to cease commercial activities with such industries under the guise of risk assessments.  

Using the justification of risk management, banks have come under increased scrutiny by regulators to sever ties to industries which may pose a “reputational risk”. In recent years, individuals, businesses, and other groups have raised concerns about being “debanked” or losing access to financial services due to political targeting. The letter explains that regulators, not banks, are at fault for these instances: 

Weaponization of financial institutions can target individuals or entire industries. A recent Freedom of Information Act request revealed that the Biden Administration engaged in a deliberate effort to pressure financial institutions to stop engaging in crypto activities. Industry debanking is not new — it echoes Operation Choke Point under the Obama Administration, in which regulators targeted lawful industries such as firearms dealers and payday lenders under the guise of risk management. 

Regulatory pressure to force debanking decisions usually takes the form of risk assessments. For example, it was discovered that the FDIC was targeting a list of “high-risk” industries, including companies responsible for firearm and ammunition sales, coin dealers, and online gambling. 

The letter also traces the root of the problem to the Anti-Money Laundering Act and the Bank Secrecy Act. The former mandates surveillance of customer activity in search of suspicious activity that could be reported to the government for national security and law enforcement purposes. However, reports from the Treasury’s Financial Crimes Enforcement Network and Government Accountability Office revealed the sheer inefficacy of the initiative.  

Banks are required by law to file suspicious activity reports (“SARs”) and currency transaction reports (“CTRs”) with the Financial Crimes Enforcement Network — a bureau of the U.S. Department of Treasury. SARs are used to tip off law enforcement that banks suspect that a crime might be taking place. CTRs flag large cash transactions (exceeding $10,000). According to FinCEN, 4.6 million SARs were filed in 2023 and fewer than 0.3% of these SARs contributed to an active FBI or IRS investigation. According to the Government Accountability Office, over 170 million CTRs were filed between 2014 and 2023, but only 5% were ever accessed by law enforcement, and even fewer were used for law enforcement or national defense purposes. 

The nature and scope of the law is incredibly expansive and overly punitive. SARs and CTRs result in debanking of individuals even if crimes are not committed. Banks also face penalties for failing to catch a crime despite filing an SAR. Banks thus have acted accordingly by erring on the side of debanking to avoid regulators imposing fines in the hundreds of millions of dollars for slight missteps.  

SARs and CTRs ultimately contribute to some customers being debanked, regardless of whether a crime is being committed. Nonetheless, banks are fined for not being sufficiently aggressive in debanking criminals that law enforcement did not catch despite the bank filing a SAR, forcing banks to err on the side of debanking when they are unsure if a crime has been committed. Banks are also prohibited by law from telling customers about the existence of a SAR, meaning customers are often left without answers when debanking occurs. Law enforcement and national security experts leverage some of this information to aid criminal investigations. However, a more strategic approach is needed to protect innocent customers from getting wrapped up in the scope of these reporting exercises.

The letter concludes with a call to action for Congress to curtail the power of regulators to politically weaponize laws to go after disfavored individuals and businesses. If such practices continue, they will diminish the integrity of free-market principles and reduce economic freedom by penalizing individuals and businesses for their viewpoints.  

Weaponizing financial regulation to punish disfavored individuals and industries is a dangerous abuse of power that threatens economic freedom. If left unchecked, this practice will not stop with cryptocurrency firms or firearms dealers—it will expand to any industry or individual who falls out of favor with those in power. Congress must act now to prevent further erosion of financial access and ensure that Americans can participate in the economy without fear of ideological discrimination.

Read the full letter here.