Controversial "Operation Choke Point" Program Has Ended

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Date: 
August 21, 2017

Updated August 23, 2017

In an August 16, 2017 letter to Congress, the U.S. Department of Justice (DOJ) announced that its controversial program dubbed "Operation Choke Point" has officially ended. In the letter, DOJ also repudiated the program, which it described as a "misguided initiative." Significantly, the letter states that DOJ "will not discourage the provision of financial services to lawful industries." 

Operation Choke Point was established during the Obama administration to "choke" payday lenders, gun dealers and other business sectors by forcing banks to end relationships with clients deemed "high-risk," a term also used to describe charities in the Bank Examiners Manual. According to the letter to Congress, under the program, a series of subpoenas were issued in 2013, accompanied by a Federal Deposit Insurance Corporation guidance document that listed a number of "elevated risk" merchants. An October 19, 2015, article in American Banker documented the impact on money service businesses and correspondent banks, thereby contributing to the global "de-risking" crisis

"We share your view that law abiding businesses should not be targeted simply for operating in industry that a particular administration might disfavor," the August 16 letter states. "Enforcement decisions should always be made based on the facts and the applicable law." According to DOJ, all investigations conducted under the program are over, the initiative is no longer in effect and it will not be restarted. 

The DOJ letter to Congress was written in response to an August 10 letter to DOJ, the Federal Reserve, and the Comptroller of the Currency from five U.S. House of Representatives committee or subcommittee chairs: Bob Goodlatte (R-VA), House Judiciary Committee; Jeb Hensarling (R_TX), House Financial Services Committee; Tom Marino (R-PA), House Subcommittee on Regulatory Reform, Commercial and Antitrust Law; Blaine Luetkemeyer (R-MO), Subcommittee on Financial Institutions and Consumer Credit; and Darrell Issa (R-CA), Subcommittee on Courts, Intellectual Property and the Internet. In an August 18 press statement, the congressmen praised DOJ's decision to end the program. "By ending Operation Choke Point, the Trump Justice Department has restored the Department's responsibility to pursue lawbreakers, not legitimate businesses," they said. 

The DOJ letter was followed two days later by one from the Office of the Comptroller of the Currency (OCC), asserting that the OCC "is not now, nor has it ever been part of Operation Choke Point." It adds, "The agency rejects the targeting of any business operating within state and federal law as well as any intimidation of regulated financial institutions into banking or denying banking services to particular businesses." The letter also notes OCC's expectation that banks "assess the risks posed by individual customers on a case-by-case basis and to implement appropriate controls to manage their relationships." 

Meanwhile, some are arguing that the same tactics employed in Operation Choke Point are being continued, albeit under a different name, by the Consumer Financial Protection Bureau (CFPB). An opinion piece in the National Review August 22 argues that "if the Bureau, which is unaccountable to Congress, is now the de facto home of Operation Choke Point, even if it is not called that there, then these letters will be of small comfort to business owners and their customers."