Why your bank can break up with you

[ukipa]

Why your bank can break up with you

Banks urged to close questionable accounts


NEW YORK (CNNMoney) -
Your bank has the right to cut you off anytime it wants. But why exactly would it break up with you?

There are the customers who bounce checks, constantly overdraw their accounts, commit fraud or otherwise lose the bank money. Those are the easy ones to get rid of.

But then there are the customers who fall into a gray area.

Banks are urged by federal law enforcement agencies and regulators to close questionable accounts -- or else risk getting hit with penalties. So they often end up shutting accounts even when a customer isn't doing anything explicitly illegal.

If a customer is merely involved in an industry considered high risk or engaged in an unpopular or "unsavory" line of work, a bank may deem it safer to cut off the relationship, according to Robert Rowe, senior counsel at the American Bankers Association, which represents the nation's largest banks.

"[The government] is putting us in a position where we're expected to be the judge, jury and prosecutor," Rowe said.

In guidance to banks, the Federal Deposit Insurance Corporation lists 30 business categories that have been linked to "high-risk activity," including gun sellers, home-based charities, payday loans, dating services, escort services, fireworks suppliers, cable box de-scramblers, coin dealers, credit card repair services, gaming and gambling websites, and telemarketing companies.

Another category on the list: pornography, which became a hot button issue recently after news reports said that "hundreds" of porn stars suddenly had their bank accounts closed by Chase (though a source close to the matter said Chase doesn't have a specific policy prohibiting porn stars from having bank accounts).

When you open a business account, banks can determine if you are in a "high-risk" industry by running a background check and continuing to monitor the types of transactions that are made once the account is open.

The FDIC also recommends that banks look at the volume and nature of consumer complaints filed on websites like the Better Business Bureau. A company that requests a large number of returns or charge backs (which often occur when a customer is dissatisfied with a purchase), should also raise red flags, according to the FDIC.

Other reasons for heightened suspicion: customers who give unclear descriptions of their businesses when opening accounts, as well as those who make multiple transactions that don't seem to make sense, according to Protiviti, a consulting firm that helps banks prevent money laundering, human trafficking and terrorist financing.

For personal accounts, there's a whole other set of warning signs that banks are looking out for.

Among them: If you have no record of current or past employment but make frequent, large transactions, you don't live or work anywhere near the city or state where you've opened an account, you have many accounts under a single name, you have past convictions on your record, or you provide phone numbers that are disconnected.

A sudden surge in account activity, consistently high volumes of transaction activity, multiple round-number transactions like $50,000 or deposits just under $10,000 (since banks must report anything above that amount to law enforcement), constant visits to safe deposit boxes and big purchases of valuable items like precious metals or fine art are some of the other forms of activity that could indicate fraud like money laundering, according to Protiviti.

What it all comes down to is that your bank reserves the right to shut your account at any time, for any reason. And because the institution is held liable if an account ends up being connected to fraud or damaging the reputation of the bank, it is often going to take a "better safe than sorry" approach, said John Ulzheimer, credit expert at CreditSesame.com.

"Nobody has the right to a credit card, a bank account, a debit card or a merchant account," said Ulzheimer. "You have to earn it and the banks set the rules. If you are what they perceive to be too risky, they'll shut you down and you have no recourse."

[cml1234]

Nobody has the right to a credit card, a bank account, a debit card or a merchant account.........


I would take some of those accounts. Gun makers, gaming and gambling? So who handles the accounts for Vegas casinos?

[ukipa]

May 8, 2014 17:53:58 GMT 4 cml1234 said:

Nobody has the right to a credit card, a bank account, a debit card or a merchant account.........


I would take some of those accounts. Gun makers, gaming and gambling? So who handles the accounts for Vegas casinos?

I am sure "Private Banks" do. And, remember, the government are in full support of Vegas / Atlantic city casinos. They are removing the competition. Ask the Indian casinos how they are meeting this requirement from local retail banks.

[ukipa]

UPDATE


Is Obama Really Forcing Banks to Close Porn Stars' Accounts? No, Says Chase Insider







A JPMorgan Chase source says Obama's "Operation Choke Point" has nothing to do with its recent account closures.

If this were a Hardy Boys book, it would be The Hardy Boys and the Mystery of the Porn Stars' Disappearing Bank Accounts.

Last month, porn star Teagan Presley told Vice that JPMorgan Chase & Co. closed her account because the bank considered her "high-risk." Then, on Wednesday, porn director David Lord told the Daily Beast that Chase sent him a letter notifying him that the bank was going to close his account on May 11. The Beast and Vice suggested that a secretive Justice Department program, "Operation Choke Point," was behind the account closures. But a Chase insider familiar with the matter says that the initiative has nothing to do with the termination of these accounts.

"This has nothing to do with Operation Choke Point," the source told Mother Jones. "There's not a targeted effort to exit consumers' accounts because of an affiliation with an industry [and] we have no policy that would prohibit a consumer from having a checking account because of an affiliation with this industry. We routinely exit consumers for a variety of reasons. For privacy reasons we can't get into why."

The porn stars' allegations play into a narrative—pushed by banks and congressional Republicans—that the Obama administration is overstretching its authority by forcing banks to police the free market. Here's the real story:

What is Operation Choke Point? Operation Choke Point is a federal initiative that aims to crack down on fraud by honing in on banks and payment processors—the companies that serve as middlemen between merchants and banks on credit card transactions. Financial institutions are not supposed to do business with companies they believe might be breaking the law. But Justice Department officials suspect that some payment processors ignore signs of fraud—like high percentages of transactions being rejected as unauthorized—in transactions they process, and banks go along for the ride, earning massive profits.

The Justice Department has already filed one lawsuit under the program. In January, the government sued Four Oaks Bank in North Carolina, charging that it "knew or was deliberately ignorant" that it was working with a company that processed payments for merchants who were breaking the law. According to the lawsuit, Four Oaks worked with a Texas-based payment processor that processed about $2.4 billion in transactions on behalf of fraudulent payday lenders, internet gambling entities, and a Ponzi fraud scheme. The processor then allegedly paid Four Oaks more than $850,000 in fees. (In April, Four Oaks reached a $1.2 million settlement with the government, but did not admit wrongdoing.)

President Obama's Financial Fraud Enforcement Task Force, headed by the Department of Justice, is behind the program. Michael Bresnick, who runs the task force, made the program public last March. He says that the aim is to "close the access to the banking system that mass marketing fraudsters enjoy—effectively putting a chokehold on it."

Is this the first time that feds have asked banks to keep an eye on their customers? No. The Bank Secrecy Act of 1970 requires financial institutions to assist the feds in preventing money laundering, which includes scrutinizing customers. However, banks argue that Operation Choke Point goes further than that law.

Does Operation Choke Point include a "blacklist" of businesses or individuals the government is requiring banks to target? Not exactly. Last September, the Federal Deposit Insurance Corporation issued updated regulatory guidelines noting that "facilitating payment processing for merchant customers engaged in higher-risk activities can pose risks to financial institutions." A footnote in the guidelines linked to a list of products and services, published in 2011, that the feds say have been associated with high-risk activity, including get-rich products, drug paraphernalia, escort services, firearm sales, pornography, and racist materials. But the September guidance makes clear that financial institutions that "properly manage these relationships and risks are neither prohibited nor discouraged from providing payment processing services to customers operating in compliance with applicable law." In other words, the guidance requires banks to perform due diligence to prevent fraud, but does not require banks to go on a porn-star witch hunt.

Why are some people saying Operation Choke Point discriminates against low-income Americans? As part of the program, the feds are scrutinizing payday lenders, which offer short-term loans at high interest rates. Critics of these lenders say they take advantage of low-income Americans, while defenders note that they're often the only option for Americans unable to get loans elsewhere. Some states restrict or ban payday loans. But as payday lenders move online, they've been able to skirt state rules, according to the Justice Department. The feds hope to crack down on payday lenders that are not complying with state and federal regulations. "This effort is focusing on ensuring that lenders are not using electronic payment networks to commit fraud or offer products that would not otherwise be permitted," says Tom Feltner, director of financial services at the Consumer Federation of America, a national association of nonprofit consumer advocacy groups.

Who opposes the program? Banks, payday lenders, gun owners, conservatives, and some Democrats have expressed opposition to the program. Frank Keating, president and CEO of the American Bankers Association, wrote an op-ed in the Wall Street Journal last month accusing the Justice Department of "forcing banks to make judgments about criminal behavior and then holding them accountable for the possible wrongdoing of others." Jason Oxman, chief executive of the Electronic Transaction Association, which recently released guidelines for payment processors, told the Washington Post that Operation Choke Point shouldn't target entire industries, and should instead focus on specific bad actors. A new lobbying group, the Third Party Payment Processors Association, opposes Operation Choke Point, and an activist group called "StopTheChoke.com" is running an online campaign against the program. The NRA, after receiving concerns from gun owners that the DOJ is using the program to take away their guns, said last week that "it will continue to monitor developments concerning Operation Choke Point."

On January 8, Reps. Darrell Issa (R-Calif.) and Jim Jordan (R-Ohio) sent a letter to the Justice Department arguing that "the extraordinary breadth of the Department's dragnet prompts concerns that the true goal of Operation Choke Point is not to cut off actual fraudsters' access to the financial system, but rather to eliminate legal financial services to which the Department objects."

Who supports it? Quite a few Democrats support the program. On February 26, Sen. Jeff Merkley (D-Ore.) and Rep. Elijah Cummings (D-Md.) sent a letter to the Justice Department recommending that the program continue. The letter, cosigned by 11 other Democrats, including Sen. Elizabeth Warren (D-Mass.), said: "The Department plays a critical role in ensuring system-wide compliance with anti-fraud, anti-money-laundering, and related laws, especially as they apply to the unique risks associated with our payments system, and we urge the Department to continue its vigorous oversight."

Diane Standaert, senior legislative counsel for the Center for Responsible Lending, notes that eradicating fraud is also a win for consumers. "Banks should have a vested interest in making sure their own customers accounts aren't being abused or unnecessarily drained," she says. "By complying with this existing guidance, it's a win-win."

[Sapphire Capital]

see this lawsuit: www.documentcloud.org/documents/1009460-justice-dept-lawsuit-against-four-oaks-bank.html

and it goes far deeper, its not any more feasible to bank in the US if you are at the forefront of finance or just plain doing international business.

[ukipa]

Thank you RL. Great read.

[cml1234]

May 10, 2014 3:42:43 GMT 4 Sapphire Capital said:

its not any more feasible to bank in the US if you are at the forefront of finance or just plain doing international business.

That bank got whacked because they teamed up with a scammy pay-loan company.

It was a relationship that allowed the scammy company to access and charge people's bank accounts, something a third party should not have access to.

Run a legit private bank and you have no reason to worry.

[Sapphire Capital]

sorry that's is a rather superficial reading, the sample was about a scammy company that is true but the amount of oversight is structured from that point of view and since bank has that capability you will see them using the oversight mechanism to control the bank operations. Chase and boa as well as Fargo have initiated plans to clean out any hurdle and it comes down to that even people who are perceived a risk but re not will be cleaned out of the major bank account relations. The simple vending machine business man in California has already trouble finding a bank which will accept all his coin, and even if they do they charge ridiculous fees and delay credit of the money for days on end. The system is crooked because they never switched over from an old fashioned system to a modern system and now due to the political influence can delay any new development. If Windows would not have cancelled XP support, most of the banks would never have gotten modern ATM, the risk of CC and DC transactions is higher here in the US because they are using a coding system created in the 60's and are unwilling to come into the modern age, for gods sake I can pay the parking meter in Rwanda with my cell phone, and thats not exactly a first world country. In response to them being allowed to push the risk of the old structures onto the customer and the money the government threw at them, the banks agreed to let them have all the data of their customers and control. Sure there are loopholes and structures which allow private banking still but they are coming at a high price. The only reason for having a bank in the US is access to the system and markets, even small banks are talking about 1M compliance cost. So they will not touch any client who may be posing a risk, the pornstar because this society thinks them half-criminal (despite the fact that more than 50% of the world production and consumption of hard core porn comes from the US), the small town used car sales man (who sells mostly to cash paying immigrants, who accept 30% interest because they are ......), the vending machine guy, even the pizza delivery guys gets asked questions when he puts his tips into a bank account, you getting paid from ebay more than once a week - welcome to the monitoring list. You do cryto currency - beware of the devil, they may even ask for an excorcism, the lest you can expect to end up on the FBI watch list through an SAR. The amount of SAR (Suspicious Activity Report) has grown so much that the authorities can not really sift through them anymore in a timely manner, so the bank sending it has 2 choices, they just send it to protect themselves from liability or they send it with a follow up phone call. The cost therefore have tripled and with competition high for new customers these cost can not be passed on, which in return only increases pressure on the profit margin. I believe the system should be reformed but a country which polices the world and can not regulate its own affairs is probably not willing to bite that bullet any time soon.

[cml1234]

May 12, 2014 4:00:01 GMT 4 Sapphire Capital said:

. The only reason for having a bank in the US is access to the system and markets, even small banks are talking about 1M compliance cost.

To offset the cost, numerous banks in my hometown opened an office that shares information, handles research and security, and covers compliance.

14 banks chipped in to start this.

They basically hired some former bankers, some former police detectives, and a couple of computer experts.

[niseag]

still is a money issue, sure you can safe a bug, but its still more expensive than other countries, who by the way have less money laundering than the US