On Operation Chokepoint and thumb-sucking soccer players
by. Henry Meier
Here are a few tidbits to consider as you start your credit union day. Recently, I did a blog on the Department of Justice’s Operation Chokepoint. On Monday, Attorney General Eric Holder doubled down on the Department’s defense of this program with a video in which he wholeheartedly endorsed the agency’s efforts to prosecute not only illegal businesses but also “financial institutions that allow this fraud to occur.” While the AG stresses that it is not clamping down on legitimate business activity, any compliance person would be right to wonder if the DOJ is placing new due diligence requirements on financial institutions.
For example, the DOJ points out that third-party processors help facilitate transactions on behalf of businesses that may be committing consumer fraud. But let’s break this down. We all agree that a financial institution should know its member. We also agree that a financial institution should report suspicious activity whenever it suspects that it is being used to facilitate money laundering or other illegal activity. My concern is that the DOJ is coming awfully close to holding financial institutions responsible not only for understanding their member’s financial activity but for understanding the business activity of their member’s customer’s, as well.
Every day millions of transactions are carried out by financial institutions of all shapes and sizes on behalf of businesses and individuals. It is the job of prosecutors and regulators to root out criminal practices and corrupt businesses. It is ultimately the job of credit unions and banks to facilitate financial transactions. Call me wacky, but rather than deterring banks from opening accounts, the DOJ would be well advised to stick to the job of prosecuting criminals, otherwise we are going to have a banking system that shies away from legitimate banking activity, not because it is necessarily illegal, but because the DOJ thinks it should be.
The National Association of Realtors yesterday reported that existing home sales were up sharply in May. This is not as impressive as it sounds because the housing market has been growing increasingly sluggish in recent months.
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