Nicholas Anthony
One of the most common problems with debanking is that customers say they were treated like criminals. Despite thinking everything was fine, customers receive a sudden letter saying their account was closed and they can’t know why. They are left in the dark. Yet, what many people don’t know is that banks are required by law to keep you in the dark.
This story has happened countless times. Reporting in the New York Times and other outlets shows that customers regularly feel helpless (or worse) when they are debanked.
“It felt like there was this secretive department, and anyone who wasn’t in that department didn’t even know about it.” – Caroline Potter
“I received no kind of warning or red flag.” – Naafeh Dhillon
“And in this scenario, you can’t really negotiate. You aren’t talking with a person who has the power to tell you what went wrong and what didn’t go wrong.” – Oore Ladipo
“They said [my] account has been suspended for further review. [Why?] ‘We can’t tell you that.’” – Todd Zolecki
Even President Donald Trump said he was given no reason for being debanked after the events of January 6, 2021.
Yet, what isn’t so common is the knowledge that banks are often forbidden from telling customers what happened. Laws surrounding the Bank Secrecy Act prohibit banks from letting customers know that a suspicious activity report (SAR) was filed. In fact, it’s not just illegal to share the contents of the report. It’s also illegal to reveal that the report even exists. Yet, these reports can be a reason for getting debanked.
There’s also another source of confidentiality to contend with. Regulators claim confidentiality over information shared with banks. One troubling example occurred when the Federal Deposit Insurance Corporation (FDIC) sent confidential letters to banks instructing them to stop working with cryptocurrency companies. Breaking through this confidentiality is no easy feat.
Coinbase, a cryptocurrency exchange, requested records from the Federal Deposit Insurance Corporation under the Freedom of Information Act (FOIA). When the records supplied were heavily redacted, Coinbase moved to sue the agency. It was immediately clear that the government was acting in bad faith. Judge Ana Reyes described the redactions as an “incredibly narrow illogical view of [the] FOIA request” and “almost laughable.” It was only then that the records were properly released and revealed the full scope of how the government pressured banks to shut down cryptocurrency activity.
Yet, customers shouldn’t have to make these requests or sue the government just to find out why their accounts were closed. To the same end, banks should be free to decide what information they share and with whom.
As I explain in my new report on debanking, Congress should fix this confidentiality problem. Doing so would go a long way toward giving customers peace of mind, banks more control over how they do business, and policymakers a better sense of which additional reforms are needed.