A bill seeking to bring an end to Operation Choke Point, the government program launched in 2013 that seeks to disconnect certain businesses from the banking industry, got a boost this week as H.R. 766 passed the U.S. House of Representatives by a vote of 250-169.
The vote comes nearly a year to the day since the Financial Institution Customer Protection Act of 2015 was introduced into the House by Rep. Blaine Luetkemeyer, R-Mo. All 240 House Republicans voted in favor of the bill, and were joined by 10 Democrats.
The bill would prohibit a federal banking agency from formally or informally suggesting, requesting or ordering a depository institution to terminate either a specific customer account or group of customer accounts, or otherwise restrict or discourage it from entering into or maintaining a banking relationship with a specific customer or group of customers, unless the agency has a material reason to do so.
To satisfy the material reason requirement, a federal banking agency must believe that a specific customer or group of customers poses a threat to national security, including any belief that they are involved in terrorist financing. Simply believing that offering banking services to a certain business may present a reputation risk is not enough to deny that business services.
In a statement released by the House Financial Services Committee, Rep. Luetkemeyer said that:
After years of remaining steadfast in bringing an end to Operation Choke Point, I am proud that the majority of my colleagues today joined me in casting their votes to ensure this program is brought to a halt and that greater transparency is achieved. Over the past couple of years I have introduced legislation, held meetings with and sent letters to Department of Justice (DOJ) and federal banking regulatory officials, and most of all, relentlessly strove to help those who have been negatively impacted by this illegal initiative. Together, the first step has been taken to ensure that federal banking agencies and DOJ can no longer intimidate financial institutions from offering financial services to licensed, legally-operating businesses that have been targeted not because of potential wrongdoing, but because of personal and political motivation.
While Operation Choke Point has been targeting a number of illegal businesses such as escort services, cable box descramblers and Ponzi schemes, several legal businesses have found themselves targeted by the program, including premium cigar stores and at least one premium cigar manufacturer. Gun and ammunition dealers have also been targeted by Operation Choke Point, which lumps these businesses together as “high risk” and carrying a significant “reputation risk” for the banks who service them.
The House’s approval didn’t go unnoticed by the International Premium Cigar & Pipe Retailers Association (IPCPR), which has been closely monitoring the bill’s progress as well as working with members who have been affected by Operation Choke Point.
“The IPCPR is encouraged that the U.S. House has passed legislation to curb the administration’s program to cut off banking services for small businesses that President Obama has unjustly deemed to be ‘high risk,’ said Kevin “Kip” Talley, senior director of federal legislative affairs for the International Premium Cigar & Pipe Retailers’ Association (IPCPR). He went on to call it a “misguided initiative that unfairly targets cigar stores and manufacturers, among other industries.”
Rep. Bill Posey, R-Fla., who has been an advocate for the cigar industry in Congress by way of trying to exempt premium cigars from FDA regulation, was also vocal in the push to shut down Operation Choke Point. “It’s unacceptable for the federal government to use its authority to pressure banks and other financial institutions into closing down accounts and blocking access to capital of legal and law abiding businesses that they may not happen to like or agree with,” he said via a press release. “The Justice Department should use their limited resources to investigate and prosecute criminals and businesses that are violating the law, not to pursue a political agenda.”
The White House has already issued a statement saying that should the bill make it to the president’s desk, senior advisors would strongly recommend a veto, adding that “this bill would constrain Federal banking regulators’ ability to appropriately engage with the financial institutions they regulate for compliance with and enforcement of U.S. legal and regulatory requirements that are designed to protect the United States financial system from money laundering, terrorist financing, and other serious financial crimes.”
Talley added that regardless of what happens to the bill, IPCPR’s commitment to protecting its members from Operation Choke Point will not waver. “Though the president has vowed to veto the bill if passed by the Senate, we will continue to fight on behalf of cigar retailers and manufacturers throughout the United States,” he noted, adding that “it is unacceptable for the federal government to use its authority to pursue a political agenda against job creators in our communities. This injustice must end.”