Operation Choke Point, the government program that seeks to keep select types of businesses out of the banking system, is once again targeting the cigar industry, and for the first time has gone after a cigar manufacturer.
The Florida-based manufacturer, who has requested anonymity, received a letter dated July 20 from PNC Bank informing that they had 30 days to close its accounts, including destroying credit cards, ending any automatic payments and withdrawing funds, according to Kevin “Kip” Talley, senior director of federal legislative affairs for the International Premium Cigar & Pipe Retailers’ Association (IPCPR). He added that the company had been with PNC since 2012, and it was the first time he had seen a bank provide a 30-day window, as previously the standard had been just 10 days. That manufacturer has since found a new bank.
Talley added that two additional retailers have come forward believing that they have been targeted by Operation Choke Point, one in Florida and one in Michigan. That brings the number of stores who have contacted the IPCPR to seven, as these two join five others who stepped forward in 2014.
With these businesses believing they have been targeted by Operation Choke Point, Talley has contacted the U.S. House of Representatives Committee on Oversight and Government Reform as well as the House Financial Services Committee, and indicated that this latest round could lead to further hearings on the matter. He has yet to identify a pattern or any similarities in the businesses targeted, other than that they are all tobacco retailers.
It was believed that Operation Choke Point had come to an end after a Jan. 29, 2015 letter from the Federal Deposit Insurance Corporation (FDIC) issued a letter to banking institutions encouraging them to take a risk-based approach to their customer relationships, rather than lumping businesses into categories which must be collectively cut off. Yet more instances of businesses being cut off from banking services have continued to surface.
Operation Choke Point was launched in 2013 by the Department of Justice as a way to “choke out” certain individuals and businesses from the banking industry. It was billed as a way to combat consumer fraud and help shut down illegal businesses such as escort services, cable box descramblers, Ponzi schemes and numerous others. However, legal businesses deemed either high risk of undesirable by the operation’s designers began to feel the effects as well, including firearms and ammunition dealers, tobacco stores, coin dealers and payday lenders. Threatened with a full audit of their customer base if they did not comply, many banks simply terminated accounts with these types of businesses, and in some cases terminated personal accounts with the owners or associates of a business.
Following rounds of hearings, it has been revealed that Operation Choke Point is being supported by a number of government agencies, including the Department of Justice, FDIC, Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency and the Federal Reserve.
Legislation has been introduced to defund Operation Choke Point, including H.R. 1413, introduced by Rep. David Schweikert, R-Ariz. in March 2015. It has sat with the House Subcommittee on Crime, Terrorism, Homeland Security, and Investigations since April.
Talley is asking that any cigar retailer, manufacturer or related business who feels they may have been targeted as a result of Operation Choke Point contact him immediately, and guarantees anonymity during the process. He told halfwheel that he has little doubt that there are retailers who aren’t aware of this program and may not connect it with a cancellation of their bank accounts.