The U.S. Department of Justice announced the end of Operation Choke Point in an August 16 letter to the Chairman of the House Judiciary Committee.  Operation Choke Point, which began under the Obama Administration, sought to prohibit banks and other financial firms from giving so-called “bad actors” access to bank accounts and payment processing systems.  The program was meant to combat money laundering and to prevent such businesses and individuals from having access to U.S. banking institutions.

Although Operation Choke Point has faced significant criticism since its inception in 2013 and has now been discontinued, the DOJ said that the initiative had uncovered criminal activities by individuals and non-banking institutions during its existence.

Under Operation Choke Point, the DOJ issued subpoenas to certain financial institutions to investigate their relationships with companies that purportedly had a higher risk of fraud and money laundering.  Some of the subpoenas included a guidance document from the Federal Deposit Insurance Corporation that identified categories of businesses that could pose a “reputational risk,” supposedly warranting heightened scrutiny by bank personnel.  Some of the “high-risk” businesses included payday lenders, telemarketing companies, pawn shops, credit repair services, and businesses offering “get rich” products.  The list also included businesses selling ammunition, firearms, and drug paraphernalia, and those engaged in the dissemination of allegedly racist materials.

Critics of the program complained that Operation Choke Point unfairly targeted legitimate businesses like payday lenders and firearms dealers that were out of favor with the Obama Administration.  Operation Choke Point also received significant backlash from Congressional Republicans.

In 2015, the FDIC rescinded the list of high-risk merchants and advised banks to analyze their relationships with businesses on a case-by-case basis.

The DOJ’s August 16 letter comes in response to an August 10 letter from the Chairs of the House Judiciary and Financial Services Committees and several related subcommittees.  The August 10 letter, addressed to the Attorney General, Chair of the Federal Reserve Board of Governors, and Office of the Comptroller of the Currency (“OCC”) Acting Comptroller, asked for “immediate corrective action” regarding Operation Choke Point, which, according to the letter, “destroyed legitimate businesses to which [the Obama] Administration was ideologically opposed (e.g., firearms dealers) by intimidating financial institutions into denying banking services to those businesses.”  The DOJ’s response to the August 10 letter, signed by Assistant Attorney General Stephen E. Boyd, confirms the end of Operation Choke Point and “reiterate[s] that the Department will not discourage the provision of financial services to lawful industries, including businesses engaged in short-term lending and firearms-related activities.”

On August 21, OCC’s Acting Comptroller responded to the August 10 House Letter, claiming that the “OCC is not now, nor has it ever been part of Operation Chokepoint.”  The OCC stated that it “rejects the targeting of any business operating within state and federal law as well as any intimidation of regulated financial institutions into banking or denying banking services to particular businesses.”

The Federal Reserve said it also plans to respond to the House’s August 10 Letter.

Some of the payday lenders affected by Operation Chokepoint filed suit in 2014 in the U.S. District Court for the District of Columbia against the Federal Reserve and the OCC.  These payday lenders alleged that the Federal Reserve and the OCC unduly pressured banks to breach their relationship with the lenders.  This suit is still ongoing.

The DOJ has closed all cases initiated under Operation Choke Point.  According to the August 16 letter, the “initiative is no longer in effect, and it will not be undertaken again.”

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Photo of Keith J. Barnett Keith J. Barnett

Keith’s experience representing clients in the financial services industry as a litigation, compliance, regulatory, investigations (internal and regulatory), and enforcement attorney spans 20 years. Keith represents clients against government regulators (CFPB, FTC, SEC, CFTC), industry regulators (FINRA), and private litigants in federal courts…

Keith’s experience representing clients in the financial services industry as a litigation, compliance, regulatory, investigations (internal and regulatory), and enforcement attorney spans 20 years. Keith represents clients against government regulators (CFPB, FTC, SEC, CFTC), industry regulators (FINRA), and private litigants in federal courts, state courts, and before arbitration and administrative law panels in the financial services industry.

Photo of Laura Anne Kuykendall Laura Anne Kuykendall

Laura Anne (LA) counsels individuals and companies responding to allegations of regulatory and criminal wrongdoing and advises them in connection with navigating these high-stakes matters throughout the investigatory, enforcement, and litigation process.

Photo of Stephen C. Piepgrass Stephen C. Piepgrass

Stephen leads the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. He focuses his practice on enforcement actions, investigations, and litigation. Stephen primarily represents clients engaging with, or being investigated by, state attorneys general and other state or local governmental enforcement bodies,

Stephen leads the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. He focuses his practice on enforcement actions, investigations, and litigation. Stephen primarily represents clients engaging with, or being investigated by, state attorneys general and other state or local governmental enforcement bodies, including the CFPB and FTC, as well as clients involved with litigation, with a particular focus on heavily regulated industries. He also has experience advising clients on data and privacy issues, including handling complex investigations into data incidents by state attorneys general other state and federal regulators. Additionally, Stephen provides strategic counsel to Troutman Pepper’s Strategies clients who need assistance with public policy, advocacy, and government relations strategies.