The practice of “debanking” has stirred fresh controversy, with high-profile individuals and industries alleging that federal regulators are pressuring banks to terminate accounts without explanation. Venture capitalist Marc Andreessen recently highlighted the issue on Joe Rogan’s podcast, claiming knowledge of 30 tech entrepreneurs who had been “debanked” in the past four years.
Andrew Torba, founder of the right-wing social media platform Gab, shared his own experience, posting a bank cancellation notice on social media. Former First Lady Melania Trump also revealed in her memoir that a bank abruptly ended her account in 2021, despite a long-standing relationship. The institution reportedly denied her son, Barron, an application soon after.
But as critics point out, the blame may lie less with the banks and more with a secretive enforcement regime directed by federal authorities.
How Debanking Operates Under Federal Oversight
The Bank Secrecy Act mandates that banks monitor customer activity and submit Suspicious Activity Reports (SARs) to the Treasury Department’s Financial Crimes Enforcement Network if illicit activity is suspected. These “know your customer” rules aim to prevent money laundering, but critics argue they place undue burdens on banks.
With penalties for lapses reaching billions of dollars, banks often err on the side of overreporting, filing 4.6 million SARs last year alone. “Once multiple SARs have been filed, examiners generally expect the account to be closed,” noted the Bank Policy Institute in a recent primer. Regulators prohibit banks from notifying customers when SARs are filed, effectively leaving account holders in the dark.
Banks may also be instructed to designate certain accounts as “high risk,” triggering compliance costs so significant that closing the account becomes the only viable option.
“This is how the Obama administration cut off banking access to politically disfavored businesses such as firearm dealers, payday lenders, and pawn shops under Operation Choke Point,” Finley wrote. From 2013 to 2017, federal agencies pressured banks to sever ties with industries they deemed high-risk.
Crypto Under Fire
A new wave of debanking appears to target cryptocurrency businesses. Freedom of Information Act requests by crypto exchange Coinbase uncovered supervisory letters suggesting that the Federal Deposit Insurance Corp. (FDIC) engaged in a pressure campaign to debank crypto firms.
The Blockchain Association, a trade group, has identified more than 30 cases of denied applications or account closures tied to digital asset companies. Signature Bank, once friendly to crypto, found itself under regulatory pressure. During the banking turmoil of 2023, non-crypto depositors fled, fearing regulators would shutter the bank to eliminate its crypto ties. Barney Frank, co-author of the Dodd-Frank Act and a Signature board member, alleged that the FDIC’s seizure of the bank was meant “to send a message to get people away from crypto.”
Debanking Beyond Crypto
While crypto companies have faced significant scrutiny, other high-profile figures have also been affected. The debanking of Melania Trump and others appears linked to government directives. A recent House Judiciary Committee report revealed that FBI officials had suggested banks file SARs on “suspicious” individuals to aid investigations into the January 6 Capitol riots.
Banks, fearing penalties, may have closed accounts without informing customers of their reasons. This opaque system has left individuals and businesses vulnerable to what some view as politically motivated financial exclusion.
The implications are profound: when regulatory pressure dictates access to banking services, the lines between lawful oversight and overreach blur. As critics of debanking continue to raise their voices, questions remain about the extent to which government influence is reshaping financial freedoms in the United States.
