Banking on neutrality: Rising tensions and the new risks of debanking

The financial industry has found itself at the center of a growing controversy: unlawful "debanking," or the denial, restriction, or termination of banking services to individuals or organizations based on a customer's political views, religious beliefs, or other prohibited factors. Critics warn that today's debanking concerns carry unsettling historical echoes - recalling how regimes like Nazi Germany used financial exclusion as a tool of persecution. Instead, financial institutions should adopt viewpoint-neutral measures to ensure financial services are not weaponized against individuals or businesses based on their political or ideological beliefs.

Accusations of politically motivated debanking have recently been raised by the Trump administration, religious and conservative groups, cryptocurrency companies, and individuals and businesses in "high-risk" industries who have been denied banking services. While financial institutions often defend these decisions on risk management or regulatory grounds, the new wave of increased scrutiny over debanking practices has led to these same institutions adjusting their policies to avoid regulatory, legal and reputational risk.

In the last three months, federal regulatory and enforcement agencies have taken official action to address debanking head-on. In April 2025, the Equal Access to Banking Task Force, a joint effort by the U.S. Attorney's Office for the Eastern District of Virginia and the U.S. Department of Justice Civil Rights ("CRT"), was announced to combat illegal debanking actions taken against Virginians, and if appropriate, seek civil relief against banking institutions in federal or state court. Also in April 2025, the Federal Reserve announced the withdrawal of several directives that required banks to notify it before doing business with cryptocurrency clients. In March 2025, the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) eradicated "reputational risk" -- or the risk posed by negative public opinion to a bank's future financial condition -- as a metric when conducting supervisory bank examinations.

President Donald Trump and legislators on both sides of the aisle have alleged that banks have been involved in systemic debanking practices that have denied credit and financial infrastructure on a political or ideological basis. Treasury Secretary Scott Bessent and Massachusetts Senator Elizabeth Warren have called on President Trump to address debanking, and dozens of state attorneys general have written to the chief executives of major banks demanding action to correct politically motivated debanking.

Financial institutions have some legitimate concerns. For example, they must comply with regulations relating to their activities with companies in perceived high-risk industries such as cryptocurrency; mind their obligations to monitor and report suspicious financial activity, such as Know Your Customer and anti-money laundering account monitoring obligations; and consider reputational concerns associated with taking on customers in perceived high-risk industries such as firearms sales, adult entertainment and sex work, or cannabis related businesses. While banks have their own internal data and models that inform their rationale for removing customers, a bank's risk-based decisions may easily be influenced by efforts to swiftly disassociate from perceived high-risk customers.

Around a decade ago, the Obama administration engaged in an effort known as Operation Choke Point that investigated financial institutions that did business with certain categories of customers who were perceived to be high-risk. After some criticism by lawmakers alleging that the program was a veiled ideological attack on certain industries, the Federal Deposit Insurance Corporation (FDIC) issued a letter encouraging supervised financial institutions to take a risk-based approach in assessing individual customer relationships, rather than denying entire categories of customers access to financial infrastructure. While lawsuits against the FDIC by payday lenders were subsequently settled, Operation Choke Point led to the lingering perception that financial institutions continue to engage in ideologically-motivated debanking.

Financial institutions are adopting policies to address the legal, reputational, and regulatory risks associated with improper debanking practices. This includes implementing transparent and standardized account closure policies, which use industry-agnostic account reviews based on documented risk factors, such as previous occurrences of fraudulent activity or regulatory compliance failures. Banks can also scrutinize and refine risk models or automated risk scoring tools to ensure that these frameworks do not directly penalize ideological or political views, and are neutral in their application. Similarly, banks can replace any vague reputational risk models with a documented, concrete rationale for each account closure. As for each account closure, financial institutions can consider providing advanced notice to customers facing closure, and an appeals process for account closure decisions overseen by an independent committee that reviews each debanking decision. Underlying each one of these policies is an emphasis towards view-point neutrality, which should guide any efforts to ensure political or ideological discrimination does not occur.

Financial institutions, individuals, and businesses may also look to recent First Amendment law to guide their approach towards view-point neutrality in debanking decisions and their response to new regulatory frameworks addressing debanking. Recently, in National Rifle Association of America v. Vullo, the Supreme Court found that the NRA plausibly stated a First Amendment claim against a former government official who coerced private businesses to terminate relationships with the NRA to discourage gun-related activity and speech. See 602 U.S. 175 (2024). While NRA v. Vullo did not directly address debanking as a whole, this case signals a recognition by the court that relationships between government actors and private businesses under the modern regulatory state can be coercive and can suppress First Amendment rights. Recent cases like Vullo and Murthy v. Missouri may provide constitutional grounding for challenging politically influenced debanking; however, litigants may need facts to support a strong inference of government coercion. See id.; 603 U.S. 43 (2024). As a result, most individuals or businesses affected by account closures are unlikely to view courts as a viable path to remedy or reform based on free speech grounds. Query whether a program like Operation Choke Point would survive a First Amendment challenge today; however, growing public scrutiny of politically motivated debanking may still lead to more regulatory oversight, now aimed at promoting greater transparency regarding debanking decisions.

In conclusion, financial institutions must be mindful of the rising tensions related to debanking, evolving regulatory frameworks and law, and the reputational and societal damage that may arise from a perception of ideological targeting. While banks may have valid operational risks associated with certain individuals or businesses, the adoption of measures to ensure view-point neutrality in debanking decision-making are of importance to all of us.