Gun sellers in the government's crosshairs

The Justice Department calls it "Operation Choke Point" and it's causing perhaps hundreds of gun shops and manufacturers across the country a lot of inconvenience and lost profits.

It seems that the FDIC issued orders in 2011 that forced banks to scrutinize "high risk" businesses like gun stores, porn shops, and drug paraphenalia outlets. The result was that lines of credit, credit card transaction processing, and even bank accounts have all come under attack by banks scared to do business with gun stores.

Washington Times:

Since 2011, regulators have increased scrutiny on banks’ customers. The Federal Deposit Insurance Corp. in 2011 urged banks to better manage the risks of their merchant customers who employ payment processors, such as PayPal, for credit card transactions. The FDIC listed gun retailers as “high risk” along with porn stores and drug paraphernalia shops.

Meanwhile, the Justice Department has launched Operation Choke Point, a credit card fraud probe focusing on banks and payment processors. The threat of enforcement has prompted some banks to cut ties with online gun retailers, even if those companies have valid licenses and good credit histories.

“This administration has very clearly told the banking industry which customers they feel represent ‘reputational risk’ to do business with,” said Peter Weinstock, a lawyer at Hunton & Williams LLP. “So financial institutions are reacting to this extraordinary enforcement arsenal by being ultra-conservative in who they do business with: Any companies that engage in any margin of risk as defined by this administration are being dropped.”

A Justice Department representative said the agency is conducting several investigations that aim to hold accountable banks “who are knowingly assisting fraudulent merchants who harm consumers.”

“We’re committed to ensuring that our efforts to combat fraud do not discourage or inhibit the lawful conduct of these honest merchants,” the Justice Department said in a May 7 blog post.

But gun retailers say their businesses are being targeted in the executive branch’s efforts:

T.R. Liberti, owner and operator of Top Gun Firearms Training & Supply in Miami, has felt the sting firsthand. Last month, his local bank, BankUnited N.A., dumped his online business from its service.

An explanatory email from the bank said: “This letter in no way reflects any derogatory reasons for such action on your behalf. But rather one of industry. Unfortunately your company’s line of business is not commensurate with the industries we work with.”

Black Rifle Armory in Henderson, Nevada, had its bank accounts frozen this month as the bank tried to determine whether any of Black Rifle’s online transactions were suspicious.

In 2012, Bank of America suddenly dropped the 12-year account of McMillan Group International, a gun manufacturer in Phoenix, even though the company had a good credit history, the owner said. Gun parts maker American Spirit Arms in Scottsdale, Arizona, received similar treatment by Bank of America, the country’s largest banking institution.

Individual banks are denying any targeting by industry, but the banker's trade association makes it clear what's going on:

"We're being threatened with a regulatory regime that attempts to foist on us the obligation to monitor all types of transactions," Richard Riese, a senior vice president at the American Bankers Association, said in the April 28 issue of American Banker. "All of this is predicated on a notion that the banks are a choke point for all businesses."

In an interview with The Times, Mr. Riese said the cost of doing business with gun retailers outweighs the benefits for some banks, given that regulators deem the industry as "risky," state laws vary on the sale of guns and ammunition, and the Justice Department's enforcement.

Gun control by stealth. Unelected bureaucrats taking the law into their own hands to stifle an industry that is selling a product with which they disagree. It doesn't get much worse than that as far as a misuse of power.

 


 

 

 
 

The Justice Department calls it "Operation Choke Point" and it's causing perhaps hundreds of gun shops and manufacturers across the country a lot of inconvenience and lost profits.

It seems that the FDIC issued orders in 2011 that forced banks to scrutinize "high risk" businesses like gun stores, porn shops, and drug paraphenalia outlets. The result was that lines of credit, credit card transaction processing, and even bank accounts have all come under attack by banks scared to do business with gun stores.

Washington Times:

Since 2011, regulators have increased scrutiny on banks’ customers. The Federal Deposit Insurance Corp. in 2011 urged banks to better manage the risks of their merchant customers who employ payment processors, such as PayPal, for credit card transactions. The FDIC listed gun retailers as “high risk” along with porn stores and drug paraphernalia shops.

Meanwhile, the Justice Department has launched Operation Choke Point, a credit card fraud probe focusing on banks and payment processors. The threat of enforcement has prompted some banks to cut ties with online gun retailers, even if those companies have valid licenses and good credit histories.

“This administration has very clearly told the banking industry which customers they feel represent ‘reputational risk’ to do business with,” said Peter Weinstock, a lawyer at Hunton & Williams LLP. “So financial institutions are reacting to this extraordinary enforcement arsenal by being ultra-conservative in who they do business with: Any companies that engage in any margin of risk as defined by this administration are being dropped.”

A Justice Department representative said the agency is conducting several investigations that aim to hold accountable banks “who are knowingly assisting fraudulent merchants who harm consumers.”

“We’re committed to ensuring that our efforts to combat fraud do not discourage or inhibit the lawful conduct of these honest merchants,” the Justice Department said in a May 7 blog post.

But gun retailers say their businesses are being targeted in the executive branch’s efforts:

T.R. Liberti, owner and operator of Top Gun Firearms Training & Supply in Miami, has felt the sting firsthand. Last month, his local bank, BankUnited N.A., dumped his online business from its service.

An explanatory email from the bank said: “This letter in no way reflects any derogatory reasons for such action on your behalf. But rather one of industry. Unfortunately your company’s line of business is not commensurate with the industries we work with.”

Black Rifle Armory in Henderson, Nevada, had its bank accounts frozen this month as the bank tried to determine whether any of Black Rifle’s online transactions were suspicious.

In 2012, Bank of America suddenly dropped the 12-year account of McMillan Group International, a gun manufacturer in Phoenix, even though the company had a good credit history, the owner said. Gun parts maker American Spirit Arms in Scottsdale, Arizona, received similar treatment by Bank of America, the country’s largest banking institution.

Individual banks are denying any targeting by industry, but the banker's trade association makes it clear what's going on:

"We're being threatened with a regulatory regime that attempts to foist on us the obligation to monitor all types of transactions," Richard Riese, a senior vice president at the American Bankers Association, said in the April 28 issue of American Banker. "All of this is predicated on a notion that the banks are a choke point for all businesses."

In an interview with The Times, Mr. Riese said the cost of doing business with gun retailers outweighs the benefits for some banks, given that regulators deem the industry as "risky," state laws vary on the sale of guns and ammunition, and the Justice Department's enforcement.

Gun control by stealth. Unelected bureaucrats taking the law into their own hands to stifle an industry that is selling a product with which they disagree. It doesn't get much worse than that as far as a misuse of power.

 


 

 

 
 

RECENT VIDEOS