Debanking refers to the practice by which banks break banking relationships based on an individual or business’s political, social or personal views – often including political ideologies – such as politics. This practice has spread worldwide and may result in lasting reputational damage as well as financial ostracisation.
Nigel Farage has brought this issue into focus and it is time for everyone to understand what “debanking” is, why it matters and how to prevent being penalised by it.
Debanking occurs when banks or their regulators close accounts or deny services to individuals and businesses based on perceived financial, regulatory or reputational risks. These risks are sometimes justified through laws, regulations or policies such as Operation Choke Point – introduced during Obama’s presidency to pressure banks into dropping clients who weren’t approved of such as payday lenders, ammunition and gun dealers, legal marijuana businesses etc.
But an increasing number of people argue that this is no legitimate reason for banks to deny services; instead they view debanking as the soft suppression of disfavoured political views or industries without due process, a form of modern-day censorship that uses banks as a proxy instead of direct government intervention – something they perceive is predominantly happening on the left-libertarian spectrum; which explains why venture capitalists like Elon Musk have started calling out debanking as being unfair and abusive.
Why is debanking happening?
Debanking usually occurs due to perceived financial, legal, or reputational risks to banks; however, what has caused alarm when raised by Marc Andreessen on Joe Rogan’s podcast were reports that political authorities are exerting pressure on bank regulators so as to force debanking decisions against certain industries based on ideological or political affiliation.
Operation Choke Point began during the Obama administration and is widely believed to have resulted in various cannabis businesses and firearm dealers being debanked due to political affiliation. While this may or may not be the case, banks must be allowed to choose clients based on multiple criteria including profitability and stability when selecting clients for banking services.
Left unchecked, this type of debanking could easily apply to other political sides – and Congress needs to address this as soon as possible.
How can I avoid being debanked?
Debanking refers to a practice where financial institutions close accounts they believe pose a risk of regulatory, legal, or reputational damage. While debanking may seem illegal at first glance, banks do have the right to select who they do business with and can opt out from working with individuals or entities who present risks.
Problems associated with managing daily finances and limited access to credit facilities. Furthermore, this could have serious repercussions for an individual or business’s reputation, suggesting they are untrustworthy or noncompliant.
Recently, several high-profile debanking incidents have generated media and political outrage, yet this issue remains far from resolved. There are various approaches to dealing with it; such as raising public awareness or pushing for regulations against unfair debanking practices. While such solutions won’t prevent banks from debanking individuals or companies they don’t like altogether, they could help lessen arbitrary decision making when banks make such moves.
What can I do if I’ve been debanked?
Debanking or “derisking”, as some refer to it, occurs when a bank suddenly closes an account without giving an explanation. This could happen for various reasons including suspicion or confirmation of criminal activities such as fraud or money laundering – or for no apparent reason at all such as its internal policies.
But this practice has increasingly become used as a means to punish people or companies with political or religious opinions that go against the establishment. Therefore, this needs to stop immediately.
Consumer Financial Protection Bureau (CFPB) is working on rules to combat debanking. One rule recently finalized by the CFPB would require large digital payment apps to provide transparent explanations when they close down an account – providing tools for fighting such acts whether based on politics or religion – while also helping prevent banks from shutting off accounts of certain groups or individuals on mass.
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