Firearms Dealers | Escort Services | Ammunition | Pornography
By JR Valdes
Firearms Licensing And Consulting Group, LLC
Firearms Consulting
Firearms Regulatory Compliance
Operation Choke Point | Banks Denial Of Service
Due to a sparsely publicized federal government program named “Operation Choke Point”, gun dealers and seemingly unrelated industries may be denied banking services because they’ve been classified as “high-risk” industries. Due to relatively new regulatory guidance as part of Operation Choke Point, banks are under increased pressure to scrutinize their relationships with “firearms sales” businesses. Some believe that banks would rather sever existing relationships or deny new business to firearms industry members rather than face increased regulatory scrutiny themselves.
Operation Choke Point | Banks May Be Denying Services Due To Pressure
As reported by American Banker, “Operation Choke Point” aims to put a choke hold on would-be fraudsters who use third party payment processors to rip off the most vulnerable among us. Regulators have directed banks to implement programs that better identify possible fraud by third party processors and merchants as well.
NRA-ILA And Operation Choke Point
According to an NRA-ILA press release, they have been made aware of instances in which firearms industry members have been refused services or had their relationships with banks severed for unclear reasons. In Miami, a firearms dealer named T.R. Liberti had his online business account closed by a local bank; reason given: ..”Unfortunately your company’s line of business is not commensurate with the industries we work with”. According to Peter Weinstock of Hunton Williams LLP, government regulators have made it clear to banks that certain industries represent “reputational risk”, and banks are reacting by being “ultra conservative”, choosing to drop certain accounts over risking additional scrutiny themselves.
Why Is The Firearms Industry “High-Risk”?
With respect to the risky category of “firearms sales”, one would assume that evidence exists indicating federally licensed firearms dealers (FFLs) are engaged in activity that would require placing them in the “high-risk”category. However, to date, there appears to be no evidence available to the public which indicates firearms dealers are engaged in activities requiring extra vigilance from banks. It may be beneficial to the firearms industry if regulatory agencies identified the type of activity firearms dealers have engaged in that’s considered “high-risk”.
An industry already heavily regulated should be interested in identifying the questionable behavior in order to ensure that members don’t inadvertently engage in it, and ensure policies are in place that prevent the “high-risk” activity. Furthermore, industry members certainly want to maintain current relationships with banks, or begin new ones. Therefore, persons engaged in firearms sales should want to work with bankers to ensure they are doing nothing to jeopardize those relationships. There appears to be no guidance on the matter that has been disseminated to the firearms industry by any regulatory body. It may serve the industry, the banks, the regulators, and the consumer to clarify this issue somewhat.
Clarification of Terms Might Help
The term “firearms sales” is broad; and banks are possibly overly scrutinizing the wrong businesses. For example, a mom-and-pop firearms business and a large gun store may be placed in the same category even if the businesses are in fact extremely different; even if some of the business is conducted online. A large importer and a small manufacturer may also be classified as “firearms sales” when in fact the two businesses are in general quite different, and likely require significantly different banking services.
Here is a sample of the type of businesses that have been identified as “high-risk” by federal regulatory bodies.
Escort Services
Credit Card Schemes
Dating Services
Drug Paraphernalia
Firearms Sales
Ammunition Sales
Fireworks Sales
Get Rich Products
Pay Day Loans
Pornography
Telemarketing
Travel Clubs