Someone Tell The Rubes At Saturday Night Live About De‐​banking

The issue arose after Trump told a New Hampshire audience that he would not allow banks and regulators to shut down people’s accounts — a practice often referred to as de‐​banking. Saturday Night Live’s Colin Jost said in response, “I don’t know what the hell de‐​bank means, but you might have to take ‘de‐​ambulance’ to see ‘de‐​doctor.’” The studio audience laughed, but many Americans across the country were not as amused.

Unfortunately, getting removed from the financial system is a problem many Americans have been forced to contend with. In 2023, The New York Times detailed the stories of several people in the United States whose bank accounts were arbitrarily closed without so much as an explanation. One customer described the experience, saying, “I feel that I [at least] deserve to get an explanation,” and that the “way they closed my accounts made me feel like a criminal.”

Why Banks Are Suddenly Closing Down Customer Accounts (The New York Times on Nov. 5, 2023)

“An examination of over 500 cases … illustrates the chaos that ensues when banks decide on their own to cut people off. Individuals can’t pay their bills on time. Banks take weeks to… pic​.twit​ter​.com/​7​W​n​G​R​lr56z

— Woke Insights (@WokeInsights) February 6, 2024

Cryptocurrency users are also all too familiar with the problem of de‐​banking. Nic Carter of Castle Island Ventures described what he called “Operation Choke Point 2.0” in early 2023, writing, “The U.S. government is using the banking sector to organize a sophisticated, widespread crackdown against the crypto industry.” As he pointed out at length, there had been a series of government officials pressuring banks followed by announcements by banks that they would shut down cryptocurrency services and cut ties with cryptocurrency users.

With that said, although a quick fact check might have helped the writers at Saturday Night Live, de‐​banking is not a term that comes up at many dinner tables. In fact, much of the financial surveillance under the Bank Secrecy Act regime in the United States rarely makes its way into popular discourse. That’s partly by design.

First, the targeted nature of financial controls makes them difficult to see in practice. When riot police are deployed, photos and videos of abuses can quickly spread across social media when things go awry. Yet, when financial controls are used, the moment of impact is when victims receive a call from the bank or an error message in an app to notify them that they no longer have access to their finances.

Howard Anglin, former deputy chief of staff for Canadian Prime Minister Stephen Harper, made this point well when Prime Minister Justin Trudeau froze the bank accounts of hundreds of Canadian protestors in 2022. Anglin warned that “[The] diffuse and anonymous nature of financial enforcement means that sweeping repression can easily go undetected.”

Yet it’s not just the targeted impact that makes the issue difficult to track. Under U.S. law, people are not allowed to know when banks report their information to the federal government. The process is confidential.

Banks are essentially required by law to leave customers in the dark — even if those concerns are the reason for shutting down an account.

Complicating matters further, being the subject of a report or a closed account does not mean that someone is a criminal. For example, the top three reasons that banks file suspicious activity reports on customers are suspicions concerning the source of funds, transactions below $10,000, and transactions with no apparent economic purpose.

Worse yet, South Carolina Senator Tim Scott revealed in a recent letter that there are now concerns that the Financial Crimes Enforcement Network (FinCEN) has “urged private financial institutions to surveil customers’ transaction‐​level data using politically charged search terms.”

These are not smoking guns.

To be clear, there are many reasons that a bank might choose to close an account. Inactivity, violations of terms and conditions, frequent overdrafts, and even restructuring can lead a bank to close accounts. To the extent those issues occur, banks should be free to act within the law. Yet, to the extent de‐​banking is instead motivated by political pressures and compliance costs, it’s just another example of why financial privacy in the United States is long overdue for reform.

So while Trump has certainly made up his fair share of terms, de‐​banking is not one of them.