The Office of the Comptroller of the Currency (OCC) announced January 28, 2021 that it will pause publication of a final rule that would have prohibited the largest U.S. banks from denying financial services in coordination with others. The rule, issued January 14, would have applied only to banks with assets of $100 billion or more.
Pausing publication of the rule in the Federal Register will allow the next confirmed Comptroller of the Currency to review the final rule and the public comments the OCC received, as part of an orderly transition, the OCC stated.
While the rule is an attempt to put an end to denial of banking services in the wake of Operation Choke Point and similar campaigns, it has the potential to cut off bank derisking of nonprofit organizations (NPOs) stemming from disinformation campaigns by organizations with a self-professed political agenda. As the rule notes, “Nevertheless, some banks continue to employ subjective or category-based evaluations to deny certain persons access to financial services. These banks are often responding to pressure from advocates from across the political spectrum whose policy objectives are served when
banks deny certain customers access to financial services.”
Recent campaigns targeting NPOs involved the manufacture and use of disinformation to pressure financial service companies and payment platforms, including banks, to end their relationships with certain NPOs. These groups erroneously tell the platforms that the NPO is associated with, working with or funding a listed terrorist group, and raise the spectre, usually in forceful yet unsubstantiated terms, that keeping these accounts open put the company at legal risk. These groups also may argue that their actions are aimed at strengthening security, but they are in fact contributing to insecurity by impeding the NPOs’ legitimate work.
Specifically, the rule would require a covered bank to make each financial service it offers available to all persons in the geographic market served by the covered bank on proportionally equal terms; not deny any person a financial service the covered bank offers unless the denial is justified by such person’s quantified and documented failure to meet quantitative, impartial risk-based standards established in advance by the covered bank; and not deny, in coordination with others, any person a financial service the covered bank offers.
Response to Comments
Comments submitted on the proposed OCC rule by Charity & Security Network (C&SN) in December were referenced in the final rule. C&SN had asked the agency to specify whether the rule applies to NPOs. In a footnote, the OCC stated that it “does not believe any changes are needed to the rule to address this comment but confirms that the phrase ‘any partnership, corporation, or other business or legal entity’ in the definition of the term ‘person’ includes nonprofit organizations.” It also addressed C&N comments when it stated, “One commenter expressly supported section 55.1(b)(4) of the proposed rule (which would prevent a covered bank from denying, in coordination with others, any person a financial service the bank offers), because it would protect nonprofit organizations working in conflict-affected and high-risk areas from disinformation campaigns by politically motivated groups.”
The OCC declined C&SN’s suggestion to require banks to inform clients the reason for the denial of service. “Although the OCC supports transparency, a requirement that banks disclose their risk-based standards may require banks to disclose sensitive commercial information, confidential supervisory information, or information relating to an ongoing civil or criminal investigation, any of which, if disclosed, could be detrimental to the bank, the quality of the OCC’s supervision of the bank, or law enforcement efforts,” the rule states. The agency also declined C&SN’s suggestion that the agency discourage banks from conducting negative media searches, which can stumble upon disinformation about NPOs working in conflict zones or in proximity to listed terrorist groups. While there is no requirement that banks conduct these searches, the OCC stated, ” Banks have flexibility in developing risk-based procedures and monitoring processes for the purpose of
complying with BSA/AML requirements (including CDD), and where appropriate, banks may review negative news to assist in the evaluation of customer risk and of any activity that the banks deem potentially suspicious.”
The rule stated that the OCC encourages customers who believe they have been denied fair access to financial services under this rule to contact the OCC’s Customer Assistance Group (CAG) at https://www.helpwithmybank.gov/.
Pending publication of the rule, the OCC notes that its long-standing supervisory guidance stating that banks should avoid termination of broad categories of customers without assessing individual customer risk remains in effect.