Debunking Debanking: How Government overregulation works in service of government oppression and woke cancel culture

Debanking is the predictable and disturbing consequence of overregulation—the vastly expanded “know your customer” laws over the past 15 years—operating in service of a weaponized administrative state. Bank regulators have the power to levy severe sanctions on private financial institutions if they don’t cancel those in conflict with the government—whether ideologically, politically, religiously or otherwise on the wrong side of a government investigation or enforcement. This cancellation-by-proxy is particularly pernicious because, by law, it operates in secret, incentivizing banks to shed any customer who has suffered even a whiff of adverse government action. It flips the government’s burden of proof, stripping citizens of their ability to bank or function in our economy if just in conflict with government ideology or power. Debanking sets into motion an insulting and liberty depriving nightmare that rivals, indeed which may exceed anything that brought McCarthyism into well-deserved infamy, because it is institutionalized by and through systematic government action stigmatizing the customer in perpetuity, and holding the government’s sword over anyone failing to disassociate with the disfavored customer.

How does it work?

Here’s the formula. Overregulation that turns banks into unwitting agents of law enforcement + Unfettered Discretion by banks cowed by threats of high fines = Debanking

Where is it targeted?

– Modern debanking started with Operation Chokepoint targeted at the gun industry and payday lenders under the Obama administration.[1] This was curtailed when Congress exposed the scheme, and more recently when SCOTUS ruled in Vullo[2] that New York state violated the First Amendment by agency coercion of state-regulated businesses to refuse NRA affiliated business approvals.

– Operation Chokepoint 2.0 started up again in the Biden administration. Tech leader Mark Andreeson reports that over 30 tech entrepreneurs and also crypto companies all across the blockchain industry have been debanked.

– In 2024, 105 climate groups signed a letter demanding that America’s largest banks cut off funding to global meat and dairy producers, making controversial and unsubstantiated claims of severe environmental impacts from livestock.[3] (Can you imagine the temerity of an issue-advocacy group thinking it could muster the banking industry to shun an entire industry? Well, unfortunately, yes. See above.)

– Christian nonprofit and apolitical ministries such as the Timothy Two Project (which trains pastors around the world), and Indigenous Advance (which offers relief to widows and orphans in Uganda) were debanked by the Bank of America with explanations that Timothy Two was “operating a business type we have chosen not to service”[4] and Indigenous Advocacy’s “risk profile no longer aligns with the bank’s risk tolerance.”[5]

– Other examples include Wells Fargo canceling a gun dealer, J.P. Morgan debanking the National Committee for Religious Freedom, PayPal shutting down Moms for Liberty and COVID policy critic Dr. Joseph Mercola and the Idaho Constitution Party cancelled by U.S. Bank without explanation.[6]

– The FBI “suggested” that banks issue SARs on J6 arrestees which conveniently did away with the need for pesky warrants or legal due process to investigate their bank accounts.

– Just days after January 6, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) emailed large banks, PayPal and Western Union with a link to a report from the London-based NGO Institute for Strategic Dialogue entitled “Bankrolling Bigotry: An Overview of Online Funding Strategies of American Hate Groups” that set out a plan for stepping on the funding stream of groups designated as “hate groups” by the highly politicized Southern Poverty Law Center (SPLC) which includes parental rights groups, Christian non-profits, immigration reform non-profits and those critical of transgender surgery. That email channel should not be open to NGOs or any non-government group and yet it was, allowing a foreign NGO to ally with FinCEN to circulate a blacklist of people or entities that posed “reputational risk.”

– Separately, Jim Jordan has found that “FinCEN urged large financial institutions to comb through the private transactions of bank customers on the basis of protected political and religious expression.”[7]

How has it come about?

1. Overregulation

Bank “Know Your Customer” (KYC) rules were first established in the Nixon-era Bank Secrecy Act of 1970. They require the financial industry to create systems to detect and report suspicious activity (SARs) with the focus on identifying and reporting possible money-laundering, laying the foundation for banks to do the government’s work for it. Those regulations were significantly expanded after 9/11 with the USA Patriot Act of 2001 focusing on terrorist funding, and in 2008 finally became a mandatory and comprehensive scheme to put banks in charge of outing financial transgressors under penalty of government sanctions. This invasion of Americans’ privacy and liberties is a prime example of “never let a crisis go to waste,” enabled under Dodd-Frank in 2010. Worse, this was widely copied internationally. The expansion continued with the Customer Due Diligence (CDD) rule of 2016, new KYC on-boarding rules in 2020 and the Beneficial Ownership Information (BOI) database of 2024 all of which tightened the noose even further. Banks, part of the economic engine of American wealth and opportunity, used to focus on drawing business to fund their lending. Now they are part-time government watchdogs paying laughable interest rates on deposits and shedding blameless long-term customers who have come into the government’s regulatory or ideological crosshairs.

No one in this scheme is giving much consideration to the deadweight financial burden and privacy taxes exacted when the government turns banks into public surveillance organs. Virtually no one dared to question whether this expansion of regulatory power was consistent with our civil liberties and the presumption of innocence that is supposed to protect all Americans.

2. Wokeism

The pervasive influence of Wokeism has suffused corporate culture, including the notoriously risk-averse financial services industry to a point where “reputational risk” has metastasized into anything that might lead to a social media campaign designed to cancel any bank doing business with a disfavored person, charity, religion or individual at odds with the government. Even Sen. Elizabeth Warren has criticized banks for debanking anyone they unilaterally perceive as a “reputational risk.”

3. Censorship by Proxy

Debanking is just another species of the “censorship by proxy” scheme unveiled by the Twitter Files that involved social media censorship and the State Department blacklisting conservative media. A bank can step on the operational and funding hose with impunity because the banks are forbidden to say why. This scheme, just like the social media censorship, is straight out of Kafka. No banking for you, and we are forbidden to tell you why.

4. Expansion of Tort Liability

One other contributor to this Orwellian nightmare that does not get much mention but is surely on the minds of banks that cancel customers, is the weaponization of banking laws to foist liability for their customer’s misdeeds on the bank. J.P. Morgan Chase settled multiple lawsuits for a total of $365M to Jeffrey Epstein’s victims and the U.S. Virgin Islands on the theory that the bank knowingly facilitated his sex-trafficking by handling his financial transactions. This theory operates on the same flawed logic of blaming gun manufacturers for gun violence. Such settlements, in turn, weaponize the lucratively compensated trial bar who collect enormous fees from such litigation—which they then turn around into contributions to their favored politicians who then practice debanking with the impunity conferred on them by sovereign immunity.

And the argument that Chase filed numerous SARs on Epstein, is discredited and exposed in at least two ways. People like Epstein will find banks to service them, by hook or by crook. Chase did not cause those crimes—and it is wholly unclear how the Virgin Islands was harmed. And if we are going to operate on a system where numerous SARs equals guilt, that conclusion is discredited by the Treasury Department’s recent disclosure that it received over 170 SARs on Biden family members involving money laundering, suspicious deposits from foreign entities, and tax fraud.[8] No Biden was ever debanked. The contrast demonstrates how political and selective debanking can be.

What does this do to the debanked?

The effects of debanking are crippling and pernicious. Wholly blameless people with decades-long banking relationships go to withdraw cash only to find their accounts have been closed. The banks are not allowed to provide reasons or answer customer questions. Worse, banks have closed accounts of relatives or spouses with the same or a similar name—and the banks don’t have to tell anyone why.

Brokerage firms where customers have long kept 401(k) funds close retirement accounts or college savings funds, accounts that poses no risk for fraud. In the case of the SEC, this could happen because you settled a disputed case with the government. And you are forbidden to discuss with the bank why the government didn’t have a case because you are gagged by your SEC settlement – a non-negotiable condition of settlement with this powerful agency.

Debanked customers find themselves unable to pay crucial medical bills. Autopay, which is required for Social Security supplemental insurance is stopped. Life insurance, car insurance, internet/cable services are made delinquent by unilateral action by a bank concerned about high fines for “reputational risk.”

Even worse, Social Security, pensions, and payroll universally require direct deposit. This enables the government to not only step on government target’s funding hose, but the ramped up “onboarding” rules leave them no place to go for the future. The debanked have no depository for funds that require direct deposit.

Customers who simply are in litigation with the government routinely get debanked. No one should be shut out of our financial circulatory system just because they are challenging government power or are otherwise entangled with or adverse to the government. The onset of debanking for many of those clients suggests that the government regime of high fines for non-compliance, coupled with the requirement of utter secrecy, means that unaccountable private banks can do the government’s retaliation for them under the guise of “reputational risk.” Banks should not be proxies for government punishment or oppression of anyone. We should not politicize our banking system which is the necessary lifeblood for anyone to participate in our economy.

This plays both ways

Liberals have as much at stake as conservatives. Consider Trump debanking hospitals or medical professionals that perform gender reassignment surgery or that handle funds for BLM—where we know that some funds were misdirected and misused. Or how about debanking the undocumented? Banks should not be making these judgments; they are not law enforcers, and certainly not judges. Debanking both prejudges customers’ disputes with the government and serves as a draconian life-long penalty. The reputational damage of government press releases already amounts to an occupational death sentence. An inability to function in our financial system is—or should be—too draconian even for felons, ex-cons or people who have formerly been charged by the government. When done for political, religious, ideological reasons we are back to McCarthyism—of a type more pernicious and difficult to root out because it is systematically embedded in the government.

Debanking violates every presumption – of innocence – of freedom – of the government’s burden of proof – of redemption that are core values of our justice system. Where are the left’s voices of compassion for the ex-con needing a job, or the poor person locked out of the economy by high bank fees? Debanking’s punishments self-perpetuate through reputations ruined by agency press releases that function as occupational death penalties and which further freeze out of our financial system the disfavored or accused person. Indeed this practice forces people to either deal in cash or set up a shell corporation to handle their funds—practices that could deliver them into new suspicion or even law violations. Helpless, hopeless and harassed by their own government, is no place for anyone to be.

Where is the recourse?

After acquittal on federal corruption charges, former Labor Secretary Ray Donovan famously asked, “Which office do I go to to get my reputation back?” Unfortunately, we have no Bureau of Name Clearing among the thousands of government agencies that make up the administrative state.

What needs to be done?

First, call debanking by its real name. This is blacklisting, pure and simple, though if we want to look at it through a Chinese lens, we’ve established an unlegislated de facto social credit system, one that is particularly insidious because it falls silently upon the vulnerable, where every attempt to defend themselves only digs them deeper. China should be no template upon which America models its laws. The antiseptic term “debanking” makes this punishment by agency process sound far too clinical, like an automatic bureaucratic operation that warrants little attention from the public. It should be called blacklisting and fade into historical infamy.

While well-intentioned, the Trump Executive Order (EO) will not do the trick.[9] Banks are not going to rebank the debanked, as President Trump directs the industry to do. Banks which still face regulatory penalties or lawsuits like the Chase/Epstein mass litigation, will always be able to find a fig leaf under which the debanking can be justified. Moreover, EOs have a limited lifespan, and the next administration can resume this pernicious debanking by proxy. Chokepoint operations, whether 1.0 or 2.0 are de facto EOs that do the Executive branch’s bidding whether out of fear or favor. The truth is, there should be no such arbitrary and capricious executive power of insinuation and regulatory overload that leads to debanking by third parties. The President’s term may be limited, and the administrative state targets may flip, but the reputational and transactional costs of debanking live with debanking’s victims forever.

The best cure is to return to reporting large cash transactions and debank no more. Leave law and its punishment to those charged with prosecutions presided over by an impartial judge, in which all participants must observe due process and respect for the rule of law.

[1] https://oversight.house.gov/release/report-dojs-operation-choke-point-secretly-pressured-banks-cut-ties-legal-business

[2] National Rifle Ass’n of America v. Vullo (2024) (Holding that the NRA plausibly alleged that superintendent violated First Amendment by coercing DFS-regulated entities to terminate their business relationships with organization to punish or suppress its advocacy; and that the contention that insurance programs offered by the NRA as benefit to its members violated New York insurance law did not insulate superintendent from First Amendment scrutiny.

[3] https://foe.org/news/banks-industrial-livestock.

[4] https://www.washingtonexaminer.com/opinion/beltway-confidential/2748853/why-is-bank-of=america-camce;omg-the-accounts-of-religious-organizations

[5] https://www.dailymail.co.uk/yourmoney/banking/article-12417653/Debanking-row-breaks-Baml-America-shuts-account-ultra-conservative-Christian=charity-serves-impoverished-Ugandans.html

[6] https://www.foxbusiness.com/fox-news-politics/republican-ags-demand-wells-fargo-answer-for-abruptly-closing-gun-dealers-account-other-woke-policies; https://www.viewpointdiversityscore.org/resources/instances-of-viewpoint-based-de-banking; https://www.dailysignal.com/2023/06/06/breaking-southern-poverty-law-center-adds-parental-rights-groups-hate-map; https://www.splcenter.org/resources/extremist-files/tucker-carlson

[7]https://judiciary.house.gov/sites/evo-subsites/republicans-judiciary.house.gov/files/evo-media-document/2024-01-17-jdj-to-bishoff-re-ti-request.pdf

[8] https://oversight.house.gov/release/comer-oversight-committee-has-uncovered-mounting-evidence-tying-joe-biden-to-family-business-schemes/

[9] https://www.federalregister.gov/documents/2025/08/12/2025-15341/guaranteeing-fair-banking-for-all-americans