Warren, Omar, Lawmakers Seek Information from Big Banks on Account Closure Practices that Discriminate Against Muslim Americans

Letter

Dear Mr. Dimon:
We write with concern regarding reports that J.P. Morgan Chase may be closing customers’ bank
accounts in a manner that disproportionately affects Muslim Americans and other minority
communities. The New York Times, after receiving reports from hundreds of consumers, recently
reported on major financial institutions shutting down accounts often without warning or
recourse as a result of banks’ efforts to mitigate suspicious activity. While it is critical that
banks comply with anti-money laundering rules, these “de-risking” practices – in which
“financial institutions terminate or restrict business relationships indiscriminately with broad
categories of customers rather than manage risk associated with the relationship consistent with
risk-based supervisory or regulatory requirements” – harm consumers and threaten equitable
access to financial services. We seek information on your de-risking practices and the steps your
institution is taking to comply with applicable anti-money laundering, fraud, and anti-terrorism
practices while preventing discriminatory account closures and restrictions.

Banks operating in the United States may close checking and credit-card accounts due to
concerns about money laundering, fraud, and terrorist activity.The Bank Secrecy Act (BSA)
requires banks to submit a “suspicious activity report” (SAR) when they observe transactions or
conduct that might violate the law, such as unusually large cash transactions or wire transfers
with banks from countries deemed “high-risk.” Some banks choose to close customers’ accounts
if they receive numerous SARs. Banks generally must keep SARs confidential. These rules also
apply to Money Service Businesses (MSBs) and Non-Profit Organizations (NPOs) with
international operations. Financial institutions are not required to publish data on their account closures, nor are they required to provide customers with notice or explanation for account
closures.
The U.S. Treasury Department explained last year that de-risking “is not consistent with the risk based approach that is the cornerstone of the Anti-Money Laundering/Countering the Financing
of Terrorism (AML/CFT) regulatory framework,” and that it:
[U]ndermines several key U.S. government policy objectives by driving financial
activity out of the regulated financial system, hampering remittances, preventing
low- and middle-income segments of the population, as well as other underserved
communities, from efficiently accessing the financial system, delaying the
unencumbered transfer of international development funds and humanitarian and
disaster relief, and undermining the centrality of the U.S. financial system.
De-risking poses a particularly severe threat for customers from the Muslim American
community. Reports indicate that Muslim and Arab, Middle Eastern, and South Asian Americans
may be considered “high risk” when sending payments or remittances abroad or donating to
charities or religious institutions. The economic ramifications extend beyond individual
consumers and communities in the United States, as de-risking can also undermine the stability
and sustainability of countries dependent on remittances and other aid flows for economic
development. Rather than take steps to appropriately manage potential risks, financial
institutions instead too often close these customers’ accounts outright – deeming the costs of
complying with anti-money laundering rules greater than the revenue they can make from these
customers. One study found that a “quarter of the American Muslim population have faced
hurdles while banking in the United States.” Among Muslim Americans who reported facing
challenges with financial institutions, 40% were denied opening a new personal account, 33%
had a personal account suspended or closed, and 30% were denied having payment sent/received
via personal account using PayPal, Venmo, or similar payment apps.
De-risking can have devastating impacts on consumers. Individuals may lose access to their
assets for weeks, may not be able to pay their bills on time, and may see their credit scores decline. The National Iranian American Council has documented many accounts of these
practices, including an Iranian American who had an account “frozen that was to be used for a
down payment on a home, despite having sent documentation confirming their citizenship,” and
students studying in U.S. universities who had their savings accounts closed without notice or
lawful justification.The negative impacts of de-risking also extend beyond Muslim American
communities. The Consumer Financial Protection Bureau (CFPB) ordered Citi to pay $25.9
million in fines and consumer redress for denying the credit card applications of applicants the
bank identified as Armenian American. Banks have also restricted or terminated customers’
accounts without notice because of their receipt of international transfers, connection to cannabis
businesses, or use of cash deposits.
In 2022, we wrote to federal banking regulators to request information on their work to
modernize financial crimes and sanctions compliance obligations in order to protect and promote
equitable banking access. The Office of the Comptroller of the Currency (OCC), Federal
Deposit Insurance Corporation (FDIC), and Department of the Treasury all reiterated their
longstanding position that “no customer type presents a single level of uniform risk, or a
particular risk profile related to money laundering, terrorist financing, or other illicit financial
activity.” OCC stated, “a decision to terminate a banking relationship generally resides with the
bank,” suggesting a disavowal of responsibility for the issue.

In addition, Treasury published a strategy on de-risking in April 2023 with recommendations for
mitigating the practice. The Department proposed revising the Federal Financial Institution
Examination Council (FFIEC) examination manual, recognizing that banks make de-risking
decisions based on expectations of how examiners will assess banks’ practices. Treasury also
proposed strengthening examiner training on de-risking and suggested that Financial Crimes
Enforcement Network (FinCEN) take a bigger role in shaping FFIEC programs and practices.
Treasury also suggested studying banks’ account closure practices, with a focus on notice
procedures.
However, public reports suggest that financial institutions, including your own, have continued
to close customers’ accounts involuntarily and without basic notice, explanation, or ability to
contest the decision. Former account holders from JPMorgan Chase, the nation’s largest bank,
submitted 200 complaints of account closures to the Times. Customers reported more than 60
account closures at Wells Fargo between February and June 2023, with affected clients receiving
no warning or opportunity to address the closure.

The lack of information regarding the scope of de-risking practices and the impact on Muslim
American consumers and other minority communities hinders policymakers’ ability to protect
consumers. To better determine how Congress and regulators can best protect ensure equitable
access to the banking system, we ask that you provide answers to the following questions no
later than March 14, 2024:
1. Please provide the following information regarding your account closure policies.
a. Does your institution provide customers with notice prior to closing their accounts
on AML/BSA grounds, if a SAR is not filed?
i. If so, how do you do so?
ii. Does the notice include an explanation of the reason for the involuntary
account closure?
b. Does your institution provide customers with notice at the time it closes an
account on AML/BSA grounds, if a SAR is not filed?
i. If so, how do you do so?
ii. Does the notice include an explanation of the reason for the involuntary
account closure?
c. Does your institution allow customers to contest an involuntary account closure
decision related to AML/BSA, if a SAR is not filed?
i. If so, how can customers contest these closures, and how is information
provided to them about their rights to contest a closure?
ii. Does your institution proactively provide customers with information as to
how they can contest an involuntary account closure decision related to
AML/BSA, where a SAR is not filed?
2. Please provide the following information, by year, for the years 2020-2023.
a. The number of accounts closed by your bank without the customers’ express
consent.
b. The number of accounts closed by your bank in relation to the filing of a
suspicious activity report (SAR).
c. The number of accounts closed by your bank for reasons not related to the filing
of a suspicious activity report (SAR), broken down by the reason for the closure.
i. For each of the above categories, the number of account closures for
which your bank received a customer complaint or dispute.
ii. For each of the above categories, the number of accounts that were
reopened following the filing of a customer complaint or dispute.
3. Does your institution provide a mechanism by which customers concerned that they may
be subject to de-risking can proactively provide documentation regarding the legitimacy
of their transaction(s)?
4. Please provide the following information on current regulations and guidance provided
by the U.S. financial regulatory agencies.
a. Do current regulations impose any requirements on your institution with regard to
providing customers with the ability to provide documentation of the legality of a
transaction in order to avoid a suspicious activity report or involuntary account
closure?
b. Do current regulations require your institution to provide notice to customers in
the case of an involuntary account closure?
c. Do current regulations require your institution to provide customers with a dispute
resolution process following an account closure decision?

While we acknowledge that financial institutions must operate within the law and may not
discriminate on impermissible grounds, the pattern of account closures raises concerns that
require further scrutiny. It is essential that your bank demonstrate its compliance with legal nondiscrimination standards and engage in a socially responsible manner to ensure equitable access to banking services. This obligation is particularly pertinent given the disproportionate impact on Muslim Americans, who are more likely to transact with jurisdictions deemed high-risk. As such, there is not only a legal imperative but a social responsibility to work collaboratively with
regulators, policymakers, and civil society to address and rectify any inadvertent biases or
systemic barriers. We urge your institution to consider these aspects as part of your comprehensive review of these questions. Thank you for your consideration of this important
matter, and we look forward to your response.

Source