This story was originally published on Banking Dive. To receive daily news and insights, subscribe to our free daily Banking Dive newsletter. The nation’s two largest banks have each flagged President Donald Trump’s August executive order targeting debanking as an issue to watch in their latest quarterly filings with the Securities and Exchange Commission. JPMorgan Chase “is responding to requests from government authorities and other external parties regarding, among other things, the Firm’s policies and ...

Core Points - Pardons do not equate to a finding of innocence and do not erase the legal consequences of a conviction [1] - The increase in pardons under recent administrations raises questions about the implications for financial institutions and their risk assessments [3][4] Group 1: Pardons and Financial Institutions - Pardons can lead to individuals being "debanked," as financial institutions may still consider past criminal behavior when assessing risk [2][5] - High-profile cases, such as those involving Elliott Broidy and Mahmoud Reza Banki, illustrate the challenges faced by pardoned individuals in securing banking services [6][12] - Financial institutions like JPMorgan and American Express have cited reputational risk and past criminal history as reasons for denying services, even after pardons [10][15] Group 2: Political Context and Regulatory Changes - The political climate has intensified discussions around "debanking," particularly among conservative figures who feel targeted [8][9] - An executive order issued by President Trump mandates that federal agencies stop considering reputation risk in banking supervision, aiming to protect individuals from politicized debanking [9] - Some banks are adjusting their policies to prohibit discrimination based on political views, reflecting the pressure from the current political atmosphere [10]

Core Insights - The practice of "debanking" poses significant challenges for fintech companies, particularly those in politically sensitive sectors, as banks may terminate relationships without clear explanations [2][3] - An executive order titled "Guaranteeing Fair Banking for All Americans" aims to prohibit banks from denying services based on political or lawful affiliations, marking a potential shift in how financial institutions evaluate clients [4][5] Regulatory Changes - Regulators will now require banks to base customer onboarding and offboarding decisions on documented risk factors rather than vague reputational concerns [5][6] - The OCC and FDIC's proposed rules will prevent examiners from citing "reputation risk" as a reason for client terminations, necessitating objective evidence for all offboarding decisions [6][8] Legal Implications - The executive order strengthens the legal basis for fintechs and clients to challenge account closures, potentially leading to lawsuits based on consumer protection statutes or discrimination laws [10][11] - Fintechs may face legal scrutiny if they cannot provide documented risk analyses during investigations into unlawful debanking practices [12][13] Operational Demands - Compliance expectations for fintechs are increasing, requiring detailed documentation of customer decisions and justifications for service denials [15][16] - Banks are tightening procedures for onboarding and account closures, expecting fintech partners to align with these heightened standards [15][18] Opportunities and Risks - Fintechs previously excluded due to reputational concerns may find banks more willing to collaborate if they demonstrate strong controls [19][20] - The absence of "reputation risk" in regulatory frameworks does not eliminate the focus on risk management, necessitating that fintechs ground their decisions in factual evidence [21][22] Industry Outlook - The anti-debanking order and proposed rules signify a realignment in how banks and fintechs manage customer relationships, raising the bar for transparency and defensibility in decision-making [23][24] - Fintechs that establish strong governance and clear processes will be better positioned to maintain and grow banking relationships in a shifting regulatory environment [24][25]

Core Viewpoint - US regulators are planning to introduce a proposal aimed at how banks' risks are scrutinized, particularly in response to concerns about the political motivations behind closing customer accounts [1][4]. Regulatory Proposal - The Federal Deposit Insurance Corporation (FDIC) is set to propose a rule that would explicitly prevent bank examiners from compelling banks to close customer accounts based on political, social, cultural, or religious reasons [2][3]. - The proposal will focus on the government's supervisory powers without imposing additional burdens on banks [2]. Debanking Concerns - President Trump has criticized the practice of debanking, where certain individuals and businesses are denied banking services, claiming that major banks like JPMorgan Chase & Co. and Bank of America Corp. have refused his business [4]. - Consumer advocates argue that there is limited evidence of widespread debanking, while critics suggest that some bank examiners have pressured banks to cease business with politically sensitive clients despite no safety risks [5]. Regulatory Actions - The FDIC has recently inquired with large banks about whether they have closed accounts or denied services based on political or religious grounds [6]. - An executive order signed by the president in August aims to eliminate unlawful debanking practices and requires regulators to identify financial institutions that have engaged in such actions [7].

Regulatory Focus - The Trump administration is cracking down on alleged discrimination by banks, a practice known as debanking [1]

An evangelical’s bank accounts were closed, helping power a political fight against "debanking." Banks cite financial risk and regulatory pressure for account closures. https://t.co/OfOwGUqttj ...

🚨 (@USComptroller) Jonathan Gould addresses the reality of "debanking" at CoinDesk Policy and Regulation, stating:"Debanking is real. It has occurred in the past to any number of crypto individuals on a personal [and] corporate level [and] other lawful business activities... it's a real phenomenon." ...

🚨 (@USComptroller) Jonathan Gould addresses the reality of "debanking" at CoinDesk Policy and Regulation, stating:"Debanking is real. It has occurred in the past to any number of crypto individuals on a personal [and] corporate level [and] other lawful business activities... it's a real phenomenon." ...

Group 1 - A new ad campaign by Americans for Free Markets (AFFM) praises President Trump for his actions against "debanking," a practice criticized for being politically motivated [1][2] - The campaign, which has a seven-figure budget, will be broadcast during major college football and NFL games, as well as on cable news and digital platforms [2] - The ad highlights the alleged pressure from previous administrations on banks to limit services for certain individuals and businesses, framing it as a violation of freedom [3][6] Group 2 - Debanking is defined as banks closing accounts or denying services, often without explanation, and has been linked to federal anti-money laundering laws [10] - Executives from leading U.S. banks reported that the Obama and Biden administrations exploited ambiguities in federal laws to achieve political goals, including the targeting of specific industries [11] - The ad campaign emphasizes the need for accountability of federal regulators and the importance of a financial system free from political interference [6][13] Group 3 - Trump ended "Operation Choke Point" in 2017, which was aimed at limiting services to certain industries, but accusations have arisen that the Biden administration has revived similar initiatives targeting crypto firms [12]

Regulatory & Legal Landscape - Legal implications of Roman Storm case verdict on crypto tools are discussed [1] - Money transmission laws' broader implications on crypto tools are examined [1] - FinCEN guidance on privacy tools and its impact are analyzed [1] - Samourai Wallet case and the judicial environment are reviewed [1] Institutional Bitcoin Adoption - TradFi (Traditional Finance) perspective on Bitcoin is introduced [1] - Executive order on 401(k) modernization and alternative assets, including crypto, is highlighted [1] - Discussion on 401(k) plans, fiduciary responsibilities, and crypto inclusion takes place [1] - TradFi Bitcoin adoption and ETF flows are discussed [1] Market Dynamics & Security - Spot ETF in-kind redemption is explained [1] - Discussion about a sale of 80,000 BTC is mentioned [1] - Quantum computing and Bitcoin's future security challenges are considered [1]