ICYMI: Clear Federal Banking Regulations Can End the ‘Debanking’ Crisis

In case you missed it, RealClearMarkets published an op-ed on Wednesday authored by Americans For Free Markets (AFFM) Executive Director John Wittman calling upon President Trump and Congress to establish clear federal banking regulations and prevent a confusing patchwork of state-level laws.

Overly burdensome laws such as the Bank Secrecy Act (BSA) and vague regulations governing Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements have created an environment where banks are obligated to build profiles on their customers and file Suspicious Activity Reports (SARs), even when banks do not necessarily believe such action is warranted. Worse, banks are legally prohibited from disclosing filings to their customers before or after they are “debanked”. The end result is an unacceptable false perception that something other than sound business decisions are guiding financial institutions.

Washington, however, has failed to correct the problem – and state governments are filling the void.

However, as Wittman notes, these state-level efforts, such as laws passed in Florida and Tennessee, have only added layers of bureaucracy, increased compliance costs, and opened the door to frivolous lawsuits and a patchwork of state laws —all while failing to address the root of the problem: unclear and inconsistent federal regulations.

With President Trump back in office, now is the time for Washington to fix this regulatory mess. Wittman warns:

“The consequences of inaction are tremendous. Imagine if national banks had to follow 50 different versions of these laws—with different rules in every state—on top of the existing labyrinth of regulatory requirements and federal laws by which national banks are supervised and governed. National banks would have to pick and choose where they could comply with the law, and where they might have to stop doing business, compromising the access to banking consumers and businesses across the country count on.”

Federal policymakers must act now to bring clarity and consistency to the banking system.

“Policymakers and regulators at the federal level have a responsibility to address the challenges of debanking in a way that bolsters, rather than divides, our financial system. Without action, we risk unraveling the very foundation of our nation’s economic strength and resiliency. The stakes are too high to get this wrong.”

Read the full op-ed in RealClearMarkets HERE.

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