Suspicious Money Dealings

Earlier this spring, there were several reports of American bank Chase closing the personal accounts of several porn actresses. There was a major backlash against Chase, and rightly so, but now it's becoming clear that the issue is a lot bigger than just them. Yesterday, the Third Party Payments Processor Association filed a brief accusing the Federal Deposit Insurance Corporation of unfairly targeted industries for moral reasons.

It seems that in 2011, the FDIC published a list of 'high-risk' industries that they deemed worthy of increased scrutiny. Many of the industries on the list are completely legel, including pornography. The TPPPA says that not long after this, the FDIC began pressuring banks to end relationships with processors who process payments for merchants in the porn industry. Apparently, it didn't end there. TPPPA and some of the banks allege that FDIC put enormous pressure on banks not to work with both processors and merchants related to the porn industry, threatening them with the highest level of scrutiny possible.

If this doesn't scare the pants off of anyone involved in banking and any industry that relies on payment processing, it should. Pornography is not the only legal industry on their list, they also targeted dating services and drug paraphernalia. What's happening here is that this arm of the federal government is deciding that it doesn't think people should be engaged in certain things - based on nothing other than a moral opposition and completely wrong-headed assumption that these industries are related to illegal activities. The truly scary thing about it is that they are not dealing with that belief or concern through any legal means. They are not simply watching the activities of those industries for anything that looks like illegal activity. They are, without any proof, trying to wholesale destroy those industries by cutting off their access to banking and payment services. If a company cannot process credit cards - particularly one that operates only on-line, they are done. Period. End of sentence. So without having to bother with any such pesky things as actual real investigations, evidence, and criminal charges, they are just choking off merchants that they don't like.

Even if you are not a fan porn and bongs, this should scare you. What's to say that the FDIC won't decide that they are suspicious of art dealers, drugstores, women's clothing retailers? They could target anyone they want this way, simply because they have a moral opposition to the industry. This is a gross and disgusting abuse of power and violation of the rights of business owners and of individuals to spend their money how they choose.

Of course, things in Canada are quite a bit different but as a retailer in the industry, I've had my share of issues with banks and merchant service organizations. When I first started, I called about seven different merchant processors before I found one that would work with me. All the others said that they would not work with any merchant in any adult related industry whatsoever. They classified my business, which sells adult toys in a retail environment, in the same category that they put strip clubs and massage parlors. Although I think restrictions against those businesses is unfair anyway, I think it's particularly unfair to put my business in the same category. I sell products, not services. There is very clear documentation of what I sell and what has changed hands. It's much more similar to a sporting goods store than it is a strip club. But, in the eyes of many of the banks in this country, anything to do with sex is risky and they don't want to touch it. In one case, I actually had a bank tell me that it wasn't because the industry was high risk, it was because they felt working with adult toy stores would tarnish their reputation.

Several years ago, I switched to a new bank (I won't name this banks, so as not to be petty - but part of me does feel they should be outed for this). The bank itself was eager for my business and happy to have me on board. They wanted me to switch my merchant account to their payment processor (mainly so they could get the revenue, but also because they thought I would get lower transaction fees). The processor called to set up the account and was unaware of what my retail business was. When I told him, there was a looooooooong pause in the conversation. Then he told me that they cannot work with a business such as mine.

So yes, this stuff happens here in Canada, just on a smaller scale. These are decisions that are made by each financial institution themselves, not directives that are coming from a federal agency. However, with the federal government we have in Canada at the moment, I don't think it's all unreasonable to think that something similar could happen here. I'm happy to see the complaint about the FDIC exposing these underhanded tactics that I'm sure they felt they could easily get away with. We need to be vigilant about this kind of thing. Access to basic banking services is actually a right in our country, not a privilege and we need to stand up for that right.