Money Shot Down

Massoud Hayoun reports that JPMorgan Chase has closed “hundreds” of porn performers’ bank accounts in just over a week:

Numerous porn actors have reported that they received no clear explanation of why their accounts were closed. “Out of left field we got a notice our two personal and two business accounts were being closed,” said Joshua Lehman, the husband and former manager of ex-porn actress Teagan Presley. Lehman said that branch and telephone bankers told him it was “because of our industry,” but staff at corporate headquarters “categorically denied this” and gave no reason for their decision. … Presley agreed with her husband, adding that a customer support representative on the phone said her account posed a risk but wouldn’t specify how. “I think it’s crazy that in 2014 that you wanna give a bank money and they won’t take it. Who doesn’t want money?”

Hayoun notes that Chase of course has no compunction taking cash from porn consumers. One performer is suing the bank for closing her account. But Lux Alptraum points out:

As a private bank, Chase is, of course, within its rights to deny accounts to whomever it chooses as it sees fit.

But there is still something disturbing about a major bank choosing to deny its services to an entire industry. Should other banks decide to follow in Chase’s footsteps, thousands of legitimately employed people and legal businesses could be cut off from one of the bedrock institutions of American society – and, as our nascent legal marijuana industry has shown, a business that cannot get access to banking services is a business that cannot function as a part of legitimate society.

Andrea Garcia-Vargas adds:

Sadly, none of this is particularly surprising as this is not the first time Chase Bank has attempted to deny services to businesses dealing with sex or sexuality. Mark L. Greenberg, founder of a softcore porn studio, even filed a lawsuit against Chase after they refused to allow him to refinance a loan, allegedly because of his job. And more recently, Tiffany Gaines, the CEO of Lovability, ran into trouble with Chase when the bank refused to process her payments – all because she was selling condoms. When reached for comment by Gaines, a Chase representative told her “processing sales for adult-oriented products is a prohibited vertical.”

However, Mary O’Hara suggests the DOJ could be responsible for Chase’ move:

[N]ews is slowly surfacing that shows the US Department of Justice may be strong-arming banks into banning porn stars. It’s called Operation Choke Point, and it has nothing to do with deep-throating. Instead, it’s a targeted effort to shut down as many as 30 separate industries by making it impossible for them to access banking services. In a Wall Street Journal op-ed Thursday, American Bankers Association CEO Frank Keating wrote that the Justice Department is “telling bankers to behave like policemen and judges.”

“Operation Choke Point is asking banks to identify customers who may be breaking the law or simply doing something government officials don’t like,” Keating wrote. “Banks must then ‘choke off’ those customers’ access to financial services, shutting down their accounts.” Keating said the highly secretive operation was launched in early 2013. That’s when porn stars started to complain to the media that their bank accounts were being shut down without explanation. And while the actors are quick to blame banks like Chase and Bank of America for discrimination, those institutions may in fact have no choice.

Update from a reader:

The DOJ operation is without question behind Chase’s decision to cancel accounts belonging to folks in the porn industry. What I find interesting is that these are their personal accounts. I work for a bank and we’re doing this exact same thing – in fact, I spent no less than three hours today working on our crisis communication plan for when we cut off payday lenders, tobacco companies, etc from receiving commercial loans from the bank for which I work. We’re tiny compared to Chase, yet still disentangling ourselves from certain industries.

That said, we are not planning to quit providing personal banking services to owners or employees in these industries.

Another:

I work in the Anti Money Laundering department of a top 10 bank and I’m responsible for closing lots of accounts for unusual and illegal activities. The fastest ways to get an account closed is doing strange things with cash, sending wires to and from countries with lots of criminality, or dealing with Nigeria. In my business the likelihood of a Nigerian doing something illegal with their money is about the same as finding an honest politician. No joke.

This is the first thing I’ve heard about closing porn accounts. Not something my bank is on the lookout for. In fact, FINCEN (the guys who monitor banks for money laundering activity) just put out guidance for banks on how to bank legal pot businesses. I never thought I’d see the day that happened.

The main entities that are weighing on the banks are all from Treasury. I can only think of one time a DOJ employee made my life harder. Perhaps the most important thing to remember about Chase is they just got hit with a $2 billion fine for weak AML procedures. Biggest fine in history for AML issues. They may be overzealous to prove to their regulators that they are with the angels, because their next fine will REALLY hurt.