UPDATE: Operation Choke Point was reversed in 2017 by the Trump Administration Justice Department.
What is Operation Choke Point?
In 2013, the Department of Justice instituted Operation Choke Point, aimed to crack down on fraud and money laundering by investigating banks and the business they do with companies that have a high risk of fraud and money laundering. However, it had unintended consequences that ended up shutting down many legitimate businesses in the process. Operation Choke Point originally came out of the Financial Fraud Enforcement Task Force in 2009, which included the Department of Justice, the Federal Trade Commission, and the Federal Deposit Insurance Corporation.
Some high-risk industries that were affected:
• Ammunition Sales
• Coin Dealers
• Credit Repair Services
• Dating Services
• Debt Consolidation
• Drug Paraphernalia
• Collection Agencies
• Online Firearms Sales
• Fireworks Sales
• Home-Based Charities
• Lottery Sales
• Mailing Lists/Personal Info
• Pawn Shops
• Payday Loans
• Surveillance Equipment
• Travel Clubs
How has Operation Choke Point affected high risk merchant accounts?
Critics of Operation Choke Point have said that it was essentially a “stop and frisk” policy, aimed at certain types of businesses. Instead of simply shutting down fraudulent businesses, it ended up pressuring banks to cut off companies in high risk industries or businesses with high risk merchant accounts. Without the ability to process credit cards, many businesses in these industries were forced to close. This includes legal businesses with clean records. Some high risk merchants even had their checking and savings accounts shut down. “If the government wants to shut down a business they deem as being corrupt they should go through the court system and be prosecuted by a judge and jury” said Rep. Darrell Issa, California Republican and committee chairman “By forcibly conscripting banks to do their bidding, the Justice Department has avoided any review and any check on their power.”
These are the unintended consequences that can happen when you target a vast amount of high-risk merchants and deny them from processing, whether their individual businesses are legal or not. Instead of going after merchants who do not follow good business practices, entire industries were punished.
Leaving the normal partisan politics aside, common sense would dictate that legal businesses have a right to process credit cards. High risk merchant processors that follow the rules should not be declined based solely on their industry type. The future of Operation Choke Point is uncertain. As of today, it is still inflicting damage to legal businesses.
Limitless Payment Solutions will continue to watch and update in future blogs as to what will happen for the rest of 2017 and beyond. Limitless will continue to help high-risk legal merchants navigate and find solutions so that these industries can process credit cards until the law is overturned.
Limitless specializes in high risk merchant account solutions. We ask the right questions and can help you through every step of the process. It is our goal to get your business up and running as quick as possible. Give us a call today at (800) 971 – 6221 or use the easy apply now and let’s get your business approved!