Operation Choke Point Officially Is Dead, but an ATM Trade Group Believes Its Ghost Lingers

It was just over a month ago that a ranking U.S. Department of Justice official told Congress that Operation Choke Point had ended. But the ATM Industry Association on Wednesday said it is distributing materials to its members to help them deal with the “lingering impact” of the controversial program.

What ATMIA calls its “Operation Choke Point Resource Kit” includes a history of OCP, information on efforts to end it, forms and instructions from the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN), and an OCP checklist.

The core membership of ATMIA, which has its U.S. headquarters in Sioux Falls, S.D., is ATM independent sales organizations and other non-bank ATM deployers. These deployers need relationships with banks, which are regulated by the FDIC and other federal agencies.

Under Operation Choke Point, beginning in 2013 the DoJ, working with financial regulators, put pressure on banks to deny payment services to fraudulent merchants. But critics soon began claiming Operation Choke Point was an effort by the Obama Administration to cut entire categories of merchants it didn’t like, including payday lenders and gun dealers, out of the payments loop. Some such merchants have ATMs in their storefronts or offices.

The recent account-closure notices from banks typically do not state a reason, but tell the operator that it has 30 days to make other arrangements, according to David N. Tente, ATMIA’s U.S. executive director. But the organization, which does not have a number on the closures, suspects Operation Choke Point is behind at least some of them. Word of the program’s end may not have come down from the top to the examiners who review a bank or credit union’s books.

“It is hard to know for sure why accounts are still being closed,” Tente tells Digital Transactions News by email. “The FDIC and DoJ have made clear that the [OCP] effort has been terminated. However, we don’t know whether field bank examiners have been formally notified to cease and desist.”

A DoJ press office spokesperson did not respond to a Digital Transactions News request for comment Thursday morning.

Tente adds that another reason for many closures could be decreased profitability of deployer relationships because of the cost that financial institutions bear to comply with regulations. “Until regulatory reform is implemented, there are still increased burdens on all FIs—particularly the larger ones,” he says.

ATMIA is recommending that any independent ATM deployer working with a single financial institution for its business and cash-settlement needs establish a cash relationship with at least one more.