How The New Executive Order On Fair Banking Redefines Financial Inclusion And Tackles The Impact Of De-Risking

Key Takeaways

• An August 2025 Executive Order prohibits banks from denying services based on customers' political or religious beliefs or lawful business activities, directly addressing exclusionary practices like those seen in Operation Choke Point.
• Federal banking regulators are mandated to remove "reputation risk" and similar subjective criteria from their supervisory guidance and regulations, aiming to depoliticize risk assessments and prevent unlawful debanking.
• De-risking has historically resulted from complex compliance requirements and regulatory penalties, leading banks to exclude certain lawful industries and vulnerable populations from the financial system.
• The Executive Order requires agency reviews, restitution for affected clients, and possible civil actions. New legislation seeks to further codify fair access and eliminate politicized banking practices.
• These requirements may lead to agency enforcement actions, restitution for affected consumers and businesses, private rights of action, and possible class action lawsuits against banks that self-identify and notify victims.

On August 5, 2025, the White House issued the "Guaranteeing Fair Banking for All Americans" Executive Order (Executive Order), a major policy shift to expand banking access, especially for those who may have been previously excluded due to political or religious beliefs or lawful business activities.

The Executive Order focuses on the recent treatment by banks and financial institutions of persons participating in activities and causes commonly associated with conservatism and also highlights Operation Choke Point in place from 2013 to 2017, which targeted certain lawful industries (such as firearm dealers and payday lenders) that were previously viewed to be at a high risk for fraud and money laundering. It asserts that these practices undermine public trust in banking institutions and their regulators, discriminate against political and religious beliefs, weaponize a politicized regulatory state, and are unlawful under the Equal Credit Opportunity Act (15 U.S.C. § 1691 et seq.) and the Federal Trade Commission Act (15 U.S.C. § 45). It directs federal agencies to take concrete steps to remove restrictions on banking and financial services that are based on a customer's lawful business activities or on the basis of political or religious beliefs that the financial service provider disagrees with or disfavors.

The Executive Order mandates federal banking regulators, including the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Federal Reserve), and the Federal Deposit Insurance Corporation (FDIC), review and revise their supervisory practices to prevent the restriction of banking services based on political or religious beliefs or lawful business activities.

The Executive Order describes reputation risk as a subjective supervisory standard that bank regulators applied to direct or otherwise encourage these improper activities, and it calls for federal banking regulators to remove the use of reputation risk or equivalent concepts from their guidance documents, manuals, and other materials. It also instructs these agencies to eliminate or amend regulations that could result in politicized or unlawful debanking and to ensure that any regulated firm's or individual's reputation is considered for regulatory, supervisory, banking or enforcement purposes only as necessary for a reasonable, apolitical risk-based assessment.

Background and History of De-Risking

De-risking is the practice of financial institutions terminating or restricting business relationships with clients or categories of clients perceived as high risk, often without individualized risk assessments. This phenomenon gained momentum in the wake of heightened regulatory scrutiny following 9/11 and the implementation of the USA PATRIOT Act which expanded the anti-money laundering (AML) provisions of the Bank Secrecy Act (BSA) and incorporated counter terrorism financing provisions.

Banks, wary of regulatory penalties and reputational damage, have often chosen to exit entire lines of business or sever ties with certain customer segments rather than manage what can be complex compliance risks. Over the past two decades, individuals, organizations, and even entire countries have been denied access to financial services or have seen their transactions blocked, often due to AML or sanctions concerns or for political or ideological reasons.¹ This practice includes closing bank accounts, blocking payments, or denying access to payment processors. Industries and customers that have been affected over the years include:

• Money services businesses²
• Embassies, consulates, and missions³
• Foreign correspondent banks⁴
• Charities and nonprofit organizations⁵
• Independent ATM service providers⁶
• Cryptocurrency exchanges⁷

Historical Drivers of De-Risking

Historically, de-risking has been justified as a response to the complex and sometimes ambiguous requirements of the BSA/AML regulations. Financial institutions must implement robust customer due diligence, monitor transactions, and report suspicious activity to authorities. The cost and complexity of compliance, coupled with the threat of severe civil and criminal enforcement actions from regulators and the U.S. Department of Justice (DOJ), has led many banks to adopt a risk-averse approach. This has resulted in the unintended consequence of excluding vulnerable populations from the formal financial system, undermining efforts to promote economic participation and reduce reliance on unregulated alternatives.

Certain government activity is designed to result in financial censorship and de-risking. For example, sanctions imposed by the Office of Foreign Assets Control (OFAC) prevent financial dealings with geographies or individuals that are the subject of sanctions initiatives that typically target human rights violators, terrorism and transnational drug cartels, and individuals and countries that threaten U.S. interests. Other government activity may also cause de-risking including regulatory compliance burdens and specific designations of certain transactions or activities as being high risk.

While de-risking is often attributed to financial institutions and the costs and profitability of serving higher-risk activities, the designation by federal banking agencies of certain industries being high risk has been especially impactful.⁸ For example, some of the early editions of the Federal Financial Institutions Examination Council (FFIEC) BSA/AML Manual (BSA/AML Examination Manual) previously maintained a listing of industries and activities that were deemed by the FFIEC as being high risk for money laundering. Until recently, charities and nonprofit organizations continued to be designated in the BSA/AML Examination Manual as "susceptible to abuse by money launderers and terrorists," and privately owned ATMs as being "particularly susceptible to money laundering and fraud," which caused both of these industries to be subjected to de-risking.

What Is Operation Choke Point?

Operation Choke Point was a 2013 initiative by the DOJ, in coordination with the FDIC,⁹ aimed at combating fraud and illegal activity by scrutinizing banks and payment processors serving businesses considered high risk for fraud or money laundering, such as payday lenders, firearms dealers, and other industries deemed "high risk." Through regulatory pressure and investigations, these federal agencies encouraged financial institutions to reassess relationships with these businesses, often resulting in the termination of banking services for entire categories of lawful but disfavored industries.

Operation Choke Point was controversial, with critics arguing it led to the indiscriminate de-risking of legitimate businesses and raised concerns about due process and regulatory overreach. The program was officially ended in 2017 following widespread criticism and congressional scrutiny.

Federal and Congressional Responses to De-Risking

As a result of the prevalence of de-risking over the years and the lack of meaningful solutions to prevent it, steps were taken by federal banking agencies and others to address it. Notable steps include various statements on industry de-risking issued by federal banking agencies and FinCEN throughout the years,¹⁰ various revisions to the BSA/AML Examination Manual—including the sections on charities and independent ATM operators¹¹—the OCC's issuance of Risk Re-evaluation Guidelines for Terminating Foreign Correspondent Banking Relationships,¹² federal banking agencies, FinCEN and OFAC's issuance of a Foreign Correspondent Fact Sheet,¹³ and the OCC's publication of a final rule that specifically addressed fair access to banking that was later rescinded.¹⁴

Congress also joined these efforts, and the Anti-Money Laundering Act of 2020 contained a specific provision in section 6215 requiring the Treasury Department to study de-risking. The Treasury Department issued its 2023 De-Risking Strategy, which indicated that:

And yet, while the government was taking steps to address de-risking, it was also directing surveillance programs targeting specific groups after the events at the U.S. Capitol on January 6, 2021.

As stated in the Executive Order, during this time period "[t]he Federal government suggested that financial institutions flag individuals who made transactions related to companies like "Cabela's" and "Bass Pro Shops" or who made peer-to-peer payments that involved terms like "Trump" or "MAGA," even though there was no specific evidence tying those individuals to criminal conduct."

Cryptocurrency and Operation Choke Point 2.0

Government steps to address de-risking also failed to prevent the same regarding an issue that originated during the so-called "crypto winter" in 2022. At that time, federal banking agencies issued "guidance" documents to the banking industry that led to the de-risking of cryptocurrency activities and exchanges.¹⁶ These guidance documents effectively identified certain cryptocurrency activities as either being high risk or an unsafe or unsound banking practice, effectively blocking them from engaging with the banking industry.

A joint statement on crypto-asset risks highlighted a number of perils and indicated that "the agencies believe that issuing or holding as principal crypto-assets that are issued, stored, or transferred on an open, public, and/or decentralized network, or similar system is highly likely to be inconsistent with safe and sound banking practices." Agencies also expressed significant safety and soundness concerns with business models concentrated in crypto-asset-related activities or that have concentrated exposures to the crypto-asset sector. Simultaneously, the OCC pulled back its previous support for cryptocurrency activities and issued an interpretive letter requiring specific approval from the agency to engage in certain cryptocurrency activities previously approved by the OCC as being part of the business of banking.¹⁷ While the guidance did not designate crypto assets as being "high risk," the sheer number of risks identified sent the same message to the industry. These guidance documents ultimately had a chilling effect on the cryptocurrency industry and became known as operation Choke Point 2.0, which has received considerable attention and was the focus of recent Senate Banking Committee hearings on Capitol Hill.¹⁸

Lastly, FinCEN issued a notice on the use of cryptocurrency kiosks for scam payments and other illicit activity that provides several red flags for financial institutions serving kiosk operators. This notice was issued the day before the Executive Order was published. While too early in the process, these types of BSA/AML issuances could result in further banking challenges and de-risking of the cryptocurrency kiosk industry, which was already affected by Operation Choke Point 2.0. For an overview of this FinCEN notice, please refer to this Perkins Coie Insights article.

This historical roadmap to de-risking suggests that the causes are varied, including BSA/AML compliance, government designations of industries as high risk, subjective reputation risk criteria used in bank supervision, significant penalties being imposed by federal banking agencies and the DOJ, safety and soundness criteria applied by federal banking agencies, and political pressure on the bank regulatory process.

Challenges for the Banking Industry

While the Executive Order is a concrete step toward addressing the exclusionary effects of de-risking, it notably does not address the underlying BSA/AML concerns that have driven much of this behavior for the past two decades. The Executive Order focuses on eliminating reputation risk to promote fairness and inclusivity but stops short of providing regulatory relief or clarifying the compliance expectations that have historically prompted banks to de-risk in the first place. As a result, financial institutions may remain caught between the imperative to expand access and the ongoing obligation to manage financial crime risks under the BSA framework.

The impact of the Executive Order on BSA compliance, therefore, remains uncertain. On the one hand, increased regulatory emphasis on fair banking may encourage institutions to reconsider blanket de-risking strategies, follow the guidance set forth in the OCC's Risk Re-evaluation Guidelines for Terminating Foreign Correspondent Banking Relationships to ensure account termination decisions are made at the highest levels, or invest in more nuanced risk management approaches. On the other hand, without corresponding changes to the BSA/AML regulatory regime, banks may continue to perceive de-risking as the safest course of action to avoid regulatory scrutiny. The tension between financial inclusion and financial integrity is likely to persist unless and until there is greater alignment between fair banking initiatives and the requirements of the BSA/AML laws.

Enforcement Actions Forthcoming

The Executive Order calls for each federal banking regulator to conduct a review to identify financial institutions that have had any past or current, formal or informal, policies or practices that require, encourage, or otherwise influence such financial institution to engage in politicized or unlawful debanking and to take appropriate remedial action, including levying fines, issuing consent decrees, and imposing other disciplinary measures. It further calls for a review of supervisory complaint data to identify any financial institution that has engaged in unlawful debanking on the basis of religion and, if such financial institution is unable to obtain compliance, refer the matter to the attorney general for civil action.

In addition to federal agency reviews, the Executive Order enlists the Small Business Administration (SBA) to require financial institutions subject to its lending programs to conduct their own internal reviews to: (1) make reasonable efforts to identify and reinstate any previous clients denied service through a politicized or unlawful debanking action with notice of the reinstatement sent to the victims; and (2) identify all potential clients denied access to financial services or payment processing through a politicized or unlawful debanking action and provide notice to each victim advising of the denied access and the renewed option to engage in such services previously denied.

These requirements may lead to agency enforcement actions, restitution for affected consumers and businesses, private rights of action, and possible class action lawsuits against banks that self-identify and notify victims. In addition, the U.S. Attorney for the Eastern District of Virginia recently announced the formation of the Eastern District of Virginia Equal Access to Banking Task Force to investigate debanking allegations.

Proposed Legislation and Regulatory Actions

As previously noted, the Senate Banking Committee held hearings relating to Operation Choke Point 2.0, and legislation was introduced by Senator Tim Scott (R-SC) and Representative Andy Barr (R-KY) to "curtail the political weaponization of the federal banking agencies." The "Financial Integrity and Regulation Management Act" (S.875) would, among other things, direct the federal banking agencies and the Consumer Financial Protection Bureau (CFPB) to eliminate reputation risk as a supervisory component. In this regard, federal banking agencies have each announced that they have eliminated references to reputation risk from their supervisory guidance and in support of the Executive Order. Comptroller of the Currency Jonathan Gould issued a statement indicating that:

The OCC has already taken initial steps to depoliticize the federal banking system consistent with the President's Executive Order. Earlier this year, the OCC removed references to reputation risk from its handbooks and guidance documents. Soon it will propose a rule removing these same references from its regulations. The OCC will also commence a review to assess the extent to which the institutions it supervises have or are engaged in politicized or unlawful debanking and take remedial actions if appropriate. The OCC is exploring additional steps to ensure politicized or unlawful debanking is never repeated.

In February 2025, Senator Kevin Cramer (R-ND) and Rep. Barr reintroduced the "Fair Access to Banking Act" in the Senate (S.293) and the House (H.R. 2743). The bill would require larger banks to provide fair access to financial services, similar to the OCC's Fair Access Rule. These requirements include that a bank must:

• Make each financial service it offers available to all persons in the geographic market served by the covered bank on proportionally equal terms.
• Not deny any person a financial service the bank offers unless the denial is justified by such quantified and documented failure of the person to meet quantitative, impartial risk-based standards established in advance by the bank.
• Not deny, in coordination with or at the request of others, any person a financial service the bank offers.
• When denying any person financial services the bank offers, provide written justification to the person explaining the basis for the denial, including any specific laws or regulations the covered bank believes are being violated by the person or customer, if any.

Steps To Take Now

Banks that may have engaged in the de-risking activities covered by the Executive Order should immediately consult with their counsel to discuss taking steps to develop a project plan to identify the types of de-risking that occurred and those persons or entities that may have been targeted and harmed, including steps to notify those persons or entities as set forth in SBA's forthcoming notice to financial institutions required by the Executive Order. As with any violation of law identified during a review, the federal banking agencies and the DOJ will expect that those individuals within the bank who may have individual culpability will be identified and held accountable in accordance with the severity of the findings, and that the bank will conduct a self-assessment to ensure that these activities do not reoccur.¹⁹

Conclusion

In summary, the Guaranteeing Fair Banking Executive Order takes significant steps toward removing the use of reputation risk criteria that resulted in debanking based on political or religious beliefs, or lawful but disfavored business activities. However, its effectiveness in reversing the legacy of de-risking will depend on how regulators and financial institutions reconcile the Executive Order's mandates with the enduring demands of BSA/AML compliance. The path forward will require careful navigation of the complex interplay between access, risk, regulatory responsibility, and political responsibility.

Endnotes

1. De-risking has been defined by the U.S. Department of the Treasury as the practice of financial institutions terminating or restricting business relationships indiscriminately with broad categories of clients rather than analyzing and managing the risk of clients in a targeted manner. U.S. Department of the Treasury, AMLA, The Department of the Treasury's De-risking Strategy, April 2023, p. 1.

2. See Office of the Comptroller of the Currency, OCC Bulletin 2014-58, Banking Money Service Businesses: Statement on Risk Management (Nov. 19, 2014), see also Financial Crimes Enforcement Network (FinCEN), Guidance to Money Services Businesses on Obtaining and Maintaining Banking Services (Apr. 26, 2005); Board of Governors of the Federal Reserve, FDIC, FinCEN, National Credit Union Administration (NCUA), OCC, Office of Thrift Supervision (OTS), Bank Secrecy Act/Anti-Money Laundering: Joint Statement on Providing Banking Services to Money Services Businesses (Oct. 26, 2005).

3. See, e.g.,Federal Reserve, FDIC, FinCEN, NCUA, OCC, OTS, Guidance on Accepting Accounts from Foreign Embassies, Consulates and Missions (Mar. 24, 2011); Federal Reserve, FDIC, FinCEN, NCUA, OTS, Guidance on Accepting Accounts from Foreign Governments, Foreign Embassies and Foreign Political Figures (June 15, 2004).

4. See OCC, OCC Bulletin 2016-32, Risk Management Guidance on Foreign Correspondent Banking: Risk Management Guidance on Periodic Risk Reevaluation of Foreign Correspondent Banking (Oct. 5, 2016); see also Federal Reserve, FDIC, NCUA, OCC, Treasury Department, Joint Fact Sheet on Foreign Correspondent Banking: Approach to BSA/AML and OFAC Sanctions Supervision and Enforcement (Aug. 30, 2016).

5. See FinCEN, Federal Reserve, OCC, FDIC, NCUA, Joint Fact Sheet on BSA Due Diligence Requirements for Charities and Non-Profit Organizations (Nov. 19, 2020).

6. See FinCEN, Statement on Bank Secrecy Act Due Diligence for Independent ATM Owners or Operators (June 22, 2022).

7. U.S. Senate Committee on Banking, Housing, and Urban Affairs, Majority Press Release, Scott Shines Light on Debanking of Americans, Pledges Solutions (Feb. 2, 2025).

8. See, e.g., World Bank Group, De-Risking in the Financial Sector (Oct. 7, 2016); Financial Action Task Force (FATF), High Level Synopsis of the Stocktake of the Unintended Consequences of the FATF Standards (Oct. 27, 2021).

9. U.S. House of Representatives, Committee on Oversight and Government Reform, Report: DOJ's Operation Choke Point Secretly Pressured Banks to Cut Ties with Legal Businesses (May 29, 2014).

10. See notes 2-5, supra.

11. OCC Bulletin 2021-59, BSA/AML: Updated Sections of the FFIEC BSA/AML Examination Manual (Dec. 1, 2021).

12. OCC Bulletin 2016-32, Risk Management Guidance on Foreign Correspondent Banking: Risk Management Guidance on Periodic Risk Reevaluation of Foreign Correspondent Banking (Oct. 5, 2016).

13. Federal Reserve, FDIC, NCUA, OCC, Treasury Department, Joint Fact Sheet on Foreign Correspondent Banking: Approach to BSA/AML and OFAC Sanctions Supervision and Enforcement (Aug. 30, 2016).

14. OCC Final Rule, Fair Access to Financial Services, 85 FR 75261 (Jan. 14, 2021), rescinded by, OCC Press Release, OCC Puts Hold on Fair Access Rule (Jan. 28, 2021).

15. Department of the Treasury, AMLA The Department of the Treasury's De-risking Strategy (Apr. 2023) p. 1.

16. Federal Reserve, OCC, FDIC, Joint Statement on Crypto-Asset Risks to Banking Organizations (Jan. 3, 2023); Federal Reserve, OCC, FDIC, Joint Statement on Liquidity Risks to Banking Organizations Resulting from Crypto-Asset Market Vulnerabilities (Feb. 23, 2023), withdrawn (Apr. 24, 2025).

17. OCC Interpretive Letter 1179, Chief Counsel's Interpretation Clarifying: (1) Authority of a Bank to Engage in Certain Cryptocurrency Activities; and (2) Authority of the OCC to Charter a National Trust Bank, (Nov. 18, 2021), rescinded Mar. 7, 2025, see also FDIC, FIL-16-2022, Notification of Engaging in Crypto-Related Activities (Apr. 7, 2022), withdrawn Mar. 28, 2025, Federal Reserve, Engaging in Crypto-Asset Related Activities by Federal Reserve Supervised Banking Organizations (Aug. 16, 2022), withdrawn (Apr. 24, 2025).

18. U.S. Senate Committee on Banking, Housing, and Urban Affairs, Majority Press Release, Scott Shines Light on Debanking of Americans, Pledges Solutions (Feb. 2, 2025). Operation Chokepoint I occurred in 2013 and focused on payday lenders, firearms and ammunition dealers, adult entertainment, check cashing and other politically disfavored industries.

19. See, e.g., U.S. Department of Justice, Guidelines for the Evaluation of Corporate Compliance Programs (updated Sept. 2024).

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