WASHINGTON — Financial companies are facing mounting pressure to identify and disrupt the financial operations of white supremacist and neo-Nazi groups in the wake of the violence at the Unite the Right rally in Charlottesville, Va., over the weekend.
But there are practical as well as legal limits to how much pressure institutions can bring to bear without federal leadership, according to experts.
The most prominent effort is led by a group called Color of Change, which
Though the effort began in February, it started bearing fruit after Charlottesville. Visa, Mastercard, PayPal and Apple Pay have announced they will block organizations deemed hate groups, many of which rely on credit card donations as their chief funding tool.
“You have dangerous white nationalists out there, who [processing companies] are not even making a great deal of money on,” said Brandi Collins, senior campaign manager at Color of Change. “What those groups get … is being able to travel around the country and wreak havoc in these very organized and coordinated ways.”
But efforts are unlikely to stop there, and banks may be the next targets of pressure to drop any relationships with white supremacist and other fringe groups. However, banks face a monitoring challenge that may not be present when dealing with high-risk businesses.
Many of these groups, perhaps anticipating that they would not be welcome if their activities were well known, don't maintain their accounts under the organization's name, but instead under a personal account or a euphemistic-sounding charity. Of the 100 organizations targeted by Color for Change, targets include "America's Promise Ministries," the "American College of Pediatricians" and the "American Family Association." (The list also includes
While a bank can sever ties to groups it fears may damage its own reputation, some say the federal government could intervene to make it easier to identify and block those groups.
John Byrne, executive vice president of the Association of Certified Anti-Money Laundering Specialists, said the Treasury and State departments can designate groups and individuals that should be cut off from banking access.
“OFAC or state department or whatever issues these listed entities or individuals all the time — specially designated drug traffickers or kingpins or terrorist groups,” Byrne said. “Then … there’s no wiggle room. Banks and others are obligated to not process those transactions.”
In the absence of such a directive, banks may have little to go on to identify extremist groups that may be using their institution, however.
“We’ve asked if the government could give us some kind of red flags or indicators to identify terrorists or terrorist activity, and unfortunately … there’s nothing that stands out about a terrorist financial transaction,” said Robert Rowe, vice president and associate chief counsel for regulatory compliance at the American Bankers Association. “The ability of the financial system to be a tool to detect terrorism is minimal. I don’t know a single banker who, if there was a way to do it, wouldn’t step up to the plate immediately.”
Collins said that her group had not yet reached out to the Treasury Department, Justice Department or lawmakers but that it intends to contact any public officials who are willing to work with it to combat violent extremists.
"We welcome to the table any Democrats, Republicans, DOJ — anyone who wants to actually deal with this in a legitimate way," Collins said.
Byrne said banks are vigilant about what kinds of activities are going through their institution, and when news breaks — as has been the case lately with Russia-related scandals — compliance officials will scan their rolls to see if anything comes up. Presumably banks are taking the same tack with these hate groups as well, he said.
“Every time there’s a new story about Russian-related activities, we know from my members that they do some quick, deep-dive research into their accounts to see if they have anything and file suspicious activity reports based on what they have,” Byrne said. “Banks, I would argue, are looking at that right now. Hopefully.”
Gilbert Schwartz, a partner at Schwartz Ballen LLP and an expert in anti-money-laundering law, said concerns about free speech don't necessarily apply here. The First Amendment protects citizens from infringements of free speech imposed by the government, not by other citizens or private companies.
There are constitutional protections against discrimination that apply to private citizens or companies — a bank cannot lawfully deny a qualified borrower a service because of his race, ethnicity, country of origin, gender, etc. But political beliefs are not one of those protected classes.
“There’s no right to have a bank account or right to have your transactions processed,” Schwartz said. “Banks and financial institutions, including payment companies, make decisions based upon reputational considerations all the time about what kinds of customers they want to deal with. Political issues are certainly something that can be taken into account.”
In the payment processor space, many companies have begun to agree. Referring to Color for Change's list, Visa said in a statement that it had determined that “a number of these sites were not adhering to those financial institutions’ acceptable use policies and/or were engaging in illegal activities,” and that it had terminated its merchant agreements as a result.
Mastercard said that it was “shutting down the use of our cards on sites that we believe incite violence,” while Discover said it was “terminating merchant agreements with hate groups.” PayPal similarly said it was terminating any merchant agreements that violate its terms of service, including “activities that promote hate, violence or racial intolerance.”
Apple Pay, meanwhile,
American Express spokesman Andrew Johnson said that the company had reviewed the list forwarded by Color of Change and determined that roughly 80 of the groups didn’t accept American Express, and that of those that did, many show the company’s logo but cannot actually accept their services — a tactic that makes the site appear more legitimate than it really is. He said that the firm had sent cease-and-desist letters to those groups for inappropriately using its logo, and that it was considering further action with groups with whom it has a real business relationship.
When asked whether American Express is free to terminate relationships based on hate speech, Johnson said the company maintains “the right to terminate any relationship that is harmful to our brand.”
Collins said this isn't a case of free speech. Many of these groups have incited violence, crossing a line into illegality.
“Corporations … have the luxury of deciding how and when they enforce what they identify as free speech,” Collins said.
