May 16, 2024

Warren, Omar Lead Colleagues in Urging Regulatory Agencies to Combat Discrimination in Financial System by Curbing ‘De-Risking’ Practices

The threat of account closures is especially stark for Muslim American and immigrant communities. 

Text of Letter (PDF)

Washington, D.C. — Today, U.S. Senator Elizabeth Warren (D-Mass.) and Representative Ilhan Omar (D-Minn.) led a letter to the heads of the financial regulatory agencies, urging them to clamp down on discrimination in banking by combating “de-risking,” — a practice that may disproportionately affect Muslim Americans and immigrant communities. 

“De-risking” is when financial institutions, in an attempt to mitigate suspicious activity, end or restrict business relationships, for example by closing bank accounts, for broad categories of clients rather than making targeted judgments to combat risk. In practice, reports show that major financial institutions have been shutting down large swaths of accounts, often without warning. 

“We write to ask your agencies to take robust action to modernize anti-money laundering and financial crimes compliance obligations to protect and promote equitable banking access for Muslim Americans and immigrant communities,” said the lawmakers. “While Congress can and should take action to expand financial inclusion, the Biden Administration can also take executive action to prevent discriminatory account closures and restrictions.” 

In April 2023, Treasury published a strategy on de-risking with recommendations for mitigating the practice after Senator Warren and Representative Omar pressured U.S. banking regulators to modernize financial crimes and sanctions compliance obligations in order to promote equitable banking access. However, since then, financial institutions have reportedly continued to close customers’ accounts involuntarily and sometimes without basic notice, explanation, or ability to contest the decision.

The lawmakers recommend  financial regulatory agencies implement the following proposals to mitigate the negative impacts of de-risking: 

  1. Issue a joint agency statement affirming that financial inclusion is a public priority for anti-money laundering/combating the financing of terrorism (AML/CFT) policy. Treasury and other banking regulators are required to publish priorities for AML/CFT policies. The agencies should issue an updated priority statement that affirms the importance of ensuring financial inclusion while also safeguarding our financial system from exploitation by illicit actors. 
  2. Create a formal advisory group on financial inclusion. While some international bodies have addressed de-risking, there is no domestic forum for policymakers and regulators to address this issue. 
  3. Issue FINCEN guidance to help financial institutions avoid shutting down or restricting accounts unnecessarily. FinCEN should issue guidance addressing common scenarios for which banks have conducted de-risking but that do not actually merit account closure, ensuring innocent customers aren’t disproportionately targeted.
  4. Amend existing training for bank examiners to include a discussion of financial inclusion metrics. Treasury has authority to establish and update training materials and standards for bank examiners. Including a model on financial inclusion that considers the effects of de-risking will  help standardize how examiners evaluate banks’ AML/CFT procedures. 
  5. DraftTreasury guidance that empowers consumers to work with institutions to mitigate AML flags. Treasury should require financial institutions’ AML programs include a process whereby customers concerned that a transaction might raise flags can proactively submit materials demonstrating the legitimacy of the transaction. 
  6. Establish minimum notice and dispute resolution requirements for consumers that experience account closures. Especially in instances in which banks de-risk consumer accounts but do not file a corresponding Suspicious Activity Report (SAR), CFPB has authority to act under multiple consumer protection statutes and protect account holders. 

“We urge your agencies to consider these proposals to ensure all persons in the U.S. are able to fully access and participate in our financial services system,” concluded the lawmakers. 

The letter is also signed by Senators Ed Markey (D-Mass.), Bernard Sanders (I-Vt.), and  U.S. Representatives Barbara Lee (D-Calif.), Rashida Tlaib (D-Mich.), Katie Porter (D-Calif.), Pramila Jayapal (D-Wash.), Alexandria Ocasio-Cortez (D-N.Y.) Jonathan L. Jackson (D-Ill.), and Joyce Beatty (D-Ohio).

Senator Warren has been a longtime leader in consumer protection and equitable access to financial services. 

  • On February 22, 2024, Senator Warren, Senator Sanders, and Representative Omar sent a letter to  the heads of JPMorgan Chase, Bank of America, Wells Fargo, and Citibank seeking information on their account closure practices and the steps they are taking to prevent discriminatory banking practices.
  • On December 18, 2023, Senator Warren led 6 senators in a letter to Acting Comptroller of the Currency Michael Hsu, calling on the Office of the Comptroller of the Currency (OCC) to allow states to move forward with their efforts to protect consumers from harmful bank practices.
  • On December 14, 2023, Senator Warren led 91 lawmakers in a letter to the Consumer Financial Protection Bureau (CFPB), asking it to protect consumers by conducting a rulemaking on forced arbitration for financial products and services.
  • On December 14, 2023, Senator Warren and colleagues sent follow-up letters to student loan servicers – MOHELA, EdFinancial, Nelnet, and Maximus – raising concerns about borrowers’ problems with return to repayment, requesting information about the borrower experience, and pushing back on the servicers’ claim that budget shortfalls limit their ability provide quality customer service to millions of borrowers.
  • On December 11, 2023, Senator Warren led colleagues in a letter to Secretary of Education Miguel Cardona, urging him to leverage his existing and full authority under the Higher Education Act to provide expanded student debt relief to working and middle-class borrowers.  
  • On November 30, 2023, in a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren applauded the Consumer Financial Protection Bureau’s (CFPB) proposed rule to rein in credit card late fees.  
  • On November 16, 2023, Senator Warren led lawmakers in sending a letter to Secretary of the Treasury Janet Yellen and Financial Crimes Enforcement Network (FinCEN) Director Andrea Gacki, asking FinCEN to update its out-of-date guidance on marijuana-related businesses to promote fairness in financial services for marijuana businesses operating in states where marijuana is no longer illegal.
  • On November 3, 2023, during a hearing of the Senate Banking, Housing, and Urban Affairs (BHUA) Committee, Senator Warren highlighted the impact of medical debt on servicemembers, especially collection attempts for bills they did not owe.
  • On September 21, 2023, Senator Warren issued a statement in support of the CFPB’s rulemaking to remove medical bills from Americans’ credit reports.
  • In December 2022, Senator Warren and Representative Omar sent a letter to the heads of all U.S. Banking regulators calling on them to improve banking access for immigrant communities and communities of color.