Trump versus Capital One

**Brian Brooks** (0:01)
N-P-R.

**Ricky Mulvey** (0:06)
You might assume that banks want your business.

**Adrian Ma** (0:09)
But not always. In fact, if you already have an account, a bank could simply ask you, hey, please pick up a check and take your business elsewhere.

**Les Joseph** (0:18)
You know, nobody has a right to a bank account. It's up to the bank, because a bank...

**Ricky Mulvey** (0:22)
Behind the ATMs and tellers, there's another division.
It's a detective agency called the Anti-Money Laundering Department. They're checking in on transactions, marking down money flows that appear sketchy. This department can even shut down a bank account without telling the customer why.

**Adrian Ma** (0:42)
And it's this Anti-Money Laundering Department that allegedly found the Trump Organization making some unusual transactions at Capital One.

**Ricky Mulvey** (0:52)
This is The Indicator from Planet Money, I'm Ricky Mulvey.

**Adrian Ma** (0:55)
And I'm Adrian Ma. Today on the show, we're stepping behind the curtain to find out why banks shut down accounts.

**Ricky Mulvey** (1:01)
And the controversial issue of debanking, how banks have cut customers for political or reputational reasons, and how all of this ties into the legal spat between the Trump Organization and Capital One. That's after the break.

**Adrian Ma** (1:19)
So how do banks find suspicious activity?
Well, first, the bank has to know who you are. Do you seem risky?

**Ricky Mulvey** (1:27)
Are you a school teacher? A small business owner? Are you a multinational real estate company?

**Adrian Ma** (1:33)
How risky you seem determines how much attention you get from the anti-money laundering team. They look into suspicious transactions to make sure that their bank isn't facilitating fraud, financing terrorism, you know, bad guy stuff.

**Les Joseph** (1:46)
So banks are constantly looking at their customers.

**Ricky Mulvey** (1:49)
That's Les Joseph. He spent decades looking for financial crimes like money laundering at both the Department of Justice and Wells Fargo.

**Adrian Ma** (1:57)
Les says money laundering teams can't look into every single transaction. I mean, a large bank has millions of customers after all.

**Ricky Mulvey** (2:04)
But the bank's detective team looks for sketchy transactions, often where businesses don't clearly connect. For example, a car wash in America making unusually large transfers to, let's say, a fried chicken restaurant in the Cayman Islands.

**Les Joseph** (2:19)
If they see something unusual, they're not going to tell a customer, you're kind of sketchy, we're seeing activity in your account that makes us uncomfortable. They're just going to say we're closing your accounts, and they're not required to give a reason.

**Adrian Ma** (2:32)
In fact, they often don't tell customers why they're shuttering accounts, because they might not want to tip off the customer to their other investigations into nefarious activity.

**Ricky Mulvey** (2:42)
Attention potential criminal, please be more careful with your finances.

**Adrian Ma** (2:47)
Yeah, not exactly keeping a low profile. And these anti-money laundering divisions are highly structured, regulated, and they keep a lot of paperwork. So when they shut down an account, they aren't necessarily accusing a customer of a crime, just suspicious transactions.

**Ricky Mulvey** (3:04)
So banks could shut down accounts because they find unusual activity. They don't want to facilitate anything criminal going on.

**Adrian Ma** (3:09)
But sometimes banks make decisions about who they keep as a customer for political reasons.

**Ricky Mulvey** (3:15)
This is called debanking. It happens when banks shut down an account for legal or even reputational risks.

**Adrian Ma** (3:22)
Les says his financial crimes unit was never told to go after accounts because they were in an unfavorable industry. But he says that banks do worry about reputational risk, you know, feeling yucky about a certain kind of customer.

**Ricky Mulvey** (3:35)
The problem is that there isn't a clean way for banks to manage reputational risk.

**Adrian Ma** (3:40)
Brian Brooks was a bank regulator supervising national banks under the first Trump administration.

**Brian Brooks** (3:44)
Reputational risk is whatever you think it is. If you're a Democrat, you think it's reputationally risky to bank an oil company. If you're a Republican, you think it's reputationally risky to bank Planned Parenthood.
Do we actually think those are financial risks that banks are in a position to mediate? Or do we think that's pure politics?

**Ricky Mulvey** (4:01)
Brian says that he saw political pressure to shudder accounts that belonged to traditional energy companies, an industry that's out of favor with some on the left.

**Brian Brooks** (4:10)
And I was on a lot of calls as a regulator with some of these groups that would just come after me saying, how can you let these banks provide financial services to these people? And I would say things like, listen, if you're a bank that, for example, offers business checking accounts, you're literally telling me that this oil company that employs 1,000 people shouldn't have a business checking account to make payroll, help me understand what risk that bank is managing. There's no risk of climate change other than you want to shut down the oil company and it's not the bank's business to make that decision.