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News~ What Do Chase Bank, Condoms, The Tea Party, And Petty Fraud Have In Common?

2017-06-10 03:31 [BANK] Source:Netword
Guide:In mid-March, a division of JPMorgan Chase

In mid-March, a division of JPMorgan Chase rejected an application to process payments for the fledgling new York City condom company Lovability, citing "reputational risk" associated with "adult" products. Ridicule and mockery predictably ensued. But Chase's decision wasn't an isolated corporate gaffe -- it's the latest, weirdest product to emerge from a subculture of startup lobbying groups, fringe tea party hyperventilists and small-time crooks who have spent months fighting a simple crackdown on money laundering.

All of this came down on Tiffany Gaines' New sex-positive condom startup, Lovability.

"My mouth just dropped open," Gaines told The Huffington Post, describing the moment she received an email saying Chase wouldn't accept her business. "It really points out the problem that my company is trying to solve … this cultural perception that it's naughty, that it's something that young people should be ashamed to be associated with."

Chase declined to comment for this story. But according to Gaines, after a few days of bad press, someone from the company's marketing department said that the firm would reverse its decision. When she asked for an explanation, Gaines said the bank initially tried to pin the misfire on a bad sales rep, but eventually got around to blaming the government.

"She told me there were federal regulations on what kinds of businesses they could work with," Gaines said. "I challenged her on what is in the prohibited area. And she said pornography and this and that."

There are no government rules that require major corporations to annoy birth control startups for a few days before agreeing to do business with them. In fact, there are no federal regulations requiring payment processors to reject sex toy shops, porn or any other legal businesses connected to sex.

But banks, payment processing firms and a relatively New lobbying group called the Third Party Payment Processors Association have been going wild on Capitol Hill in recent months over a pretty conventional law enforcement effort with a salacious name: Operation Choke Point. The project attempts to curb money laundering by scrutinizing banks and payment processors that facilitate transactions with illegal businesses -- petty fraudsters running payday lending scams, sham telemarketing operations and other shady groups.

It's Money Laundering 101, but the program's detractors have portrayed it as a vicious government effort to dictate what kinds of companies banks can do business with.

The most extreme element of the movement comes from the anonymous, conspiratorial website, a site that features an image of President Barack Obama as Godzilla "destroying America" and warns that guns, ammunition, pharmaceuticals and other whole industries may soon be eliminated. The site has developed a bit of a following on Facebook, with more than 37,000 likes.

Democrats in Congress say the Third Party Payment Processors Association -- a lobby group that formed last year in response to Operation Choke Point -- has issued similar warnings in private meetings.

"They came in here and said, 'How would you like it if we started cutting off things liberals like, like birth control?'" says one House Democratic aide who met with the TPPPA in November.

"They can assign reputation risk based on their moral judgements, but everybody has different moral judgments," TPPPA President Marsha Jones told HuffPost. "That's the danger of it. One administration is polarized one way and the other another way. And we must remove morality out of payments because it's dangerous."

What's astounding about the lobbying blitz isn't that major companies are complaining about government regulations -- rather, it's that this is a response to a simple crackdown on straightforward fraud. Early this year, House Oversight Committee Chairman Darrell Issa (R-Calif.) suggested in a letter to Attorney General Eric Holder that the Department of Justice is abusing the fraud investigation in an effort to harass and intimidate all payday lenders.

"We support the fight against fraud because it only hurts the processors, too," Jones said. "But the tactics the government is using right now is like bombing a neighborhood to catch a drug dealer."

There is no evidence that Chase declined Lovability's application to send a political message. But the episode highlights just how extreme the private sector reaction has been to a very basic law enforcement effort. Even for Washington, this is all a bit much.


Moving money for criminals is called money laundering, and it's illegal. Since 1970, banks have been required to monitor their clients' transactions to ensure they don't funnel funds for drug dealers, gun runners, or any other illegal outfit. But some banks have been accused of looking the other way in the name of profit. In 2011, Wachovia settled federal charges that it laundered over $378 billion from Mexican drug cartels. The bank paid a fine, and the Department of Justice ultimately decided not to prosecute any Wachovia employees (although it has done a bang-up job jailing rank-and-file workers at medical marijuana shops that are legal under California state law).


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