Banking regulators' secretive financial network that determines which U.S. citizens face account closures
In a move aimed at protecting American bank account holders, Senator Tim Scott, the Chairman of the Senate Banking Committee, has introduced the Financial Integrity and Regulatory Management (FIRM) Act. This legislation seeks to prevent banking regulators from closing accounts based on political reasons or personal dislike.
The FIRM Act comes in response to documented cases where banks have allegedly closed accounts, particularly those of growth industries like cryptocurrency, for questionable reasons. Senator Scott accused these regulators of wielding their power against Republicans, conservatives, and certain industries.
One significant case involves the First Lady Melania Trump, who claimed in her memoir that her longtime bank account was shut down, and her son, Barron Trump, was not able to open an account at the same banking institution following the events of January 6, 2021.
The FIRM Act mandates that banks justify account closures solely on legal or regulatory grounds, not on ideological or subjective reasons. It requires financial institutions to provide legally valid reasons—such as anti-money laundering concerns backed by evidence—for closing accounts. Discriminatory or politically based decisions are effectively prohibited, preventing regulators or banks from using account closures as a tool of political or personal retaliation.
Enforcement mechanisms would include penalties and increased regulatory scrutiny to ensure compliance. This approach responds to cases where banks closed accounts ostensibly for risk reasons but allegedly motivated by personal or political bias, a practice that had been criticized under previous regulatory environments like Operation Chokepoint 2.0.
Bank of America's CEO, Brian Moynihan, stated that there are "100-plus regulators in our building every day" and that the bank is often told to close accounts. JPMorgan Chase, for instance, confirmed that they do not close accounts based on political or religious affiliation and have called for a more transparent regulatory framework.
The issue of shutting down bank accounts, also known as de-banking, is rooted in the power held by banking regulators. Regulators were allowed to flag bank accounts that posed a "reputational risk" to the banking institution under Operation Choke Point. This practice, first crafted under former President Barack Obama's Department of Justice, has been a source of controversy, with critics arguing that it gives unelected bureaucrats the power to decide who gets an account, who gets a loan, and who has access to banking services.
The high level of power that regulators hold operates under an "alphabet soup" of federal agencies. President Donald Trump himself noted that "the regulators control the banks." Outdated laws and rules, such as the $10k maximum balance transfers and Suspicious Activity Reports (SARs), create limitations on a bank's ability to serve customers.
Senator Scott and Representative Andy Barr introduced the FIRM Act to codify the removal of vague language regarding reputational risk. The Act is tied to a broader U.S. initiative, including executive actions planned as of August 2025, to penalize politically motivated account closures, especially targeting sectors like cryptocurrency that have faced biased banking practices.
In summary, the FIRM Act prevents improper account closures by requiring transparency and valid legal justification for such actions and imposing penalties for politically or personally biased decisions, thus safeguarding clients from arbitrary debanking.
- The Financial Integrity and Regulatory Management (FIRM) Act, introduced by Senator Tim Scott, aims to prevent banking regulators from closing accounts based on political reasons or personal dislike, especially in industries like cryptocurrency.
- The FIRM Act dictates that banks must justify account closures solely on legal or regulatory grounds, prohibiting discriminatory or politically based decisions that could be used as a tool for political or personal retaliation.
- Enforcement of the FIRM Act includes penalties and increased regulatory scrutiny to ensure compliance, addressing cases where banks closed accounts ostensibly for risk reasons but allegedly motivated by personal or political bias.
- The issue of shutting down bank accounts, or de-banking, is rooted in the power held by banking regulators, who were allowed to flag accounts that posed a "reputational risk" to the banking institution under Operation Choke Point.
- The FIRM Act is part of a broader U.S. initiative to penalize politically motivated account closures, with a specific focus on sectors like cryptocurrency that have faced biased banking practices.
