What is debanking? Why Citi said it won't debank for political reasons anymore?

Yahoo

3 days ago

Citigroup released a statement Tuesday saying that the bank will be changing its policies to make it clear that it does not debank or discriminate on political grounds.
This statement comes after President Donald Trump and other Republican leaders accused the banking industry of discriminating against certain customers based on political affiliation, according to The Wall Street Journal.
'Citi has always been fully committed to treating all current and potential clients fairly and we have policies, procedures and controls in place for this express purpose. At the same time, we appreciate the concerns that are being raised regarding 'fair access' to banking services, and we are following regulatory developments, recent Executive Orders and federal legislation that impact this area,' said the bank's statement.
In the statement, the bank also announced it will no longer have a specific policy regarding firearms following regulatory developments and 'fair access' concerns.
'These changes reinforce our commitment to serve all clients fairly, and we will continue to work with regulators and elected officials on ways to improve transparency and trust in the banking sector,' the bank's statement read.
Citigroup's firearms policy was adopted in 2018 shortly after the mass shooting at Marjory Stoneman Douglas High School in Parkland, Florida, where 17 students and staff were fatally shot by a 19-year-old, per The Wall Street Journal.
The policy restricted how the bank provided services to firearm manufacturers, sellers and resellers, according to NBC.
'Our U.S. Commercial Firearms Policy was implemented in 2018 and pertained to sale of firearms by our retail clients and partners. The policy was intended to promote the adoption of best sales practices as prudent risk management and didn't address the manufacturing of firearms. Many retailers have been following these best practices, and we hope communities and lawmakers will continue to seek out ways to prevent the tragic consequences of gun violence,' Citi's statement said.
According to The Wall Street Journal, when the bank implemented the policy, it said it wasn't because of an ideological mission but that the company wanted to do its part to prevent guns from 'getting into the wrong hands.'
The policy required clients to 'adhere to these best practices: (1) they don't sell firearms to someone who hasn't passed a background check, (2) they restrict the sale of firearms for individuals under 21 years of age, and (3) they don't sell bump stocks or high-capacity magazines,' per NBC.
Citi's firearms policy received backlash from right-wing news outlets and pro-gun groups.
Debanking is the idea of banks closing the accounts of organizations or people that are perceived to pose a financial, legal, regulatory or reputational risk to the bank.
For years, banks have faced criticism from groups and individuals saying they were unfairly dropped as customers, according to The Wall Street Journal. These claims have been partially fueled by the fact that banks most often don't give explanations when closing a client's account.
Political pressure around debanking has increased recently as right-wing officials and tech leaders have alleged that certain people, including cryptocurrency proponents and conservatives, were being blocked by the Biden administration from banking services, per NBC.
Since President Donald Trump's return to the White House, he has confronted the CEOs of Bank of America and JPMorgan Chase and he raised complaints at the World Economic Forum in Switzerland earlier this year.
Both of the confronted banks said they would never close an account on political grounds, per NBC. As the debate of debanking has continued, banks have repeatedly said they don't discriminate against customers based on beliefs or background.
'They have said account closures are driven by anti-money-laundering rules or other regulatory reasons, which can cause them to drop risky customers who might be engaging in suspicious activity,' per The Wall Street Journal.
Republicans in Congress have proposed legislation to address concerns around debanking. Concerns have also been raised by Democrats, such as Sen. Elizabeth Warren, who claim that banks have unfairly shut down accounts linked to formerly incarcerated clients or on the basis of religion.
Monday's statement from Citigroup follows the concerns raised on both sides of the political spectrum over the last few months.
'We will update our employee Code of Conduct and our customer-facing Global Financial Access Policy to clearly state that we do not discriminate on the basis of political affiliation in the same way we are clear that we do not discriminate on the basis of other traits such as race and religion,' per Citi's statement.