Processing Solutions: Operation Choke Point Isn’t Over … Yet

Mia Hyun

Last summer I received numerous calls from merchants in the adult business, to learn that their bank and merchant accounts had been terminated. Terminated by top tier banks, like Chase, Union Bank, and Wells Fargo. Legitimate businesses with banking relationships that had been established for over 10 years, now dissolved, leaving merchants searching for a solution to a seemingly ambiguous problem.

Operation Choke Point was created as a joint “good faith” initiative between the Department of Justice (DOJ), Federal Deposit Insurance Corporation (FDIC), and Consumer Financial Protection Bureau (CFPB), to crack down on fraud from illegal business. It became clear that the real goal of the scheme was actually designed to financially “choke out” companies that were considered to be “high risk.”

Despite the fact the businesses were engaged in legal operations, Operation Choke Point strong-armed banks to terminate relationships with a wide range of legitimate businesses simply because they were labeled “high risk” for fraud by federal regulators.

Despite the fact the businesses were engaged in legal operations, Operation Choke Point strong-armed banks to terminate relationships with a wide range of legitimate businesses simply because they were labeled “high risk” for fraud by federal regulators. Essentially, the FDIC “hit list” of businesses was unjustly “choked” right out of their bank accounts and lines of credit.

The former chairman of the FDIC William Isaac wrote in the American Banker, “The Justice Department and several regulators have pressured banks to close accounts with these businesses — on a sweeping, industry-wide basis — without any proof of wrongdoing. OCP is way out of control”.

Some of the businesses on the FDIC list of “high risk” businesses included coin dealers, escort services, pornography, short-term lenders, firearms and ammunition sales, telemarketing, lifetime memberships, and online dating companies.

Operation Choke Point was a highly secretive operation launched in early 2013. The American Bankers Association CEO, Frank Keating, wrote that the “DOJ is telling bankers to behave like policemen and judges” and characterized Operation Choke Point as an “attack on market economy.” When Operation Choke Point was launched a wide segment of legitimate and lawful business received notices that their bank accounts were being terminated. These terminations cited “regulatory trends” and “heightened scrutiny.” The span of businesses affected, including adult entertainment, generated substantial trepidation with the overreaching scope of Operation Choke Point.

By mid 2014 OCP had become a political football and an investigation was launched. The House Oversight and Government Reform Committee stated in their key findings, “OCP has forced banks to terminate relationships with a wide variety of lawful and legitimate business - the goal of the initiative to deny these merchants access to banking and payment networks. The department lacks adequate legal authority for the initiative.”

In fact, the OCP consequences were brought to the attention of U.S. Attorney General, Eric Holder, but it was dismissed in favor of continuing this questionable, and complete breach of First Amendment rights. We can only assume Holder resigned only to fall on his OCP sword.

Since the findings were published, the FDIC has started a backpedaling public relations campaign by calling the list a “misunderstanding” and that “in fact, it is the FDIC’s policy that insured institutions that properly manage customer relationships are neither prohibited nor discouraged from providing services to any customer operating in compliance with applicable law,” the letter states. “Accordingly, the FDIC is clarifying its guidance to reinforce this approach, and as part of this clarification, the FDIC is removing the lists of examples of merchant categories from its official guidance and informational article.”

Some view this as a victory against OCP, but many view this as the FDIC saving political face amidst the public scrutiny of civil liberties.

Brian Wise at the U.S. Consumer Coalitions states, “the policy changes are a practical stunt to quell the public.” As a matter of fact the DOJ and the Consumer Financial Protection Bureau (CFPB) have admitted to no wrongdoing. Additionally, the CFPB is expected to announce the first round of rules crafted for the short term lending industry later this year.

This will mark the first time the CFPB will exercise its power to regulate an industry as a whole. On a different note, the Judicial Watch filed a Freedom of Information Act lawsuit against the DOJ to obtain records of OCP in the U.S. District Court for the District of Colombia.

Furthermore, Rep. Blaine Luetkemeyer, member of the House Financial Services Committee, still intends to move forward with a Bill introduced last year aimed at ending OCP.

The unfortunate result of Operation Choke Point is that it caused real business harm to legitimate businesses that were targeted by the initiative and additionally banks are now petrified to make any changes to current memos. Some good news is: there are many advocate companies now such as the California Financial Services Association and the U.S. Consumer Coalition.

If you have been affected or wronged by OCP, tell your story and keep the momentum going. Write to: or visit

Mia Zhu is the founder and CEO of Los Angeles-based Mobius Payments Inc., which offers comprehensive cutting-edge electronic payment processing solutions and specializes in high-risk merchant account activations in the U.S., E.U. and Asia. Zhu has been serving the adult community of businesses for over 15 years. In the past, she has worked with several banking organizations, including RBS, Humboldt Bank and Comerica Bank. Zhu holds a master’s degree in science and currently resides in Los Angeles. Mobius Payments may be reached at (877) 244-0583 or