The following is information provided by Money Metals Exchange:

Question: I haven’t heard much about Operation Chokepoint lately. Is that initiative ongoing and are you seeing any impact?

Answer: Yes, Operation Chokepoint continues, and we think it is very likely impacting our industry.

We’ll elaborate first by explaining Operation Chokepoint. The U.S. Justice department announced the program in 2013. The Obama DOJ’s stated intent is to dissuade fraud and money laundering by ratcheting up scrutiny on banks and financial services providers who have clients in certain “high risk” businesses.

Targeted industries include precious metals and guns and ammunition, but there are many others. Unelected bureaucrats developed a list of businesses they deem suspicious. But since investigating and prosecuting actual fraud or money laundering is difficult, their approach is an end run around due process by cutting off access to banking.

Operation Chokepoint is designed to “choke” businesses by pressuring banks to stop accepting customers in businesses that officials don’t like. Banks and financial services providers such as PayPal face additional scrutiny, regulation, and penalties for keeping clients who are considered high risk.

Michael Bresnick served as executive director of the Financial Fraud Enforcement Task Force when it created Operation Chokepoint. He has since left for a job in the private sector. He wrote in April for American Banker and confirmed, “Members of the industry (financial institutions) have raised their hands in frustration and simply avoided lines of business typically associated with higher risk.”

We believe Operation Chokepoint is behind a recent decision by PayPal to suspend services to many in our industry. We are aware of Paypal accounts that have been placed on hold for months without explanation. Others have been permanently closed with no opportunity for appeal or recourse. Of course, Paypal has been a left-wing activist and can be expected to toe the Big Government line.

In our own dealings with Paypal, we have long found it to be a very poorly run business (poor service and communication, an unhelpful fraud department, and outdated technical resources) compared to other processors who also had lower costs, and we have now discontinued offering Paypal as a payment option.

But Operation Chokepoint is just another front in the broader war on cash. Bureaucrats and bankers aren’t going to be happy until every transaction is conducted “on the grid” and therefore subject to scrutiny and regulation. That should concern all of us.

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