Gun Retailers Equated to Porn Industry as 'High-Risk' for Bankers

Image: Gun Retailers Equated to Porn Industry as 'High-Risk' for Bankers

Monday, 19 May 2014 11:33 AM

By Drew MacKenzie

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Gun merchants have accused the Obama administration of violating their Second Amendment rights and attempting to put them out of business by listing them as "high-risk" enterprises and urging banks to cut off their credit lines.

The Federal Deposit Insurance Corp. has put banks on notice that online gun retailers are in the same category as porn stores and drug paraphernalia shops when it comes to risk assessment, The Washington Times reported.

The Justice Department also recently launched a new program called Operation Choke Point, a credit card probe targeting banks and payments processors such as PayPal, which has resulted in banking and credit institutions ending its association with online gun retailers – even if they have a good credit history.

"This administration has very clearly told the banking industry which customers they feel represent 'reputational risk' to do business with," said Peter Weinstock, a lawyer at Hunton & Williams LLP.

"So financial institutions are reacting to this extraordinary enforcement arsenal by being ultra-conservative in who they do business with. Any companies that engage in any margin of risk as defined by this administration are being dropped."

Gun merchants have slammed the FDIC’s regulations and the Justice Department’s operation as a means for the White House to bypass Congress and target them and their Second Amendment rights, says the Times.

T.R. Liberti, the owner of Top Gun Firearms Training & Supply in Miami, Florida, was informed last month by his bank, BankUnited N.A., that it was cutting ties with his online business.

Black Rifle Armory in Henderson, Nevada, had its bank accounts frozen this month as its bank checked into the company’s transactions for potential credit fraud, according to the newspaper.

Gun parts maker American Spirit Arms in Scottsdale, Arizona, was recently dumped by banking giant Bank of America, prompting owner Joe Sirochman to vent, "This seems to be happening with greater frequency and to many more dealers.

"At first, it was the bigger guys — gun parts manufacturers or high-profile retailers. Now the smaller mom-and-pop shops are being choked out, and they need their cash to buy inventory. Freezing their assets will put them out of business."

Sirochman said that gun retail is "one of the most heavily regulated industries" and the FDIC and Justice Department mandates have added even more restrictions.

"We have to ship our guns to another federal licensed dealer for pickup," he said. "The people that are picking up the rifles have to go through a background check to make sure they don’t have any felonies. You can’t own a gun or pass the background check if you do.

"All this is, is an assault on our Second Amendment rights."

Two years ago, Bank of America ended its dealings with McMillan Group International, a gun manufacturer in Phoenix after 12 years, despite its excellent credit history.

The group’s owner, Kelly McMillan, went on Facebook to alert gun owners of his dilemma and soon learned that thousands of small gun-shop owners were getting the same treatment, the Times reported.

McMillan said that banks were either freezing their accounts or refusing to process their online sales. But he’s fought back by opening a credit card processing company for the gun industry called McMillan Merchant Solutions.

"Four generations of my family have been in this industry, this is my way to give back," said McMillan. "This is an attempt by the federal government to keep people from buying guns and a way for them to combat the Second Amendment rights we have.

"It’s a covert way for them to control our right to manufacture guns and individuals to buy guns."

Republicans claim that the Obama administration is targeting businesses it doesn’t like, like the gun industry, by abusing its regulatory power," the Times said.

FDIC acting general counsel Richard Osterman defended his agency’s "high-risk" assessment, meaning subject to money laundering or other criminal behavior, of certain companies like gun merchants.

"As long as financial institutions are properly managing their relationships and the risks, they’re neither prohibited nor discouraged from providing these services," Osterman said.

"These types of programs can involve high-risk activities that could create litigation risk and reputation risk for financial institutions. So they need to do due diligence to ensure that the folks who they’re banking are acting in a safe and sound manner."

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