Venable partner Jeffrey D. Knowles spoke with the Wall Street Journal in a March 12, 2015 article on the first criminal charges to emerge from the Justice Department's Operation Choke Point, a federal probe targeting banks handling fraudulent transactions. Earlier this week, the Justice Department brought criminal charges against a California bank alleging it handled the transactions of a payment processor that swindled customers across the country.
"The government is seeking to deputize banks in consumer protections, by holding them accountable for customer behavior," said Knowles. "DOJ was looking for a short-cut to the whack-a-mole approach…As big as DOJ is, it doesn't have the resources to go after every bad merchant…They are looking to move up the food chain and hold banks responsible for their customers and the customers of their customers."
Knowles added that emphasis on customer monitoring, known as Know Your Customer, puts small banks in a difficult position. "There's heightened expectations there will be greater due diligence and closer scrutiny of bank customers," he said. "For a smaller bank without the resources of a JPMorgan, they are hard pressed to meet all the due diligence requirements…they are between a rock and a hard place."