Key insight: The Trump administration's directive to target antifa-aligned groups sits uncomfortably alongside its push to prevent politicized bank account closures.
Supporting Data: Executive order on antifa and a related memo could prompt banks to exit progressive clients to minimize risk, which could bring potential constitutional challenges.
Forward look: Banks will likely prioritize high-risk cases, freezing accounts and filing additional suspicious activity reports.
Trump administration directives that federal agencies root out antifa will likely cause banks to distance — if not terminate — relationships with a number of non-profit groups that promote left wing causes, experts say, even as the administration is pushing for accountability for alleged "debanking" against conservative groups during Democratic administrations.
President Trump's Sept. 22
A related national security
The order and memo have drawn relatively muted bipartisan scrutiny, though some Democratic members of Congress circulated a letter
Treasury Secretary Scott Bessent said in an Oct. 14 appearance on conservative podcast The Charlie Kirk Show that the administration's national security push was a direct response to left-wing activity in recent years, including pro-Palestinian protests and the online response to the murder of Kirk at a campus event in Utah last month. Bessent likened Kirk's assassination to "a domestic 9/11."
"Many of these organizations have been financed by nonprofits. And it's going to stop, and we are going to, as they always say, 'follow the money,'" Bessent
The push to root out purported illegal left-wing activity will have a chilling effect on banks' relationships with nonprofits maligned by the administration, according to Todd Baker, a fellow at Columbia University's Richman Center and principal at Broadmoor Consulting. Banks with strong ties to left-leaning causes should be particularly concerned, but many could fight back in court.
"Any bank needs to be concerned, although the focus of the political actors behind this will be on influencing the largest banks to shed clients the Administration deems objectionable in a maximally public way," Baker said. "There is also likely to be risk for the few others, such as Amalgamated Bank and Beneficial State Bank, that have relatively large numbers of so-called 'progressive' nonprofits in their customer base."
"If the administration attempts to pursue a bank like Amalgamated or Beneficial, it is likely to face fierce litigation on constitutional grounds, as the policy is clearly aimed at political speech by the targeted nonprofits."
Poorvika Mehra, a fellow at the Charity & Security Network, which assists nonprofits with certain compliance challenges, said that she has already been working with nonprofits and banks on how to respond to the directives. In some cases, she said, banks may opt to quietly exit the non-profit banking space altogether rather than comb through client lists to make case-by-case decisions.
"This memo is basically asking you to follow the money, but within ideological movements, and compliance teams immediately will ask which customers put the banks at risk, especially in this very volatile, ever-changing AML/CFT environment," Mehra said. "The lowest-friction option is to quietly exit the entire category. So advocacy groups, grassroots networks, migrant rights organizations — even certain faith-based groups, depending on the work that they're doing — or gender justice groups could be targeted."
But parsing which organizations fall afoul of the new policy is complicated and fraught given the administration's simultaneous crackdown on what it calls politicized "debanking." Under the anti-debanking push, federal agencies are
The debanking order is directly undercut by the national security memo, Baker said.
"The two directives are inherently self-contradictory, and any search for a coherent policy to reconcile the two is impossible," Baker said. "This administration appears to believe that the Presidential criminal immunity and the 'unitary executive' theory adopted by the Supreme Court give it free reign to pursue partisan and blatantly unconstitutional ends through administrative means.
"So far the courts have been unwilling or unable to place any effective restraints on such actions," Baker continued.
What's more, the directives could counteract a reduction in anti-money laundering compliance, which has been a stated goal of the administration according to Mehra.
"This is, to me, directly contradictory with centralized guidance, which was to reduce the compliance burdens on banks. And now suddenly the administration issues nebulous new guidance that will result in heightened SARs for 'domestic terrorism' — which, let's be clear, is not a legally-backed designation," Mehra said. "There is no legal impetus for the president designating what seems like civil society and legal dissent as domestic terrorism, but these words go a long way, even if they aren't legally backed, because there's … a chilling effect that comes into the picture."
The Treasury Department and its Financial Crimes Enforcement Network, or Fincen, are expected to issue supplementary guidance on how to implement the national security directives. But Carleton Goss, a former attorney with the Office of the Comptroller of the Currency and partner at Hunton Andrews Kurth LLP, said that likely means that banks will take a cautious, compliance-focused approach for the time being, adding that institutions can often leverage their existing Office of Foreign Assets Control and Bank Secrecy Act programs, adding new inputs as needed.
"Banks have robust, sophisticated OFAC compliance programs, so one avenue could be to add some more individuals or groups to OFAC screening postures, and then it would get captured and reported as part of our standard OFAC reporting processes," Goss said. "So in addition to covering all the normal items that supervisors cover, [they'll say] 'Talk to us a little bit about how you're responding to this executive order,' take that back and think about whether [the bank's] response is sufficient."
Goss emphasizes that banks should focus on achievable, targeted actions rather than broad investigations, for example using keyword searches rather than reviewing all nonprofits.
"Just looking at nonprofits would probably be too expansive … [but] in a prior order, [Trump] said antifa, so banks could examine whether they have anybody with any documented ties to antifa. That would be an easy one," Goss said. "I think for a lot of these where it's unclear what kind of scope the government is looking for, what you really need to do is present some kind of good faith effort to comply with it. Don't try to boil the ocean — recognize that this is out there, ask how can [a bank] leverage what they already have to try to meet the spirit of the dirdective and come up with some plan to do that. In the absence of any further guidance that sounds reasonable as a first step."
But Baker said there could be risks associated with compliance with the order as well. Since the directives are on shaky legal ground to begin with, he said, banks that cut ties with innocent groups could face scrutiny for debanking lawful customers from a future administration.
"Those institutions who choose to take this exercise seriously will be limited to 'reading the tea leaves' as the policy itself has no basis in law or policy and is almost certainly unconstitutional.Most banks will take a very cautious approach to implementing any change in their policies," Baker said. "I suspect that even banks with management sympathetic to the MAGA movement will be concerned about blowback under a future Democratic president or Congress should they be proactive in debanking 'anti-American' or 'anti-capitalist' nonprofits. This will tend to result in banks 'slow rolling' their response to these directives unless they are sure that compliance will be rewarded in the longer term."
In the near term, banks should focus their compliance efforts on the most egregious potential instances of designatable offenses, such as overt violence, says Goss.
"The first thing banks need to do is identify [violence or illegal conduct] if it's there. The second thing they need to do is file a SAR on it and then the third thing they need to think about is, 'do we need to restrict activities in any way, or do we need to freeze accounts?'" Goss said. "Perhaps you don't have to terminate a client to effectively terminate a client, if you freeze all their accounts."
Given the sensitivity around politicized account closures, Goss says banks will likely place a high threshold for outright denials of service, but that doesn't mean they won't restrict services or take action to distance themselves from liability.
"They will file SARs, perhaps will freeze their accounts and perhaps they'll reach out to [the client directly], because, you know, nine times out of 10 the debanking problem arises because the person you debank complains," Goss said. "If there is clear evidence that you've been engaging in violence or illegal activities, then it's possible that your accounts are going to get a closer look."
Counterintuitively, Mehra said, restricting account access for groups could lead to less oversight of the nonprofit sector and more instances of those groups meeting their financial needs through other means. But the order and whatever pressure it places on them will not dissuade those groups from fulfilling their missions, she said.
"You can 'debank' [non-profit organizations], but if you think that humanitarian work is going to stop just because there's no banking access — that's a fantasy," she said. "They're just going to turn to, ironically, less-safe mechanisms of transferring money, which is just going to get them more and more outside the purview of the formal financial system — and then you have absolutely no oversight."
