Today the CEO of a major bank called for establishing a Merchant Category Code (MCC) for abortion services. The CEO argued that doing so would help financial institutions detect and perhaps prevent the violation of abortion prohibitions in states where it was illegal by allowing the bank to notify law enforcement if there was evidence of spending behavior commonly observed before someone had an abortion. It might also allow law enforcement to find out if someone else was paying for the abortion, such as when a person had an abortion and received a deposit from someone else for the same amount around the same time.
This is, of course, fictitious because no bank CEO would advocate for such a policy. But a real CEO, Priscilla Sims Brown of Amalgamated Bank, has proposed the same scheme for gun-related transactions. In a discussion with CNBC’s Andrew Ross Sorkin at the network’s Evolve Global Summit, Brown argued that, as CNBC put it, “the financial industry can, and should, use these codes to track gun purchases in order to help prevent acts of gun violence.”
One way to do so would be to create an MCC for gun stores. MCCs are the code used by credit card companies and banks to identify the type of merchant processing the transaction. Creating a code for gun sellers, Brown argues, would help credit card companies monitor for suspicious activity and notify law enforcement, presumably via a “suspicious activity report” (SAR). Brown views this proactive monitoring of conduct as a possible way to detect when someone is engaging in irregular behavior that might indicate an impending attack, or when someone may be making a “straw purchase” for someone who is legally prohibited from owning a firearm.
To be fair, there is some logic to at least part of this argument. The same CNBC article points to the 2017 shooter who, in the months before killing 61 people at the Route 91 Harvest music festival in Las Vegas, racked up more than $90,000 in credit card debt and spent $26,000 on guns and ammo. But to know how effective this monitoring would be, we would need to know how noisy the information is. How many sudden increases in spending presage an illegal act versus someone just splurging on guns and ammo? If 1 in 10 such spending jags precedes a shooting, this data might be useful; if it’s more like 1 in 1,000,000, obviously it’s much less so.
One of the major critiques for our current suspicious activity reporting system is that banks report so many “suspicious” events that law enforcement is looking for a needle in a haystack while simultaneously being buried by a stack of needles. The U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) received more than 20 million Bank Secrecy Act reports in FY 2019.
It is unclear what percentage of those reports amounted to anything, though a Bank Policy Institute study looking at an admittedly small sample of banks found that a median of 4% of suspicious activity reports resulted in follow-up from law enforcement—though not necessarily a further investigation, let alone a conviction. Not only would increasing the number of reports further burden the system, but if the data included a lot of false positives, it might distract law enforcement from legitimate threats. It is at best unclear whether opening a new field of SAR reporting will do more good than harm.
The idea that monitoring gun transactions by credit card companies could prevent straw purchases is a bit more far-fetched. Brown says that software could be used to discover if someone is buying guns for prohibited individuals by, for example, detecting if the buyer was receiving deposits from that person that matched what they were spending on guns, but it is not clear how this would work or how effective it would be.
In the hypothetical described above, how would the bank know that the buyer was receiving money from someone prohibited from purchasing a firearm? Would banks have access to the National Instant Criminal Background Check (NICS) system and run background checks on not only their customer but also their counterparties? Would prohibited individuals be flagged by FinCEN? Keep in mind that it isn’t just criminal convictions that can prohibit someone from owning a gun. Certain mental health issues and immigration status, for example, can also prohibit someone. Should those be flagged for banks?
Arguably, if the bank saw a series of purchases flagged with the MCC for firearms and a series of deposits in the same amount, it could be deemed “suspicious” and be reported by SAR, but this begs the question “how many prohibited individuals pay their straw buyers in the exact amount via bank transfer?” I don’t know, but I would suspect the answer is “not many.” Of course, the software could become a bit looser on what it flagged, relaxing requirements, but that would only exacerbate the overreporting issues discussed above.
To be sure, if a prohibited person or straw purchaser were arrested and law enforcement investigated their accounts, it would be helpful to look at financial records to make a connection, but how much extra use would the MCC be if law enforcement already had a suspect and some combination of access to their financial accounts, the firearm, and access to the sales records gun shops are required to keep?
So far, all of these arguments have focused on the limited utility of such surveillance for preventing violence. But even if they were effective, we should still be hesitant to proceed. While preventing violence is an obviously worthy goal, it must be balanced with other values, particularly privacy. This tension permeates American criminal and constitutional law and should be treated judiciously under all circumstances.
If the financial industry injects itself into contentious political debates, it can’t complain when it finds itself commandeered later. In the wake of the Dobbs decision striking down Roe v. Wade and returning the regulation of abortion to the states, much concern has been expressed, including by Amalgamated Bank’s Brown, about how financial records could be used by states as evidence in prosecutions against people who illegally provide or obtain abortions.
This makes sense, and from the point of view of abortion opponents, efforts to use financial services to prevent or prosecute abortions would come from the same motivation Brown cited for tracking firearms—the desire to prevent violence. While there isn’t an MCC for abortion services, how useful would one be to help law enforcement separate abortion from other, nonrestricted medical services?
Do not be surprised if states that outlaw or restrict abortion begin leaning on financial services firms to keep more detailed records, especially if these firms are seen as overtly politicizing themselves. The more financial services firms make themselves tools of surveillance, the more surveillance they will likely be compelled to perform. Doing so would likely further harm people’s trust in financial institutions and further turn finance into a tool to wage political battles, neither of which would be conducive to a stable financial or political system.