FDIC and DOJ to investigate Operation Choke Point

Both the Federal Deposit Insurance Corporation and the Department of Justice will review their involvement in Operation Choke Point, a mass-market fraud prevention initiative that’s caught flak for its expansive list of “high risk” merchants.

The federal agencies agreed to collaborate in response to a letter written by U.S. Rep. Blaine Luetkemeyer, R-Missouri, and signed by 30 members of congress. The Committee of Oversight and Government Reform, of which Luetkemeyer is a member, has been investigating the operation for almost a year and determined that in the Justice Department’s effort to combat fraud it also unfairly harmed legitimate businesses.

“The correspondence I received from the FDIC and DOJ is a great first step in ensuring that those responsible for Operation Choke Point are held accountable and that Congress and the American people receive details and answers they deserve,” Luetkemeyer said.

The FDIC will review its activities related to Operation Choke Point to ensure that it acted within the bounds of the law, and it will investigate charges that a senior FDIC official provided false testimony to congress.

The DOJ Office of Professional Responsibility has opened an inquiry and will gather and review material applicable to Operation Choke Point.

The operation was created early 2013 to stop fraudulent merchants from ripping off consumers through direct payments. The strategy relied on banks denying fraudsters access to its customers’ accounts and in turn “choking” the channels needed by a business to survive financially.

In the search of “high risk” merchants, investigators looked for patterns of possible fraudulent behavior. Initially the operation targeted businesses offering phony financial services in the form of payday loans, debt relief, health care discount cards, and government grants.

Primarily the Justice Department probed online businesses, but it spread across a wide range of industries from firearm and ammo, porn, lottery, get rich quick products, coins, fireworks, gambling and more.

It’s unclear how many businesses — legitimate and fraudulent — were effected by the operation, so last month Leutkemeyer created a platform for businesses that believe they were targeted to tell their story.