With The Bank’s Permission

Not too long ago, I opened a new business account at Citibank. I already had a business account there for more than 30 years, but they were offering some promo for a new account, so Dr. SJ told me to do it and she must be obeyed. But when I tried to open the account, I was told by the branch manager that I had to prove that I was a lawyer, even though my other account was captioned “counselor at law.” I was annoyed, but pulled out my state-issued bar card. Not good enough, I was informed.

I told her to check the New York State bar registration website. Nope, she officially replied. It was my job to prove it to her, not her job to figure it out. What she wanted was for me to bring in my bar admission certificate, the huge framed monster issued by the state court upon my initial admission that hung on the wall of my office for decades to impress potential clients with its fancy writing and gold seal. I tried to explain the levels of absurdity to her, but she didn’t care. “It’s the law,” she informed me.

What law?
The law.
What law?
The law that if you don’t, I can’t open the account. That law.

In a decision issued without explanation, Southern District of New York Judge Jed Rakoff denied the defendant banks motion to dismiss suits by putative victims of Jeffrey Epstein.

The implications in these suits are chilling, no matter how unsympathetic Epstein may personally have been. They suggest that mere allegations against someone should warrant financial institutions canceling their accounts—something that seems not only unfair on its face but also likely to hamper a person’s ability to defend themselves in court. A society where private businesses must reject anyone accused of crimes or face criminal liability themselves is perverse, frightening, and antithetical to civil liberties. Even the expectation that someone who had pleaded guilty to any crime should be excluded from banks doesn’t seem desirable.

Banks are, of course, private institutions and allowed to reject business from whomever they choose. They have no duty to presume innocence until proven guilty. But if federal court rulings play a role in encouraging such antics, it’s difficult to say how freely or coerced these private decisions really are.

What do banks have to do with Epstein’s use of his money, conduct, crimes? They’re no more involved in his human trafficking than the waiter who served Epstein dinner at a restaurant, or the physician who gave Epstein his annual physical. But as Willie Sutton said, “that’s where the money is,” and so the plaintiffs went after banks because Epstein is dead and, well, money.

The first is a push to hold banks and other financial institutions accountable for the actions of their customers. We see this in government initiatives like Operation Choke point, which urged banks not to do business with people in a number of disfavored business sectors, and in pressure from activists for banks, credit card companies, and payment processors to cut off accounts from people and businesses in the porn industry or risk being liable for any crimes therein. This trend risks giving regulators, politicians, and private busybodies a way to shut entire industries out of legal banking systems, thwarting free enterprise and free exercise of a profession without having to pass any new laws or prove any criminal action.

While this suit involves Epstein, and everybody hates Epstein such that who but a sex trafficker would argue against these suits, what is happening here is that “law” is being made that puts banks at risk for the unknown, and that which is none of their friggin’ business, of their customers. Was the bank teller supposed to inquire of Epstein why he was making a withdrawal? Was the back office drone supposed to not approve payment of his check until he had verified that Epstein hadn’t written it for some nefarious purpose?

And if the bank could be held liable for handling Epstein’s money, for not sticking its nose underneath his covers and uncovering the accusation that he was engaged in underage sex trafficking, the same will be the true for the rest of us. Banks are private corporations, despite what Liz Warren or Bernie Sanders shrieks, and they exist to turn a profit. They are not assuming any risk of liability to your victims because the money you put on deposit came from or went to some unlawful use. Better safe than sorry. Better profitable than take a hit because you’re doing the dirty. Better to make it your problem than theirs.

Do you want to have your bank refuse to honor your draft unless you inform some wanker what it’s for and what you’re up to? What if they don’t believe you’re a lawyer, or a social worker, or an engineer, and demand you prove it to their satisfaction? What if this happened regularly, every check or deposit? Will it become that onerous and pervasive? Probably not, but it will be entirely in the bank’s discretion because they could, per Judge Rakoff, be liable should you be up to no good.

The bank’s risk management lawyers will come up with a list of “rules,” which constitutes “the law” as far as bank drones are concerned, and the staff will comply because that’s their job and they’re not putting it at risk because of you. Crazy? Inane? Absurd? Of course, but this is about protecting banks from liability, and based on Judge Rakoff’s denial of dismissal of all causes of action against banks for Epstein’s potential crimes, the banks aren’t wrong to cover their butts at our expense.

13 thoughts on “With The Bank’s Permission

  1. Michael Shapiro

    A nice cell phone photo of your admission certificate wouldn’t suffice? In my experience, when a lay person insists “it’s the law” it never is. Banks are the most risk averse institutions, period. And, the bigger the bank the less interested they are in your business unless your name is Musk. FYI, First Republic is a very friendly bank.

    1. SHG Post author

      I asked, and was informed that it had to be “in the flesh.” My latest foray is with my 30 year old IOLA account, for which they now want me to file a W-9. I explained what an IOLA account is, but it didn’t matter. It was on their grocery list. I asked the general counsel of the NY IOLA fund about it, and she told me it was absurd and made no sense at all. I refused and they have now restricted my IOLA account. I again informed the general counsel and she was of the view that there might be a violation of law here, but not the one they think.

      Years ago, Citi courted my business. No more.

      1. The Infamous Oregon Lawhobbit

        Sympathies, sympathies, and more sympathies. It took me three bank tries before I found one that could do a single-client IOLTA account. And two of the three couldn’t even do a regular IOLTA. I was not aware – until then – that lawyer trust accounts were rocket science.

        Oddly enough, the bank that managed my regular “all clients” IOLTA told me they couldn’t do a special single-client one, as they’d never heard of such a thing.

  2. JD

    An admission certificate can be faked. They need to ask a question only a lawyer can answer correctly, such as what is a Brady motion.

    1. Curtis

      I think we need Captchas that are designed for each profession. One for lawyers, one for engineers, etc.

  3. B. McLeod

    Fortunately, there are a lot of depository institutions, and some of them actually want deposits. When the ludicrous demands become actually inconvenient, it is time to move on to a different institution. The same is true with the banks that mail boilerplate, “updated” account agreements in which the customer absolves them of negligence, indemnifies them for their own incompetence, and consents to arbitration in Bumfook, Egypt, as the sole mechanism for resolving any dispute, all costs to be borne by the customer. Fire the bastards. That’s all. There are plenty of institutions that still live in the real world.

  4. Hunting Guy

    Thomas Jefferson.

    “Everything predicted by the enemies of banks, in the beginning, is now coming to pass.”

    1. B. McLeod

      Jefferson would be amazed at some of the banking hijinks. My favorite is the provision I call “the Nigerian garnishment clause.” Typically folded in with the provisions on customer obligations relating to third-party claims or disputes, this boilerplate clause provides that the customer pre-authorizes the bank to comply with any purported legal process, from any jurisdiction, without challenge or verification, and not only absolves of the bank of any responsibility, but if the bank incurs any costs in its response, the customer must indemnify. I have fired two banks and a savings & loan for sending agreements with this provision.

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