My first reaction to this story was outrage, followed by skepticism. The story around Operation Choke Point (OCP) appears to have taken a year long breather (the first story about porn stars losing their bank accounts was reported in May 2013 http://www.cnbc.com/id/100746445), only to resurface with a WSJ article on the subject: http://online.wsj.com/news/articles/SB1000142405270230481090....
The WSJ article was penned by former governor of Oklahoma and current American Bankers Association (ABA) President, Frank Keating. The ABA is a national trade association that represents all banks (source: http://www.opensecrets.org/news/2012/09/capital-eye-opener-s...), essentially a lobbying firm for the banking industry. One wonders why the banking industry would care enough to have the President of their lobbying firm publish a piece about this in the WSJ. Surely a Republican from Oklahoma cares little and less about the financial well being of porn stars.
On the same exact day the WSJ article was published (April 24, 2014), an article written by Jason Oxman, CEO of the Electronic Transactions Association (another lobbying group) was published, also lambasting OCP: http://thehill.com/blogs/congress-blog/economy-budget/204174...
These two articles, if you can call them that, given the authorship, are the only source pieces at the root of the current media interest in OCP.
It's clear (to me anyhow) that the porn stars aren't the story here, they're just the fodder to get the people in a tizzy about OCP. I'm wondering what else is in involved in Operation Choke Point that's making the banking industry and the payment processors call out the big guns. Whatever it is, I imagine large sums of money are involved.
Weird. I looked up Operation Choke Point and you're right, the lead-off stories are from Keating and Oxman, followed by an article in Reason, all suggesting that OCP is a scheme run by DOJ to suppress legal businesses through the banking system.
Then I found a WaPo article saying that OCP was a scheme by DOJ to monitor and constrain fraudulent businesses like payday loans and prepaid cards.
Before your comment, I had no inkling that any of these enforcement actions might have been orginating with DOJ at all. I figured, Chase just doesn't want to service the porn industry. But it looks like that's not actually the case!
My priors indicate that the Democratic DOJ is not actually launching a shadow jihad against porn (of all things) by intervening in the bank system. That's just not a Dem issue. On the other hand, consumer financial fraud is a top-tier issue for the DOJ under any administration, liberal or conservative. Occam's razor suggests the WaPo is probably right-er than some op-ed by a banking lobbyist.
Why are EFF and Reason and the largest bank lobby campaigning against OCP?
Weird! Thanks for pointing this out. I flagged the story originally, but have now unflagged it.
"Why are EFF and Reason and the largest bank lobby campaigning against OCP?"
Because the DOJ shouldn't be using the regulatory bureaucracy to make an end run around congress to close down businesses they don't like that are otherwise legal? What happens if they decide next that they don't like gun shops or abortion clinics or businesses that are owned by <insert discriminated group> here.
If these businesses are doing something wrong then shut them down legitimately under the law or have the law changed to outlaw them but allowing some official in the DOJ to use bank regulation to for them out of business is not right.
If that was the argument, why not make it directly? Why does the EFF frame the problem in terms of "feminist porn" while burying the lede on payday loan scams? It seems increasingly clear that nobody at DOJ gives a shit what kind of porn you watch. They're just tired of auto-billing scams.
Are we reading the same article because I feel like they are making that argument. Payday loans maybe a bad deal but they aren't inherently scams. At any rate if these are scams then why aren't they being addressed through the courts instead of via this extrajudicial method?
Can I for once be the origin of a crazy conspiracy theory rather than the annoying guy huffing and griping in the corner and killing everyone's fun?
How about this:
DOJ has launched a project that coordinates with the country's largest banks to constrain and monitor high-fraud businesses; say, porn sites, prepaid cards, and payday loans.
Porn doesn't have a significant lobby.
But payday loans and prepaid cards sure as hell do.
Unfortunately for those lobbies, it's unseemly to write op-eds about how the DOJ and banks are collaborating to suppress the exploitation of poor people.
It is, however, possible to get stories placed about the government's secret plan to create a Morality Police Force to eliminate pornography and, one assumes, any other form of expression the government disfavors.
And this must be some new meaning of the word "constrain" I wasn't previously acquainted with. This "operation" appears to be intended to terminate these "undesirable" businesses with extreme prejudice, and without the pesky Rule of Law getting in the way.
When I called payday loan companies "fraudulent", I was letting my biases show. The more accurate way to describe them is with the phrase I used in my latter comment: a high-fraud business, one that hosts quite a bit of fraud.
If you want to write an impassioned case on behalf of payday loan companies, be my guest. You asked a question: what did the OP mean when it pointed out that this issue was being driven by op-eds from banking lobbyists? I provided a possible answer.
Investigations and prosecutions of fraud --- OCP includes criminal prosecutions --- are part of the rule of law. Meanwhile, banks profit directly from fraud by collecting transaction fees. The banking lobby wants to convince the government thank the banks will self-police, but the issue at hand is an externality to the banks.
What I'd like to know is, why are EFF and Reason casting this as suppression of pornography? It's the payday lenders and prepaid card scams that are driving the lobbying effort.
You know very well if the DoJ was "containing" problems through legit fraud prosecutions nobody would be raising a huge fuss.
(ADDED: one wonder how many of these prosecutions are legit vs. "the process is the punishment" well nigh unlimited budget DoJ vs. likely small fry.)
It's the lawless abuse of regulatory powers---e.g. why the FDIC is part of the operation---to try to shut down entire sectors of the finance industry that has people figuratively up in arms.
Given that both explicitly mention payday lenders, I would say not, they're just adding their weight to the current propaganda effort.
The EFF's motive would seem to be obvious; after talking about the porn star situation, they note an online case:
"This is particularly troubling because “pornography” itself is subject to interpretation. While the crackdown currently affects mainstream, prominent performers, it could quickly turn into a bank account ban for radical and feminist porn. We’ve seen examples of this in the past. For instance, Cindy Gallup, who hopes to revolutionize pornography and cultural acceptance of human sexuality through her website MakeLoveNotPorn.com, struggled to find any bank that would do business with her in the United States. Artists of all stripes should be concerned about this unnecessary encroachment on free expression."
And then they immediately segue to Operation Check Point with its less sympathetic victims.
Reason is the the leasing popular libertarian journal of opinion, they have no reason (sorry) whatsoever not to defend payday loan companies and other free market entities our betters frown upon. Their second paragraph jumps right to Operation Check Point and lists these as "undesirable" lines of business it's suspected as attacking, "payday lenders, ammunition sales, dating services, purveyors of drug paraphernalia, and online gambling sites", every one of which they unquestionably defend as a class. Leading off with payday lenders is telling, I'd say.
Don't you find it offensive that you're purposefully misled by the two industries - who prefer to not defend themselves directly and instead use Porn as the innocent victim?
Not at all. The general principle is the defense of the Rule of Law, and of course those fighting for it are going to use the most sympathetic victims as leading examples.
Isn't the proper thing to do is for banking to be made an utility service, like gas or electricity, which banks are required by law to provide, as long as the payment is for a legitimate or non-prohibited transaction?
My local Chase branch has been calling and emailing me relentlessly, multiple times per week for the last four weeks or so, ostensibly because required "profile" information is missing on my business accounts.
I replied by email to ask what information they need. They won't give any specifics, but insist that I schedule time to meet in person.
I've had the same Chase accounts for many years, and my business is pretty mundane, so I assumed it was just overzealous cross-selling of services or investments that I don't need.
But according to this EFF article, maybe there's more to it?
The consensus is that heavy deposits of money orders into Chase accounts prompted manual fraud reviews, leading to shutdowns of the entire client relationship (credit and deposit accounts).
A lot of hosting providers do not want to host adult sites. Mine told me it was primarily because those sites are frequently subject to DDoS attacks and they didn't want to constantly battle that. They wouldn't even allow me to host a site that just handled the sign-up and payment processing even when absolutely no adult content would be hosted on that site (or even my account with them). (I ended up never pursuing my idea so it was a moot point)
Many insurance companies will not write home owners policies for people that have a blacklisted breed of dog. When faced with insuring my home, I chose a company that didn't mind my pit bull.
I'm not sure if I should really be outraged that a bank doesn't want to do business with a person they see as a high risk. It might not be a 1 or 2 click process to switch banks but it is not that hard. A Wells Fargo customer support person was rude to me one time and I had a new account at a new bank by week's end.
We need empirical definition of what constitutes "high risk" in every single situation where that measure is a factor. It must be absolutely transparent else it should be deemed that the claimer of high risk is actually a money laundering vector, or arbitrary service denier.
Further, we need a war-on-bankers.
Bank simple and standard treasury are attempts at pulling the wool over people via "startup hype" whereby they still back themselves with traditional banks.
Square and stripe are simply the "new mastercard"
There is no actual real innovative movement in finance.
Bitcoin is going to be attacked, co-opted and robbed. It is also being gamed/cornered by people like the Winklevii...
What we need is a crytpo-credit system which is abstracted and anonymous to banking-of-traditional-fiat where a user can build a crypto-credit score from which real currency transactions can emerge/be borrowed.
The current system is an oppressive, exclusive system designed to be exceedingly top heavy.
> We need empirical definition of what constitutes "high risk" is
Average CC fraud rate is 0.04% of credit card transactions. A 'high' rate would be greater than 0.1%.
The site categories that are listed frequently have fraud rates of 1% or higher, they are way above average. Webcam site fraud rates are at least 1%, if you counted attempts you could multiply that by an order of magnitude.
Further, what isn't fraud on the webcam sites is often money laundering. As much as I hate to admit it, but the DOJ are right to be wary of them (not that I agree with shutting down sites or porn star bank accounts carte blanche).
Webcamming is a very easy way to launder money, and it happens. A lot.
Any chance you would know what she's doing for payment processing? About to head down a similar route with a project I'm working on -- definitely "adult", but selling physical objects rather than webcam time / vip access.
It isn't. This is especially true if you aren't geographically constrained. These are all places you can get a powerful VM or a Dedicated for less than $100/month as well.
I'm not sure who the parent posts have talked to but I've never had a problem finding one. Especially if it was a colo deal with liability insurance, etc.
French Companies:
OVH aka SoYouStart
Online.NET
UK:
Linode
Netherlands:
Virtually anyone but the first that comes to mind is WorldStream
I don't know what the space looks like now but 10 years ago they were not hard to find. They were just really expensive. Too expensive for me for a side project/experiment at the time.
Bank neutrality anyone? It seems like we could make banks "financial common carriers" so that they aren't liable for customers' illegal behavior as long as the banks themselves follow the law.
Something that just came up to me: why is making porn movies for money legal, but prostitution is illegal? It seems to me that either both should be illegal or both should be legal. The current situation seems pretty contradictory. At the end of the day it's "sex for money" in both cases.
"Something that just came up to me: why is making porn movies for money legal, but prostitution is illegal?"
The law is not a strictly logical system (this is usually a good thing, despite the common negative perceptions). Pornography was once illegal; then the interpretation of the law changed so that it would be considered "protected speech," unless it is being displayed in certain contexts. Prostitution is illegal in most of the USA, except for certain forms which are not illegal (e.g. it may not be illegal to have sex with your boss in exchange for a promotion).
In California, the anti-prostitution laws apparently have a loophole that is exploited by pornographers.
I am told that in California it is illegal for someone to pay to receive sexual acts. However, it is legal to pay people to engage in sexual acts with each other as long as the person making the payment doesn't participate.
In some states, it IS illegal to shoot porn there. Prostitution isn't a federal crime, outside of coercion or human trafficking. That's why it's legal in certain Nevada counties, but nowhere else. It's up to the state to decide what is what, and to be honest, most of them don't allow either to exist.
> Something that just came up to me: why is making porn movies for money legal, but prostitution is illegal?
For the most part, the same legislators who would ban the latter would probably ban the former, but the former has (within certain bounds) been deemed, in the US, protected expression under the First Amendment.
The main pragmatic objection to prostitution is not the sale of sex but the consumer traffic it tends to bring into a neighborhood, which pisses off the people who live there.
I think this is where crypto currencies really shine. They remove the gatekeeper for financial services. All their other benefits (and risks) are less significant.
"They remove the gatekeeper for financial services"
Hardly. Even if you ran your entire business on Bitcoin, you would still need to find an exchange when the tax man came around demanding fiat currency (unless you are dealing in such tiny amounts that you can rely on people you find online, but then your business is probably not very successful). Exchanges are the gatekeepers of cryptocurrencies; Bitcoin, Litecoin, and every other "coin" would have just been worthless toys if exchanges had not been set up.
There is also the reality of cryptocurrency use that must be considered: almost all businesses (legal and illegal) that "accept Bitcoin" actually "accept $NATIONAL_CURRENCY via a Bitcoin exchange/service." Illegal businesses try to decouple their Bitcoin payments from the exchange i.e. they attempt to launder their money (no surprises there); legal businesses proudly announce which Bitcoin service they are using to "accept Bitcoin." Those services and exchanges are gatekeepers in practice, and are increasingly compliant with money service laws and regulations (just like banks).
"Public" is one thing, associating a name to a hash is something else entirely. Keeping in mind that a user can have unlimited wallets and send coins between them on the fly...
You can certainly try to keep a secret for a very long time. But the secret nature of bitcoin is waaaaay exaggerated. If you use it, you can be traced often."I have 300 wallets" is possible, but not convienent
Basic bitcoin security is new wallets for each transaction. It is still a very hard problem just looking at the block chain that if this hash sends coins to that hash who the owner of the recieving wallet is. Is it the same person filling a new wallet or a transaction?
Earlier item using a Reason article, much more suspicious this is a new action of Operation Choke Point, and listing other areas possibly under attack: https://news.ycombinator.com/item?id=7667309
It's the US government forcing them to do this. how will shaming the bank change the fact that they are probably obligated to do what the government tells them to?
I don't see anywhere that this was done at the behest of the government. While the government has shut down accounts in all banks involved in criminal activities, adult entertainment is not a criminal activity. And the article it is only Chase bank, not all banks.
Do you have additional information that the EFF hasn't included? I'd love a reference to that. There is some more complex issues in the Bay area with cannibis retailers since it is "legal" by state law and "illegal" by federal law to sell pot. That puts the banks in a tricky place. So far though they have not pulled accounts for licensed dispensaries.
Essentially the government is threatening legal action against the banks unless they shut accounts down of businesses and individuals associated with those businesses that the government doesn't like. Chase is the biggest bank out there so it isn't surprising that the government probably targeted them fist and they also have the largest number of potential jilted customers to complain. Even though we are only hearing about 2 or 3 cases here there are certainly many more who aren't making a stink in the media.
By all libertarian interpretations Chase bank should be allowed to do - or to not do - business with whomever it wants. For example if it wants not to deal with people/businesses in the porn industry, or even people of a certain skin colour, it shouldn't have to. Whether this is good for businesses, or even if it is a moral or right thing to do, is yet to be determined.
The WSJ article was penned by former governor of Oklahoma and current American Bankers Association (ABA) President, Frank Keating. The ABA is a national trade association that represents all banks (source: http://www.opensecrets.org/news/2012/09/capital-eye-opener-s...), essentially a lobbying firm for the banking industry. One wonders why the banking industry would care enough to have the President of their lobbying firm publish a piece about this in the WSJ. Surely a Republican from Oklahoma cares little and less about the financial well being of porn stars.
On the same exact day the WSJ article was published (April 24, 2014), an article written by Jason Oxman, CEO of the Electronic Transactions Association (another lobbying group) was published, also lambasting OCP: http://thehill.com/blogs/congress-blog/economy-budget/204174...
These two articles, if you can call them that, given the authorship, are the only source pieces at the root of the current media interest in OCP.
It's clear (to me anyhow) that the porn stars aren't the story here, they're just the fodder to get the people in a tizzy about OCP. I'm wondering what else is in involved in Operation Choke Point that's making the banking industry and the payment processors call out the big guns. Whatever it is, I imagine large sums of money are involved.