Mon Jan 1, 0001

Patio11 (Bits About Money) — Debanking Summary

Source: https://www.bitsaboutmoney.com/archive/debanking-and-debunking/

Patrick McKenzie’s article — primarily about crypto debanking, broadly applicable:

  • SAR regime: ~4M SARs/year, banks cannot tell customers, second SAR triggers closure, no appeals. Secrecy codified at 12 CFR 21.11(k).

  • “Sontaku” compliance culture: Japanese concept — banks anticipate regulator preferences and implement without being asked.

  • Enhanced Due Diligence (EDD) as gate: Banks without EDD for high-risk categories refuse service rather than develop controls.

  • Cascade mechanism: FDIC says “reputational risk.” Bank says “business decision.” Payment processor says “terms of service.” Hosting provider says “acceptable use policy.” Each individually defensible.

  • Silvergate Bank: Processed $1 trillion with transaction monitoring disabled for 15 months. Onboarded Binance entities despite documented money laundering ($22B flowed through).

  • Asymmetry: Debanking easy to do, hard to detect externally, nearly impossible to appeal. Affected party often cannot learn why.