Government officials continue deputizing private businesses to implement restrictive policies that can't win traction through the political process or are forbidden by the Constitution. The latest target is gun rights.
The newest development comes in the form of a specific merchant category code for retailers of firearms and ammunition, breaking them out from the broader category of specialty retailers in which they were previously included. The code makes credit card purchases from such businesses much easier to track and potentially exposes buyers and sellers to harassment.
The new code is touted as an anti-crime measure, but its advocates don't specify how tagging all transactions by associated vendors will identify suspicious activity.
"Amalgamated Bank announced that its application to the International Standards Organization for a new merchant category code (MCC) for gun and ammunition stores was approved," the New York-based financial institution announced September 9. "This code is the key to creating new tools that all financial institutions must now use to begin detecting and reporting suspicious activity associated with gun trafficking and mass shootings to the Financial Crimes Enforcement Network, the government agency charged with safeguarding the financial system from illicit use."
Amalgamated Bank is more of a political operation that happens to process financial transactions than a financial institution with ideological leanings. "When you deposit your money at Amalgamated, it supports sustainable organizations, progressive causes, and social justice," the bank boasts. So, it's no surprise that its petition to the Geneva-based International Standards Organization was supported by similar calls from like-minded politicians. That includes Sen. Elizabeth Warren (D–Mass.), Rep. Madeleine Dean (D–Penn.), Democratic New York City Mayor Eric Adams, and other elected officials, all of whom developed a simultaneous interest in how credit card companies identify vendors.
"Mass shooters have repeatedly financed deadly massacres using credit cards, and Bank CEOs need to step up to save lives," huffed Warren.
But the new code doesn't come with subcategories for aspiring mass murderers; it tags all purchases, whether of rifles or beef jerky, and without regard for intent. That has industry insiders worried that politicians are again weaponizing the financial system to target activities they don't like but haven't been able to ban through law. That's a game anybody can play.
"Some executives in private discussions have flagged concerns that it could lead to the creation of more codes that could be used to crack down on controversial businesses such as abortion providers," The Wall Street Journal reported.
Well, of course it could. It wasn't that long ago that the banking industry was conscripted by the U.S. Justice Department's Operation Choke Point crusade against payday lenders, adult entertainment, gun dealers, and other politically disfavored enterprises.
"The general outline is the DOJ and bank regulators are putting the screws to banks and other third-party payment processors to refuse banking services to companies and industries that are deemed to pose a 'reputation risk' to the bank," George Mason University law professor Todd Zywicki wrote in 2014. "Most controversially, the list of dubious industries is populated by enterprises that are entirely, or at least generally, legal."
Operation Choke Point was officially terminated in 2017. But that wasn't the end of using nominally private businesses to achieve policy goals. American Banker reported in 2019 on financial institutions pressured to deny services to "politically divisive clients." More recently, under fire from elected officials, UPS implemented tougher shipping policies for gun-related businesses, and even destroyed some packages in transit. The regulatory state gives politicians enormous leverage.
"The social media companies are at pains to show that they share the government's goals, which is precisely the problem," Reason's Jacob Sullum noted of cooperation by Facebook and Twitter to suppress messages disliked by the White House. "Given the broad powers that the federal government has to make life difficult for these businesses through public criticism, litigation, regulation, and legislation, the Biden administration's 'asks' for stricter moderation are tantamount to commands."
Ultimately, whether private firms do the bidding of government by choice or because of intimidation, the fact is that politicians are bypassing the hard work of legislation and the protections of the Constitution to target activities they just don't like. In the case of the new gun store merchant code, that poses risks to businesses as well as to customers whose transactions are flagged. But the codes specifically apply to credit card payments, creating an incentive for people to look to alternatives.
"Gun buyers trying to fly under the radar now have an incentive to pay with cash (or perhaps cryptocurrency, where it's accepted)," notes Marc Hochstein of CoinDesk.
The move also could be a boon for payment systems specifically created for the firearms industry, assuming they aren't subsequently targeted themselves.
"We've seen unusually high interest in GunTab since the new MCC was announced," I was told via email by a representative of GunTab, a payment service specifically intended for firearms-related transactions. "In particular, online forums have been very active with people discussing ways to avoid the de facto gun registry this code implies. GunTab is being suggested because we're an escrow service, not a gun store. But we're still concerned about this new MCC because of what it really represents."
The people at GunTab warn that the new merchant code might be used to choke off services to gun dealers and create a crude registry of owners. But they especially worry it will be used to generate Suspicious Activity Reports by financial institutions to the Financial Crimes Enforcement Network that could land law enforcement on people's doorsteps through "predictive policing" efforts that interpret innocent activity as a threat. Think of it as swatting formalized through financial regulations.
Interestingly, the feds are also targeting "buy now, pay later" programs that are popular with consumers, even for groceries now that inflation is so high. Such plans are also widely used for firearms purchases, which has drawn (you guessed it) the attention of anti-gun politicians.
How will financial institutions implement the new merchant code? Queries to American Express, the International Standards Organization, Mastercard, and Visa went unanswered as of press time. But whatever they do, expect it to be just the latest step in an ongoing effort by politicians to punish people and activities they dislike by conscripting private companies to do what government can't.