It’s time for the legislature to pass a financial inclusion law that ensures all Washingtonians have access to the financial system and to promote public safety.

The Honorable Mark Mallet, Chairman,

The Honorable Bob Hasegawa, Vice Chair,

The Honorable Lynda Wilson, Ranking Member,

The Honorable Mona Das, Senator of the 47th District,

The Honorable Representatives of the 47th District,

Honorable members of the Financial Institution, Economic Development & Trade Committee, Senators and Representatives

Dear Chairman, Vic Chair, Ranking Member, Honorable Senators, and Representatives,

RE: It’s Time for the legislature to pass a financial inclusion law that ensures all Washingtonians have access to the financial system and to promote public safety.

The House of Representative recently passed the historic SAFE Banking Act, which will improve financial transparency in the marijuana industry and increase public safety. Due to their inability to secure reliable banking services, marijuana businesses have been forced to store large amounts of cash in their premises at great risk to the owners, employees, and customers. If the Bill passes the Senate, it will be a great win for the marijuana industry and the communities in which they operate in.

As you are aware, there is another class of businesses that have been denied bank accounts and are storing cash in their premises at great risk to the owners and their employees. The businesses I’m referring to are small immigrant-owned remittance companies. In 2018, a man was sentenced to five years in prison for impersonating an FBI agent and robbing several immigrant-owned money transmitter businesses in Seattle of hundreds of thousands of dollars. In another incident, a money transmitter that serves the African diaspora was held up at gunpoint on Cedar Street in Roxbury and robbed of $420,000.

Money transmitters help US residents send money to their loved ones abroad; similar to the service offered by Western Union. After the terrorist attack that occurred on 9/11, financial institutions in the USA began the process of terminating or restricting business relationships with account holders they deemed to be “high risk.” These included remittance accounts. Rather than reducing risk, bank de-risking has increased vulnerability by pushing some businesses out of the regulated financial system altogether. In testimony to the U.S. House on Financial Services in February 2019, the Secretary of the Illinois Department of Financial and Professional Regulation, Mr. Bryan Schneider stated “As a regulator of a broad range of MSBs (money service businesses), I see first-hand the challenges these companies face in getting and maintaining banking relationships. Indiscriminate de-risking not only weakens access to financial services but actually makes enforcing the Bank Secrecy Act more difficult. It has become a public safety issue.”

But unlike the marijuana industry, the customers of these remittance companies are less affluent and they don’t have the powerful banking lobby fighting for their cause. In fact, it is legal for US banks to serve these businesses, they have chosen not to. US banks have applied de-risking in a discriminatory manner denying small and immigrant-owned money transmitters accounts while continuing to serve venture-backed upstarts and large operators like Western Union. Thousands of well-paying jobs are in jeopardy, and millions of US residents are being denied access to culturally specific services.

There is no evidence that smaller remittance companies are more likely to commit Anti-Money Laundering and Bank Secrecy Act (AML/BSA) violations compared to larger operators and yet banks have chosen to deny small operators bank accounts. In a study I conducted for my book “Un-Silicon Valley,” which looked at AML/BSA violations identified by the US Department of Treasury between 2008 and 2015 showed that out of 145 incidents of violations only one money transmitter, Paypal, was cited for violations. If the data set from my study is expanded, I believes it will show that small service providers are in fact less likely to commit AML/BSA violations, then their larger counterparts.

I was the CEO of CoinFling, a financial technology startup that had to shut its doors in 2018, not because we ran out of money or didn’t have paying customers. The reason we closed is that banks denied the company an account. These same banks, however, were serving our venture-backed competitor that had the same risk profile. A prospective investor I met early on in my entrepreneurial journey warned me that my ethnicity could be an impediment to the success of the company. It’s quite ironic that it would be a disadvantage to be an immigrant entrepreneur pursuing an opportunity in an industry that is entirely dependent on immigrant customers.

Financial Institution, Economic Development & Trade Committee should conduct an inquiry on the impact of bank de-risking, including its effects on public safety and equal access. The Committee should consider passing a law that guarantees financial inclusion for all Washingtonians.

While I applaud the passing of the SAFE Banking Act, I would be remised if I didn’t point out the hypocrisy of the US banking industry. The industry which lobbied for the bill by calling it a public safety crisis, continue to remain silent when unbanked immigrant-owned companies in Seattle and across the US are robbed of hundreds of thousands of dollars in cash. When banks give preferential treatment to venture-backed companies, they are in effect denying women and entrepreneurs of color these same opportunities since these groups are less likely to be funded by a venture capitalist.

It’s already lawful for banks to serve remittance businesses; what’s needed is a law requiring them to provide equal access to their services. Bank de-risking fundamentally goes against America’s ideal of equal opportunity and Washington State Legislature needs to address this inequity.

Written by

Roble Musse is a serial entrepreneur and author of the book “Un-Silicon Valley.” twitter — @Unsilicon_Roble https://www.unsiliconvalleybook.com/

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store