For years, the regulatory message to banks on account management was consistent: exit relationships that present unacceptable BSA/AML risk. Close the accounts for the money services business that can’t demonstrate adequate controls. Exit the cannabis-adjacent company operating in legal gray territory. The guidance from examiners was clear, and the consequence of not following it was a formal finding or worse.
On August 7, 2025, that calculus got considerably more complicated.
President Trump signed an executive order titled “Guaranteeing Fair Banking for All Americans,” directing federal banking regulators to identify and remedy what it characterized as “politicized or unlawful debanking.” The order defined that to include account denials based on political viewpoints, religious beliefs, or engagement in constitutionally protected speech, and required regulators to review whether institutions had been pressured into exiting entire industry categories based on reputational concerns rather than individualized risk assessment.
Three months later, the OCC released preliminary findings that nine large national banks had maintained policies between 2020 and 2023 that restricted or terminated access to banking services for certain industry sectors based on reputational impact rather than specific, documented compliance risk.
Banks now face scrutiny from two directions simultaneously. That’s new, and most account management policies weren’t written for it.
What the Executive Order Actually Says
The order directed federal banking regulators to take several specific actions within defined timeframes. Regulators were required to conduct reviews identifying institutions with past or current policies conducive to politicized debanking and to take “appropriate remedial action,” including fines, consent decrees, or other disciplinary measures, against institutions found to have engaged in such practices.
The order also directed regulators to remove “reputation risk” and equivalent concepts from all examination guidance, manuals, and other documents within 180 days. The OCC had already moved on this front. In March 2025, it announced it would no longer examine regulated institutions for reputation risk and began removing references to it from the Comptroller’s Handbook. The Federal Reserve followed in June 2025. A proposed rulemaking from the OCC and FDIC would go further, codifying a prohibition on agencies criticizing account decisions made solely on the basis of perceived reputational exposure.
The practical effect: “this customer type creates reputational risk” is no longer an acceptable standalone rationale for an account decision in an examination. That’s a meaningful change for institutions whose written policies include broad industry-category exclusions.
The Impossible Position, and How to Navigate It
Here’s where banks are caught. BSA examiners still expect robust customer risk management programs. Suspicious activity reporting obligations haven’t changed. The expectation that a bank will exit relationships when it cannot adequately monitor or manage the BSA/AML risk they present hasn’t changed. Nothing in the debanking executive order overrides the Bank Secrecy Act or the OCC’s longstanding guidance that institutions must manage customer risk on an individualized basis.
What the order adds is a new layer of scrutiny on the basis for those decisions. Exiting a relationship because a customer presents specific, documented BSA/AML risk that the bank cannot manage remains entirely defensible. Exiting a relationship because the customer operates in an industry sector that the bank has categorically excluded, without individualized risk assessment, is now the problem.
This isn’t an entirely new concept. The OCC’s own guidance has long stated that banks should not terminate entire categories of customer accounts without considering the risks presented by individual customers. What’s new is the enforcement pressure on that principle from the opposite direction. Banks that previously treated categorical exclusion as a conservative compliance posture are now discovering it carries its own regulatory liability.
The practical implication for account management is about documentation as much as policy. A bank’s decision to exit a relationship needs to trace to specific, documented compliance findings, not to a category-level judgment embedded in a policy written five years ago. That traceability is what separates a defensible BSA/AML decision from a debanking finding under the executive order.
Three Things to Address Now
First, audit your written account management policies for categorical industry exclusions. If your policy terminates all businesses in a specific sector (cryptocurrency, cannabis-adjacent, firearms dealers, payday lending) without an individualized risk framework, the policy needs revision. The revision doesn’t mean you have to serve those industries; it means the framework for evaluating customers in those industries must be risk-based and documented at the individual customer level.
Second, review your documentation practices for adverse action on business accounts. For every relationship exit driven by compliance concerns, there should be a clear, documented record of the specific findings that drove the decision: SAR filing history, CDD gaps, monitoring alerts, inability to obtain required information. That record protects the bank under the debanking order and satisfies BSA exam expectations simultaneously. The two requirements aren’t in conflict if the documentation is done right.
Third, train relationship managers and compliance staff on the distinction between risk-based decisions and category-based exclusions. Front-line staff often make exit referrals based on institutional culture rather than written policy, and that cultural shorthand, if it reflects categorical thinking rather than individual risk assessment, creates liability. The decision tree should be clear and consistent: what is the specific risk this customer presents, can it be managed, and is that determination documented?
The debanking order doesn’t make compliance easier. It makes the documentation standard for account decisions more demanding in a way that runs parallel to existing BSA exam expectations. Institutions that get ahead of the policy and documentation work now will be better positioned when those examination questions arrive from both directions.
Sources
President Trump Issues Executive Order on Fair Banking | Latham & Watkins (Aug. 2025)
Executive Order Addresses “Politicized or Unlawful Debanking” | McGuireWoods (Aug. 2025)
OCC Ceases Examinations for Reputation Risk | OCC (Mar. 2025)
OCC Releases Preliminary Findings from Debanking Investigation | Winston & Strawn (Dec. 2025)
Trump’s Order on Debanking Has Put Banks in an Impossible Position | American Banker
Prohibition on Use of Reputation Risk: Notice of Proposed Rulemaking | OCC (2025)
