In a bold move to address perceived discrimination in the financial sector, U.S. President Donald Trump signed an Executive Order on Thursday 7th August 2025, prohibiting banks from denying services to individuals or businesses based on their political or religious beliefs. The Order also directs federal regulators to eliminate the use of “reputational risk” as a standard for bank supervision, a practice that critics argue has been used to unfairly restrict access to financial services for conservatives within the US political sphere.
Background and Motivation
The Executive Order comes in the wake of Trump’s claims, made during a CNBC interview on Tuesday 5th August 2025, that he personally faced discrimination from major banks. Trump alleged, without providing evidence, that JPMorgan Chase and Bank of America refused to accept his deposits following his first term in office, which ended in 2021. He pointed to these experiences as evidence of a broader trend of “debanking,” where financial institutions allegedly deny services to individuals or entities based on their political or religious affiliations.
The Order also references what Trump describes as “government-directed surveillance programs” targeting conservatives, particularly following the 6th January 2021 attack on the U.S. Capitol by his supporters. The administration argues that such practices are “incompatible with a free society” and that banking decisions should be based solely on “material, measurable and justifiable risks.”
Key Provisions of the Executive Order
The Executive Order introduces several measures for U.S. financial institutions and their regulators:
- Prohibition on Discriminatory Practices: U.S. banks are prohibited from refusing services based on political or religious beliefs or lawful business activities. This applies to both account opening and closures.
- Regulatory Review and Enforcement: Federal regulators are directed to review the practices of all supervised banks to identify any current or past instances of debanking based on non-financial criteria. Regulators have 180 days to complete this review and are authorised to impose fines or other disciplinary measures on institutions found to be in violation.
- Elimination of Reputational Risk Standards: The Order formally requests that regulators abandon the use of “reputational risk” as a supervisory criterion. This standard, which allows regulators to penalise banks for activities that could lead to negative publicity or litigation, has been criticised by the banking industry as overly subjective and prone to abuse.
- Potential Legal Action: Cases of discriminatory practices may be referred to the U.S. Department of Justice for possible civil enforcement.
- Internal Policy Review: Regulatory bodies must ensure their policies do not enable or tolerate discriminatory banking practices.
Industry and Regulatory Response
Major U.S. banking trade groups, including the Bank Policy Institute and the American Bankers Association, have welcomed the Order as a step towards regulatory clarity. They argue that subjective standards have pressured banks into account closures, particularly in anti-money laundering (AML) contexts.
However, large banks have consistently denied engaging in politically motivated debanking. JPMorgan Chase issued a statement on Tuesday 5th August, asserting that it does not close accounts based on political beliefs, while Bank of America declined to comment on specific client matters but expressed support for clearer regulatory guidelines.
Challenges and Implications
The Executive Order raises several questions about its implementation and impact. One key issue is how US regulators will interpret and enforce the new rules. The 180-day review period will be critical, as regulators must balance the Order’s directives with existing AML and Know Your Customer (KYC) requirements, which often require heightened scrutiny of Politically Exposed Persons (PEPs) and other high-risk clients.
Critics of the Order argue that it may complicate banks’ ability to manage legitimate risks, such as those posed by clients involved in controversial but legal activities. The elimination of the reputational risk standard could also reduce regulators’ ability to address practices that, while not explicitly illegal, may expose banks to significant public or legal backlash.
Broader Context
The Executive Order is part of a broader push to challenge perceived biases in the financial sector. In the US, Republicans have long argued that banks, under pressure from regulators, unfairly target conservative individuals and businesses, particularly those in sectors like firearms, energy or religious organisations. The removal of reputational risk as a supervisory standard earlier this year by federal bank regulators was a precursor to this Order, reflecting a shift toward loosening regulatory constraints.
For the banking industry, the Order aligns with ongoing calls for regulatory reform, particularly around AML rules, which banks argue are outdated and overly restrictive. However, the success of the Order will depend on how regulators and banks navigate the tension between ensuring fair access to financial services and maintaining compliance with federal laws.
Looking Ahead
As US regulators begin their 180-day review, the financial industry will closely be watching how the Order is implemented. Banks may need to revise their customer screening processes to align with the new directive while continuing to meet stringent AML and KYC requirements.
Whilst the Executive Order is specific to U.S. financial institutions and regulators, its implications could extend to UK firms and markets, particularly those with operations or clients in the U.S. market. UK banks and financial institutions with U.S. subsidiaries will need to align their compliance frameworks with the new U.S. requirements to avoid penalties, especially if they serve clients classified as PEPs. The removal of the reputational risk standard may prompt UK regulators, such as the Financial Conduct Authority (FCA), to reassess their own supervisory practices, as global regulatory alignment is often a consideration in international finance.
Additionally, UK firms may face increased scrutiny from clients and advocacy groups monitoring for perceived discriminatory practices, potentially influencing the FCA to clarify its own AML and KYC guidelines to prevent similar controversies in the UK market.
How Complyport Can Help
The recent Executive Order reflects the ever-evolving regulatory landscape for financial institutions, particularly around AML and KYC compliance, as banks navigate new requirements to avoid discriminatory practices while maintaining robust risk management frameworks. At Complyport, our team of regulatory experts is well-equipped to support your institution in adapting to these changes and ensuring compliance with federal regulations.
Our services include:
- AML/KYC Policy Development: We assist banks in developing and updating AML and KYC policies to align with the new Executive Order while meeting existing regulatory requirements. Our experts ensure your frameworks are robust, transparent and defensible.
- Regulatory Compliance Audits: Our team conducts comprehensive reviews of your institution’s account opening and closure practices to identify potential vulnerabilities and ensure compliance with the prohibition on debanking based on political or religious beliefs.
- Cross-Border Regulatory Gap Analysis: We evaluate differences between UK and U.S. AML/KYC requirements, including treatment of PEPs, application of reputational risk and enhanced due diligence thresholds, to identify and close compliance gaps for firms operating in both jurisdictions.
- Staff Training on Compliance Practices: Our training incorporates FCA expectations, MLR 2017 requirements, and recent U.S. regulatory developments to minimise the risk of inadvertent breaches or perceived discriminatory actions.
Contact Us
For more information on strengthening your compliance frameworks or navigating the implications of the new Executive Order, contact our team today to schedule a consultation with one of our Subject Matter Experts. Ask ViCA, your Virtual Compliance Assistant. Claim your complimentary 20 queries today! Register here: https://vica.chat
