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If your bank doesn’t like your startup’s blog, they may freeze your funds (markmaunder.com)
151 points by mmaunder 2614 days ago | hide | past | web | 42 comments | favorite

Hey. Jason Goldberg here. Do I think Citibank or Citigroup is a homophobic malicious company? No. Do I think some compliance officer is a moron who made a really stupid decision? Yes. Three hours of trying to sort this out provided even more comedic insanity than I even revealed on the blog post. Including a bank manager who didn't want to talk about this because she was uncomfortable talking about the content of our blog over a recorded phone conversation. Oh, and we've learned that the account was marked to be a cancelled by said compliance officer for this "objectionable content." wtf.

All we know so far is that we finally got someone to lift the block on the account, but that the best she could promise is another review of the situation today.


Why is a bank even looking at your content out of curiosity? Should it matter unless you're violating the law (and presumably a judge can tell them to freeze/cancel your accounts at that point)?

Right? I'm told that irbid standard practice for a compliance officer to review new business acccounts shortly after they are opened. This individual clearly had some bad judgement.

I started opening an account with HSBC in the states last month and they were noticeably wary until they saw a web page for my company - the Patriot act was specifically mentioned - it seems that the due diligence requirements for new accounts is very high.

That's an odd thing for them to look for. Almost any dufus with FrontPage,etc. could put up a reasonably businessy looking website. I don't expect bankers to be internet experts, but I would think they'd realize that the presence of a website isn't much of a proof of legitimacy.

As an interesting counter-anecdote, I recently opened a business account with TCF bank. We definitely didn't have our website up (not sure we'd even registered a domain name at that point). TCF didn't seem to have any interest in our web site, they just wanted our federally issued EIN and a copy of our business registration with the state (in our case, Articles of Organization for an LLC.). IMHO, those seem like sensible documents for them to request. A website? Not so much.

Agreed, but most bankers aren't paid to think anymore. I had those other documents in hand as well... but, show the website... whatever works.

Perhaps there is a secret thrill in being a banker who may one day catch a Patriot Act violator, or even a $200 bonus?

Perhaps they were getting a merchant account as well? When we got our merchant account they had a checklist of things they had to check out on the site to make sure we were inline with Visa / Mastercard requirements.

Though, it's still mind boggling how the leap could be made from, you know, mentioning gay folks to ... I don't even know ... treating it as porn? The blog is totally tame.

The only thing I can think maybe happened is that they hit the home page, and then falsely referred to it as "the blog". The wording on the home page is sparse and ambiguous enough that it could be misconstrued (especially if we're already talking about someone who fears teh gays) as being a hook-up site.

That said, I hope Jason and crew ride this one for all it's worth; it's like the perfect storm for generating buzz pre-launch. :-)

Just speculating, could be related to the "know your customer" laws: http://en.wikipedia.org/wiki/Know_your_customer

Thanks for popping in. Something does not add up at all, and I would be inclined to think at the bank's end.

Which type of an account, checking/savings/loan/? Were they closing it, closing a card, freezing it?

A bank manager/supervisor should be bending over backwards to rectify the situation if one of their employees has been stupid enough to close an account over a personal moral issue. As we all probably know, a bank can terminate an account at any time for any reason - except as laws (such as anti-discrimination and the various banking regulations) otherwise dictate.

The bank must first explain whether the closure is, in their view, lawful and complying with their own regulations. If they maintain this is the case, they must explain to you the criteria for "objectionable content" and why presence of such a non-banking-related issue is considered grounds for termination, and why it is not discriminatory (e.g. if the issue is something like a non-profit account for a for-profit company.)

If they acknowledge it was an error, YMMV but I personally would like to be briefed on how they address the issue, both with the employee in question and ensuring something similar does not occur in the future; preferrably by a senior VP. It is that severe.

I have no information specific to Citi but I doubt very much that any bank manager/supervisor is in a position to do anything about a decision made by the Compliance office. Compliance is a big gorilla in a financial services org -- they're responsible for keeping the company out of legal trouble. That includes making sure SarbOx, the Patriot Act and other regulations are followed to the letter. Most of the rules they enforce have significant financial/legal consequences so their decisions get a lot of deference. And the nature of compliance actions, which are often triggered by things like suspected money laundering or fraud, means front-line employees are unlikely to have any detailed information about the reasoning behind them, beyond a brief note on the account from the compliance office, which reveals no more than the barest minimum of information (the folks Fabulis talked to were probably all giving the same response because they were probably all reading the same compliance-office note on the account).

All of this makes a lot of operational sense -- missing a legitimate compliance violation costs the firm more than cleaning up after the occasional false positive, as long as those false positives stay occasional. But the downside is that one stupid decision by one stupid employee in the compliance office can take some serious effort to unravel. The legit complaints have to bubble up through all the deadbeat dads bitching about having their child support payments garnished...

I did indeed mean the supervisor managing compliance officers, but good info nonetheless!

This is crazy enough that a supervisor will probably fix it instantly once business hours start, but on the (~15%?) chance that they don't fix it, you might want to record the call and announce that you are recording it.

Good and even-tempered response, JG. Nothing is sadder to me than an internet mob with torches and pitchforks attacking a company because of the actions of one stupid individual (or even a few).

My guess (and hope!) is that senior folks at Citi come down on these individuals like a ten ton hammer and apologize profusely to you guys. G'luck!

Just reading that blog post it sounds as if Citi behaved monstrously. Big banks are an easy target; frequently, I suspect, with justification. I personally don't like big banks; I use a small one. But...

There's a lot that post didn't say. Was the block just a temporary hold? What was the source of the funds? Was it a merchant account? If so the bank may have been justified in holding deposits longer if there had been more chargebacks than anticipated or even if the nature of the business indicated a likelihood of greater chargebacks.

If the reason Citi gave, as quoted by the Fabulis founder, was because of objectionable content in a blog might that just indicate the bank had rightly or wrongly reclassified the type of business based on blog contents?

Good point about reclassification; actual "objectionable content"* could cause law enforcement to order a hold but those are disclosed to the accountholder. Another issue might be an account opened for a non-profit or some other account type problem. Yet another could be a suspected misrepresentation in account documentation but that would be more likely in case of a loan of some type.

Needs much more detail and some type of corroboration.

Existing laws, threat of lawsuit and just plain bad PR means this is something a bank would be very unlikely to do.

My family has had some personal experience with banks freezing accounts -- it can be done on the whim of a single person. That person probably didn't think of any of those consequences in this instance.

That is certainly true, it just seems very unlikely. Particularly if it is an account hold, not a blocked card or held deposit or something.

It is definitely not beyond the realm of possibility that some "morally enraged" or otherwise vindictive person might have done so. But they usually have some cover story in those cases, too.

I wonder if some of these banks are perhaps a bit less solvent than they would like to be still. I've noticed that it takes my current bank an outrageously long time (4 days) to move money between accounts unless someone goes down to the branch and manually signs the transaction. It's annoying to know that the web interface, though convenient and handy will impose a wait state where the money is not in either account for several days; whereas taking 15 minutes to go to the branch will cause the money to move right away.

Big banks are bad about doing this. They delay your funds so that they can actually earn interest on your money while you don't have access to it.

What bank is it?

Chase, formerly WAMU; I rather suspect it may have something to do with the fact that some of the accounts were opened after Chase took over and the destination accounts were with WAMU long before. But of course they aren't going to tell me they can't mesh the two computer systems smoothly.

No experience with Chase's site, but make sure you are indeed making a transfer and not an "online (bill) payment." The bank is also required to provide you with an availability schedule (and, if I recall correctly, inform you when you make the transfer) so make sure you get a Terms & Conditions booklet where this is explained. Transfers between two personal checking accounts should always complete within a business day; savings- and business accounts may be different.

They might certainly have some loophole, but they must be able to explain it.

Well, Chase isn't exactly fast at taking money for a payment either. Car loan payments made on the website from another bank's checking account don't seem to hit for 3 to 4 days.

Parenthetical, but I really like the use of -webkit-transition in the Fabulis blog's stylesheet. I wasn't even aware of this extension to CSS, so I fruitlessly searched to find the javascript that was making it happen, until I finally got the idea to check the CSS. Try resizing the page in Safari, Chrome, or Webkit (cmd-plus or cmd-minus) and notice what happens with the links.


Big banks are at least as evil as big telecoms; switching to a regional bank might be a good move and result in far better service.

The Citibank response to this problem. Whatever actually happened, the issues seems to have been resolved and written off as a "misunderstanding".


Citibank sincerely apologizes to Mr. Goldberg for this misunderstanding. This situation had nothing to do with the content of his web site and any comments by our staff to the contrary were incorrect; we are reviewing what happened. This was a technical issue about missing documentation that is required for new business accounts. Once we resolved the situation, we unblocked the account immediately. Mr. Goldberg is a valued customer and we appreciate his business. Also, Citi is strongly committed to diversity, including support for the gay, lesbian, bisexual and transgender community, and other organizations promoting diversity. In fact, this week Citi has announced the financing for the True Colors Residence, a housing facility for homeless GLBT youth in New York City.

Jason seems to be a pretty competent guy, met him after the socialmedian aquisition here in germany. And this is not his first startup, I can't really imagine that he pulled off samething shady, so all the fault to citi.

So what was the objectionable content?

I am confused. What are the relevant US laws that allow banks to freeze accounts? Does Citi's accountholder agreement make provisions for such a freeze? If, as some here have conjectured, the issue was with an attached merchant account, why not just cut off the ability to accept plastic?

If AdultFriendFinder can exist and take credit cards, then there must not be any [Edit: at least sex-related] business "content"-based laws which allow freezing assets.

Just imagine the outrage if they did this to an individual.

No, I'm actually quite outraged that they did this at all.

Whenever I see a citibank logo, I think about these two related blog posts from 5 years ago:

http://ioerror.livejournal.com/301520.html http://ioerror.livejournal.com/301688.html

By what fucking law can they block an account? SUE THE LIVING SHIT OUT OF CITIBANK!

So there is this absurd rumor, see, and it is totally unsubstantiated, so it is probably true right? I mean, what is more likely, that citibank is breaking federal law and has lots of rules in place that will basically send all their depositors running for the hills for no reason, and which are on their face totally absurd... or this idiot blogger has the story which he admit is based entirely on unsubstantiated rumors wrong?

Epic Hacker News Fail.

Nope. The blogger worked with the CEO in question for 6 months and they still keep in touch (I did too FWIW). I'm not sure where "he admits is based on unsubstantiated rumors" comes from. He says he got the information from the person whose account was blocked. The CEO. That's about as ironclad as you can get, short of standing over his shoulder at an ATM.

I agree with your reaction against internet mobs and think it's ridiculous to attack a company for the act of an individual manager... Citi should get a chance to fix this.

But I think your hatred of internet mobs is clouding your judgment a bit... Because you're wrong on this front.

Furthermore, it's corroborated by the CEO on his blog here:


Which is linked to from the post.

This story is obviously false rumor. Feel free to mod me back up in 12 hours when this is official.

You are quite mistaken.

It's official. Quote from a Citi representative: "I apologize for any confusion about the status of your account and the Fabulis website. Whatever statements that were made by any Citi representative related to the content of your website were inappropriate and made in error, and I will review in detail what happened. You have my firm commitment on this point."

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