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Pressure mounts for credit card companies to track suspicious arms sales

A group of congressional Democrats is urging credit card companies to track suspicious gun and ammunition purchases to identify and stop gun crimes, according to a letter obtained by CBS on Thursday. News.

The letterwritten by Senator Elizabeth Warren of Massachusetts and Representative Madeleine Dean of Pennsylvania and signed by more than a dozen of their colleagues, urges the CEOs of Mastercard, American Express and Visa to support the creation of a merchant category code for firearms and ammunition retailers — a move the industry initially resisted, according to a CBS News investigation in June.

“The creation of a new [merchant category code] for arms and ammunition retail stores would be the first step in facilitating the collection of valuable financial data that could help law enforcement counter the financing of terrorism efforts,” the letter states.

A merchant category code, they wrote, “could make it easier for financial institutions to monitor certain types of suspicious activity, including straw purchases and illegal wholesale purchases that could be used in the commission of domestic terrorists or firearms trafficking”.

New York-based Amalgamated Bank launched the effort to create a code to track gun and ammunition sales in July 2021. They renewed the effort after a series of deadly mass shootings in in which young men used high-powered weapons purchased with credit cards.

Merchant category codes consist of four digits and are used in all kinds of industries as a means of classifying retailers, without revealing individual product purchases. Local shoe shine parlors have their own unique code, unlike the roughly 9,000 standalone US gun dealers. Credit card companies currently group gun retailers with other outlets, classifying them as “5999: Miscellaneous Retail Stores” or “5941: Sporting Goods Stores”.

Amalgamated Bank’s request to create a code was twice rejected by the International Organization for Standardization, which sets standards across the financial services industry and assigns merchant category codes. Documents reviewed by CBS News show that credit card industry employees were part of an internal committee within the organization that recommended denying the request.

Amalgamated decided to appeal the organization’s initial rejection decision after seeking feedback from card company employees.

“MCC specific [codes] in narrow shops [sic] are difficult,” wrote an American Express employee. “Managing long lists of tightly defined MCCs can become tedious if there is no compelling reason for the long list.

In February, the International Organization for Standardization rejected Amalgamated’s appeal. In an email, the bank was told that a new code for gun and ammunition sellers would fail to capture “sales at sporting goods stores” and, at the same time, would impose a “burden” on small retailers.

In June, the organization told CBS News that the credit card companies were not responsible for the decision and that employees of those companies were merely advising the committee, serving in their personal capacity and “do not represent the views of their employer”. Those who pushed to reject Amalgamated’s application did so “based on their expertise”, the organization said.

At the end of June, the bank requested the merchant category code again and has not yet received a response on the renewed request.

In their letters to American Express, Visa and Mastercard, Warren and Dean asked each company for their current position on the creation of the code. They further inquired about each credit card company’s role in “supporting, opposing or delaying” the process as industry representatives on the standards organization’s committee that reviews applications. new merchant category codes.

Mastercard said in a statement to CBS News that it is reviewing the proposal and how it might be implemented and managed by banks in its network. “This will help us continue to provide a payment system that supports all lawful purchases while protecting the privacy and decisions of individual cardholders,” said Scott Eisen, senior vice president of communications at Mastercard.

CBS News has also contacted representatives from Visa and American Express and is awaiting a response.

Amalgamated was founded by unionized workers nearly 100 years ago and bills itself as the nation’s oldest socially responsible bank.

“Everyone has a responsibility to do what they can to stop gun violence. As a bank, it is our right and responsibility to report the use of the financial system to fuel black market arms sales and sales associated with mass shootings,” Priscila Sims said. Brown, president and CEO of Amalgamated Bank.

“Issuing a merchant category code for arms dealers will enable us to do just that, and we are confident that our pending application will be granted if Visa, Mastercard and American Express go through their process of creating new codes. We are grateful to Senator Warren and Representative Dean for joining our call for the industry to take this common sense approach to ending gun violence.”

Proponents say such a code could be a useful tool to help law enforcement identify bad actors by shining a light on potentially suspicious buying habits, and they note that a number of mass shootings notorious were financed by credit cards.

The shooter who terrorized a Colorado Cinema in 2012, he charged more than $9,000 worth of firearms, ammunition and tactical gear in the two months before his attack, which killed 12 people and injured 70. The man who shot the Pulse Nightclub in Orlando, killing 49 people, put more than $26,000 on credit cards on guns and ammunition. And the shooter who killed 59 people in a music festival in las vegas in 2017, they billed nearly $95,000 on dozens of guns.

With a unique code for gun and ammunition sellers, the bank says it would be able to run software to detect suspicious purchases, the same way it detects evidence of other activity suspicious and malicious behavior, such as fraud and human trafficking.

Amalgamated said it could then file what’s called a Suspicious Activity Report with law enforcement to flag things like large purchases at multiple stores that may be for the black market, or possible Straw purchases, which is when someone buys a gun for another person who isn’t legally entitled to have one.

Banks and credit unions made more than 1.4 million suspicious activity reports in 2021, flagging transactions that could suggest anything from identity theft to terrorist financing.

Pressure continues to mount from outside groups asking the industry for support. On Tuesday, New York City Mayor Eric Adams, along with City Comptroller Brad Lander, pension administrators and other elected officials, also called on the three major credit card companies to support the establishment of a new unique code for gun dealers.

“When it comes to firearms falling into the wrong hands, we need to find solutions upstream before we face downstream consequences, because downstream consequences are lives lost,” Adams said. . “When you buy a plane ticket or pay for groceries, your credit card company has a special code for these retailers. It’s just common sense that we have the same policies in place for gun stores and ammunition.”

The city’s push comes after 50 New York state lawmakers sent a letter to Mastercard and American Express asking for their support for the merchant category code.

The increased pressure on credit card companies also comes ahead of the standards body’s fall meeting, where the fate of Amalgamated’s second app will be decided. The ISO did not immediately return requests for comment.