Financial Institution Customer Protection Act of 2016

Summary: Financial Institution Customer Protection Act of 2016  This bill prohibits a federal banking agency from formally or informally suggesting, requesting, or ordering a depository institution to terminate either a specific customer account, or group of customer accounts, or otherwise restrict or discourage it from entering into or maintaining a banking relationship with a specific customer or group of customers, unless: (1) the agency has a material reason to do so, and (2) the reason is not based solely on reputation risk to the institution. The &quot;material reason&quot; criterion shall be satisfied if an agency believes that a specific customer or group of customers poses a threat to national security, including any belief that they are involved in terrorist financing.  Unless the appropriate agency determines that the customer or group of customers has used due diligence to avoid doing business with any entity described below, the bill deems the criteria addressing &quot;material reason&quot; to be met if the agency believes a customer or group of customers is, or is acting as, a conduit for an entity which:    poses a threat to national security;   is involved in terrorist financing;   is an agency of the government of Iran, North Korea, Syria, or any country listed from time to time on the state sponsor of terrorism list;   is either located in, or subject to the jurisdiction of, any of such countries; or   does business with any entity located in such countries.  If an appropriate federal banking agency orders a depository institution to terminate a specific customer account or a group of customer accounts, the depository institution shall inform the customer or customers of the justification for the termination. No notice may be given to the customer, however, if the agency requests or orders a depository institution to terminate a customer account (or a group of customer accounts) based upon a belief that customer or those customers pose a threat to national security or are otherwise described above. The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 is amended to revise requirements for summoning witnesses and requiring production of books or other records the Attorney General deems relevant or material to a civil investigation in contemplation of a civil proceeding which may result in civil penalties for specified violations.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Financial Institution Customer 
Protection Act of 2016''.

SEC. 2. REQUIREMENTS FOR DEPOSIT ACCOUNT TERMINATION REQUESTS AND 
              ORDERS.

    (a) Definitions.--In this section--
            (1) the term ``appropriate Federal banking agency''--
                    (A) has the meaning given the term in section 3 of 
                the Federal Deposit Insurance Act (12 U.S.C. 1813); and
                    (B) in the case of an insured credit union, means 
                the National Credit Union Administration;
            (2) the term ``depository institution''--
                    (A) has the meaning given the term in section 3 of 
                the Federal Deposit Insurance Act (12 U.S.C. 1813); and
                    (B) includes an insured credit union; and
            (3) the term ``insured credit union'' has the meaning given 
        the term in section 101 of the Federal Credit Union Act (12 
        U.S.C. 1752).
    (b) Termination Requests or Orders Must Be Material.--
            (1) In general.--The appropriate Federal banking agency may 
        not formally or informally request or order a depository 
        institution to terminate a specific customer account or group 
        of customer accounts or to otherwise restrict or discourage a 
        depository institution from entering into or maintaining a 
        banking relationship with a specific customer or group of 
        customers unless--
                    (A) the agency has a material reason for the 
                request or order; and
                    (B) that reason is not based solely on reputation 
                risk to the depository institution.
            (2) Treatment of national security threats.--The 
        appropriate Federal banking agency shall satisfy the 
        requirement under paragraph (1) if the agency believes a 
        specific customer or group of customers is, or is acting as a 
        conduit for, an entity which--
                    (A) poses a threat to national security;
                    (B) is involved in terrorist financing;
                    (C) is an agency of the Government of Iran, North 
                Korea, Syria, or any country listed from time to time 
                on the state sponsor of terrorism list;
                    (D) is located in, or is subject to the 
                jurisdiction of, any country described in subparagraph 
                (C); or
                    (E) does business with any entity described in 
                subparagraph (C) or (D), unless the appropriate Federal 
                banking agency determines that the customer or group of 
                customers has used due diligence to avoid doing 
                business with any entity described in subparagraph (C) 
                or (D).
    (c) Notice Requirement.--
            (1) In general.--If the appropriate Federal banking agency 
        formally or informally requests or orders a depository 
        institution to terminate a specific customer account or a group 
        of customer accounts, the agency shall--
                    (A) provide the request or order to the institution 
                in writing; and
                    (B) include with the request or order a written 
                justification for why the termination is necessary, 
                including any specific laws or regulations, if any, the 
                agency believes that the customer or group of customers 
                are violating.
            (2) Justification requirement.--A written justification 
        under paragraph (1)(B) may not be based solely on the 
        reputation risk to the depository institution.
    (d) Customer Notice.--
            (1) Notice required.--Except as provided under paragraph 
        (2), if the appropriate Federal banking agency orders a 
        depository institution to terminate a specific customer account 
        or a group of customer accounts, the depository institution 
        shall inform the customer or customers of the justification for 
        the termination of the account or accounts under subsection 
        (c)(1)(B).
            (2) Notice prohibited in cases of national security.--If 
        the appropriate Federal banking agency requests or orders a 
        depository institution to terminate a specific customer account 
        or a group of customer accounts based on a belief that the 
        customer or customers pose a threat to national security, or 
        are otherwise described in subsection (b)(2), neither the 
        depository institution nor the appropriate Federal banking 
        agency may inform the customer or customers of the 
        justification for the termination of the account or accounts.
    (e) Reporting Requirement.--Each appropriate Federal banking agency 
shall issue an annual report to Congress stating--
            (1) the aggregate number of specific customer accounts that 
        the agency requested or ordered a depository institution to 
        terminate during the 1-year period preceding the issuance of 
        the report;
            (2) the legal authority on which the agency relied in 
        making the requests and orders described in paragraph (1); and
            (3) the frequency with which the agency relied on each 
        authority described in paragraph (2).

SEC. 3. AMENDMENTS TO THE FINANCIAL INSTITUTIONS REFORM, RECOVERY, AND 
              ENFORCEMENT ACT OF 1989.

    Section 951 of the Financial Institutions Reform, Recovery, and 
Enforcement Act of 1989 (12 U.S.C. 1833a) is amended--
            (1) in subsection (c)(2), by striking ``affecting a 
        federally insured financial institution'' and inserting 
        ``against a federally insured financial institution or by a 
        federally insured financial institution against an unaffiliated 
        third person''; and
            (2) in subsection (g)--
                    (A) in the subsection heading, by striking 
                ``Subpoenas'' and inserting ``Investigations''; and
                    (B) by amending paragraph (1)(C) to read as 
                follows:
                    ``(C) summon witnesses and require the production 
                of any books, papers, correspondence, memoranda, or 
                other records which the Attorney General deems relevant 
                or material to the inquiry, if the Attorney General--
                            ``(i) requests a court order from a court 
                        of competent jurisdiction for such actions and 
                        offers specific and articulable facts showing 
                        that there are reasonable grounds to believe 
                        that the information or testimony sought is 
                        relevant and material for conducting an 
                        investigation under this section; or
                            ``(ii) either personally or through 
                        delegation no lower than the Deputy Attorney 
                        General, issues and signs a subpoena for such 
                        actions and such subpoena is supported by 
                        specific and articulable facts showing that 
                        there are reasonable grounds to believe that 
                        the information or testimony sought is relevant 
                        for conducting an investigation under this 
                        section.''.