FedNow won’t give agency power to seize bank accounts for political beliefs

CLAIM: The Federal Reserve is launching a new program that will give it the power to monitor, freeze and even seize private bank accounts based on a person’s behavior or political beliefs.

AP’S ASSESSMENT: False. Fed officials and banking experts say the new FedNow service does not give the agency additional surveillance and enforcement authorities. They say the service simply replaces the agency’s outdated system for banks to process checks and electronic payments.

THE FACTS: A post circulating widely on social media claims a new government program will give the Federal Reserve broad powers to monitor and seize people’s personal bank funds.

“The U.S. banking nightmare is about to get a lot worse,” reads the post, which has been liked or shared more than 4,500 times as of Tuesday. “A new Federal program with the power to control your money goes into effect in as little as 30 days.”

The post and other similarly worded ones link to a lengthy blog piece with the headline “U.S. Government Docket No. OP-1670 Exposes New Fed Power to Seize Control of U.S. Bank Accounts.”

The blog item claims a secretive government initiative “gives unelected officials the power to closely monitor or even freeze your account based on your behavior, and potentially even based on your political views.”

It also claims the system would give government officials the power to monitor a person’s investments, restricting how much they can invest or contribute to certain companies, causes and political parties.

The effort would even give government officials the power to pressure people to get vaccinated, “or worse,” the post claims.

But the government document referenced by the post — Docket No. OP-1670 — suggests nothing of the sort, Fed officials and banking experts say.

Instead, they say, it details the creation of FedNow, a new service set to launch this summer that will allow banks and credit unions to speed up the dayslong process of clearing checks and electronic payments.

“FedNow is an instant payments service that the Federal Reserve will offer to banks and credit unions to transfer funds for their customers,” the agency said in an emailed statement. “The Fed and FedNow cannot access individuals’ bank accounts or control how they choose to spend their money.”

Aaron Klein, a senior fellow at the Brookings Institution, a think tank in Washington, D.C., concurred, saying the claims are part of a “nonsense campaign” that has “no basis in reality.”

The Fed is simply revamping its outdated Automated Clearinghouse system, which is the network financial institutions use to send each other electronic credit and debit transfers such as payroll direct deposits, social security benefits and tax refunds, he said.

“They are upgrading their current system that runs on 1950s tech to one that’s modern,” Klein explained in an email. “It’s like changing from Blockbuster to Netflix.”

Nicholas Anthony, a policy analyst at the Cato Institute, another Washington-based research group, noted that banking institutions are already required to report suspicious financial behavior and other potential threats under the federal Bank Secrecy Act, which was enacted in 1970 to crack down on money laundering and the financing of terrorism.

“While there are many sound concerns around FedNow being an unnecessary expansion of the Federal Reserve’s footprint,” he wrote in an email. “I do not share the same concerns that FedNow will expand surveillance.”

There isn’t anything secretive about the planned system, either, as the blog post claims, Anthony noted.

The Fed has provided regular updates on the process, launched a frequently asked questions page and even published a notice in the Federal Registerearly in the process in order to solicit public feedback.

The blog post appears to wrongly conflate the forthcoming FedNow system with digital currency, commonly referred to as a “central bank digital currency,” or CBDC, which the Fed has also said it is exploring, Anthony and other experts say.

Fed officials have stressed FedNow is unrelated to the notion of a government-run digital currency, which social media users also falsely claim would lead to the elimination of cash.

“The Federal Reserve has made no decision on issuing a central bank digital currency (CBDC) & would not do so without clear support from Congress and executive branch, ideally in the form of a specific authorizing law,” the agency wrote in a series of tweets last month. “A CBDC would not replace cash or other payment options.”

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This is part of AP’s effort to address widely shared misinformation, including work with outside companies and organizations to add factual context to misleading content that is circulating online. Learn more about fact-checking at AP.