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WASHINGTON (AP) — The Treasury Department is warning that state laws that restrict banks from considering environmental, social and governance factors could harm efforts to address money laundering and terrorism financing.
The Associated Press obtained a copy of the letter sent Thursday to lawmakers. The letter singled out a law signed by Florida Gov. Ron DeSantis in May that says it would be an “unsafe and unsound practice” for banks to consider non-financial factors when doing business. The letter concludes that “such laws create uncertainty and may inhibit” national security efforts.
Conservative Republicans such as DeSantis have sought to block environmental and socially conscious standards for investing, saying that such initiatives can lead to unfair discrimination based on political beliefs and harm legitimate businesses. They say that considering environmental, social and corporate-governance issues, or ESG, before deciding whether to invest is woke behavior gone amok.
Tennessee recently enacted a similar law, although it was not mentioned in the Treasury letter. State legislatures in Arizona, Georgia, Idaho, Indiana, Iowa, Kentucky, Louisiana and South Dakota also have measures along these same lines under consideration.
DeSantis has said the law being questioned by the Treasury Department would protect the access that conservative groups and the firearms industry have to the financial sector, arguing that such organizations have at times had their accounts frozen or closed.
The Treasury Department letter said that the Florida law could, however, undermine the work of federal agencies, heightening “the risk that international drug traffickers, transnational organized criminals, terrorists, and corrupt foreign officials will use the U.S. financial system to launder money, evade sanctions, and threaten our national security.”
The Treasury Department letter was a response to a July 8 request from Rep. Josh Gottheimer, D-N.J., Rep. Blaine Luetkemeyer, R-Mo., and Rep. Brad Sherman, D-Calif.
Gottheimer said he was pleased that the Treasury Department shared his concerns.
“To any states that are considering similar laws, I urge them to think twice before putting America’s national security at risk,” the congressman said in a statement.
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Follow the AP’s coverage of the U.S. Department of the Treasury at https://apnews.com/hub/us-department-of-the-treasury.
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