Blacklisted by the bank

In an age of homeland insecurity, financial institutions add layers of scrutiny that some critics call overzealous.

By , Special to The Christian Science Monitor

Hossam Algabri ripped open his statement from Fleet Bank one day after work last November, and began to read: "We regret to inform you that we have decided that it is not in our best interest to continue your banking relationship with us."

Mr. Algabri assumed that a mistake had been made. He hadn't bounced a single check since he opened an account at the institution's predecessor, BayBank, 11 years earlier.

As he dialed customer service, he began to wonder: Did this have anything to do with the war on terrorism?

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"You hear about it all the time, but you never think it will happen to you," says the Egyptian native, who came to the United States at age 12 and became a citizen this year.

Algabri sat on hold that day for 20 minutes. Nine months later he is still, in essence, on hold. The bank has told him that his account was flagged for suspicious activity, but says that is all it is at liberty to reveal. He has since opened an account elsewhere.

Banks have long played a role in stopping the flow of money among suspected terrorists, money launderers, and narcotraffickers. But the terrorist attacks of Sept. 11, 2001, raised the bar. More watch lists have been generated, more institutions have become accountable - and more consumers may feel the heat.

And while alleged government violations of civil rights under the USA Patriot Act have received steady attention, consumer complaints in the private sector have fallen largely off the radar.

"No one paid attention to the lists because they primarily affected foreign nationals," says Peter Fitzgerald, an expert on government watch lists at Stetson University in Florida. "Now it affects those who do business with those who do business with those who do business with someone suspected of terrorism."

Financial institutions are under pressure from the government. They face stiff fines - up to $1 million in some cases - if they don't stop money flows or freeze accounts.

Some observers worry, however, that financial discrimination has become an unwanted byproduct. Under an article of the Patriot Act, some investigations are now conducted in secret, and American consumers like Algabri are increasingly finding their accounts closed without explanation - and with little recourse.

"Blacklisting was set up as a foreign-policy tool," but as the practice creeps into the realm of criminality, there are questions about whether the mechanisms in place to protect those who are accused, Fitzgerald says.

Targeted financial sanctions are widely supported, both in and out of the financial community, as a homeland-security measure. They are intended to punish "the bad guys," say sources, instead of an entire nation, such as Iraq.

But are its tentacles reaching too far, gathering up batches of mistaken identities? And are financial institutions too often erring on the side of caution?

Algabri's story probably dates back to his former employee, Ptech, of Quincy, Mass. The software firm made headlines last winter when it became public that one of its financiers, a Saudi national, showed up on a Treasury Department watch list.

The company was later cleared, but Algabri's account - as well as those of four Muslim and Arab colleagues - remains closed. Each received the same letter from Fleet on Nov. 2, about a month before the Ptech story broke, according to sources involved in the case.

Algabri says he believes in the nation's war on terrorism, but not the "overzealous" one that is unfolding today. "I believe they closed my account because I am a Muslim," he says. He plans to file a discrimination complaint against FleetBoston Financial Corp. in the coming weeks.

Fleet Bank did not return calls to discuss Algabri's account.

According to civil rights advocates, consumer complaints regarding account closures, canceled credit cards, and disrupted wire transfers have increasingly surfaced across the nation.

In Boston, Fleet Bank has closed at least 15 accounts of Muslim and Arab holders without explanation, according to the Massachusetts office of the American Arab Anti-Discrimination Committee. In New Jersey and New York City, dozens of Muslims have been asked to provide large amounts of documentation without cause, or face credit-card cancellation, say several sources, including the American Civil Liberties Union (ACLU).

"Recently we have started to see a number of cases ... all of which seem to have something to do with the Patriot Act," says Christopher Dunn, a legal adviser with the New York branch of the ACLU. But it is a nascent issue, he says. "We are only now trying to understand what is happening."

In fact, the pockets of complaints that have bubbled up are thought to signal a much deeper problem.

"Many of [those targeted] are immigrants. They don't want to draw attention to themselves," says Khurram Wahid, a legal adviser for the Council of American-Islamic Relations in Washington. "They don't want themselves on any system complaining about anything."

Blacklisting dates back to World War I, says Fitzgerald, when it was used principally as a political tool - to make a statement about an unsavory regime. In the 1990s, President Clinton used blacklisting to stymie narcotraffickers and terrorists. After Sept. 11, its role expanded once again.

The government's principal watch list of Specially Designated Nationals and Blocked Persons (SDN) - generated by the Office of Foreign Asset Control (OFAC) at the Department of the Treasury - currently lists more than 5,000 individuals and entities with whom the US is not to do business.

Financial institutions are required to cross-reference their customers and the constantly revised, 80-page OFAC list to make sure they have no matches. They do so via outside vendors or within in-house compliance departments. Any time a transfer occurs, for example, the names of sender and receiver are run through a program comparable to a computer spell-checker, which pulls up all possible "hits."

Cross-referencing is time consuming. "But it's the law, and we abide by the law," says John Hall, spokesman for the American Bankers Association. "We are doing our part in the fight against terrorism."

While the OFAC list is available on the Treasury Department's website, investigations of suspected terrorists or money launderers under Section 314 of the USA Patriot Act are more controversial, at least from a consumer perspective. Section 314 authorizes the government to communicate with financial institutions about suspicious activity. The institution then reports to the Treasury's Financial Crimes Enforcement Network. The customer is unaware that authorities have contacted the bank, but may find his or her account inexplicably closed.

For months, Fleet Bank refused to give Algabri - and his lawyers - a reason for shutting down his account. After two meetings with bank officials, Algabri found out that a one-time withdrawal of $7,000, as well as his habit of depositing different checks in individual envelopes at the same time, constituted suspicious behavior.

While banks are not required to shut down accounts - as they are when a name appears on the OFAC list - the government does instruct institutions to be prudent. In most cases, that means closing down the account.

"The institution has to make a decision," says John Byrne, senior counsel at the American Bankers Association. "A 314 is a serious demand ... if they are contacting you, it's for a good reason."

But doubts remain about mistaken identities. "People get accused, then cleared, and there is no repercussion for accusing anyone," says Merrie Najimy, president of the Massachusetts branch of the American Arab Anti-Discrimination Committee. "Banks can hide behind ... the Patriot Act and can get away with what they want."

Consumers have also found themselves on unofficial lists spun from an FBI suspect list generated after Sept. 11. "That list got into private hands," says Lara Flint, staff counsel at the Center for Democracy and Technology in Washington. "Many on that list have long since been cleared, but they are still feeling the ramifications," she says. "It's one example of how a list can get out of control."

Financial institutions acknowledge that closing customer accounts is not good business. Wire companies, for example, have been hit hard by having to disrupt customer transfers.

"And it has created a good deal of acrimony [among customers]," says Jorge Guerro, president of the National Money Transmitters Association. "They don't understand that we are under obligation by the government."

As Sept. 11 showed, seemingly insignificant transfers can support colossal terrorism. Now, corporate America is especially eager to show it is doing "the right thing," says W. Michael Hoffman, executive director of the Center for Business Ethics at Bentley College.

Still, there is a fine line between violating customers' rights and allowing terrorist money to flow through an institution, he says. "They must set up clear and transparent protocols for conducting any investigation."

Some call those protocols unclear. "The question is, how does one get oneself off one of these secret government watch lists?" asks Flint. "I think that's still an unanswered question."

Of the 15 people whose accounts have been closed in Boston, only Algabri has fought back.

"It draws attention to you, in your community," Algabri says. "It places a big question mark over your head." Most of his peers have opted to quietly set up accounts elsewhere.

"People feel powerless to do anything, so they've resigned themselves to being targets," says Salma Kazmi, assistant director of the Islamic Society of Boston Cultural Center. "People just want to get on with their lives."

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