Friday, February 15, 2008

Banks, civil rights and terror laws

Banks, civil rights groups and community members should lobby together for change in terror laws.
A number of individuals, businesses, and organizations have had their bank accounts closed due to so-called "suspicious account-related activity." The suspicion causes the compliance department to recommend account closure.
This is not happening only to Arab Americans and American Muslims. A few weeks ago, I was at a meeting in Washington that centered on the issue of charities in the U.S. A non -Arab/non-Muslim resident attorney who attended the meeting spoke of his Saudi clients and shared a story about his bank experience. He said that he receives wired funds to his escrow account from Saudi Arabia for his legal fees. His bank sent him a notice stating that it intends to close his escrow account. He found out that the funds from Saudi Arabia were the reason. The cost-benefit analysis of the bank showed that closure of the red-flagged account was the bank's best bet.
The obvious and initial reaction of most clients is anger towards the bank. Since the 9/11 attacks, the Arab and Muslim communities have been hit hard by the increased sensitivity of banks to "suspicious activity." Banks are not simply refusing Arab and Muslim business. On the contrary, they strive for clientele growth; it is well known that banks offer numerous incentives to draw new customers in. It is fair to say that all banks want Arab and Muslim business.
Banks are acting this way because of anti-terror laws. In the post 9/11 era, banks have found themselves having to live by "know your client" rules. This seems like a sensible mandate until you read "Follow the money" by Ted Frank in "The Wall Street Journal" on October 28, 2006. He writes: "Banks are not immune from terrorist-related lawsuits ... They're getting hauled into court because of who has accounts at their institutions." He adds "[f]ederal laws permit parties injured by an act of terrorism to recover treble damages and attorneys' fees in civil suits against terrorists. But an act of terrorism may also include 'knowingly providing material support or resources to a foreign terrorist organization.'"
Providing "material support" to a terrorist organization is a crime. Innocent banks doing business with entities which even the government has not classified as associated with terrorism have been subject to costly litigation. This is due to "the vagueness and breadth of this language" and post 9/11 "lawsuits are pending now that claim that the banks should have known then what the U.S. government did not decide until years later," Frank writes. An infamous bank robber once stated that he robbed banks "because that's where the money is." Plaintiffs cannot sue the terrorist suspects/defendants so they sue "where the money is." Banks are being sued in terrorist-related cases because of individuals/entities who hold accounts with them.
These lawsuits can potentially expose banks to great financial liability. To reduce this risk, banks have been ruthless with closing accounts that are deemed suspicious. Unfortunately, the bulk of those ensnared in this risk aversion tactic are primarily but not solely Arabs and Muslims.
There is a way to deal with this situation. The banking industry lobby group is ranked as the most influential lobby group in Washington. Muslim, Arab and other advocacy groups have a common cause with the banks. In this particular case, reasonable bank protection would make banks less likely to close someone's account due to a newspaper article or weblog entry raising wild allegations. A coalition of advocacy groups and banks should lobby for what Frank calls laws that "make clear that civil liability is limited to those who commit criminal acts of international terrorism and those who aid and abet with specific intent to commit terror."
This is one instance where Arab and Muslim advocacy groups as well as civil rights organizations have common ground to change the law. In protecting the banks from frivolous lawsuits, we preserve the civil rights of Arab Americans and American Muslims. This is sound advice that you can take to the bank.

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