San Diego, California – The Southern District Court of California issued a sweeping ruling in favor of Bank of America in the ground-breaking class action lawsuit that alleged the bank had discriminated against Iranian Americans in its efforts to comply with U.S. sanctions on Iran. While this ruling is deeply disappointing to the more than 15,000 individuals of Iranian heritage who were directly impacted by Bank of America’s widespread closures, the fight to ensure equitable banking access for our community is not over. Following the ruling, there is increased onus on the U.S. government to alter policies to prevent the widespread closure of accounts on the basis of national heritage.
Nia v. Bank of America was initiated in 2022 on behalf of Mohammed Farshad Abdollah Nia, whose Bank of America account was closed despite his efforts to confirm his current residency in the United States. U.S. sanctions on Iran prevent American financial institutions from servicing an individual that is “ordinarily resident in Iran,” though this vague term has been interpreted broadly by banks, including Bank of America. As a result, many thousands of members of our community have had their accounts closed with little to no warning by both Bank of America and other financial institutions. NIAC provided Mr. Nia’s legal team with key background on this issue before the class action was filed, and attended the oral arguments held in February.
Lead plaintiff Jason Rathod argued that Bank of America imposed its restrictions on the basis of national origin and went well beyond what was required by U.S. sanctions in its compliance efforts by terminating accounts based on prospective future actions. Bank of America argued that its compliance efforts were conducted in good faith, based on U.S. sanctions requirements, and suggested that even if the policies they implemented were discriminatory, that would not necessarily make them unlawful.
The judge on the case, the Hon. Judge Cynthia Bashant, ruled against the plaintiff Nia and for Bank of America on nearly every point of contention. While Judge Bashant did claim that the plaintiff presented a prima facie case of discrimination that was credible, the Judge then accepted Bank of America’s claims that it imposed the restrictions to comply with U.S. sanctions on Iran.
According to the ruling, “a bank operating in good faith could consider a customer’s citizenship as a factor in determining whether that customer is ordinarily resident in Iran and could create a policy like the one (Bank of America) has. It is entirely possible, even probable, that an Iranian citizen living in the United States without permission to stay indefinitely, such as through a Green Card, may become ordinarily resident in Iran…Nothing in the record points to (Bank of America) creating its policy with even a whiff of dishonest intent. All evidence points to (Bank of America) creating its policies with” U.S. sanctions on Iran in mind. Judge Bashant also suggested that a core sanctions law – the International Emergency Economic Powers Act – generally shields financial institutions from liabilities that may arise from efforts to comply in good faith with U.S. sanctions, and cited it in dismissing many of the plaintiff’s claims.
Here, the judge appeared to overlook or dismiss many of the arguments of the plaintiff, including the arguments that Bank of America went well beyond what was required by sanctions in implementing their policies and that they only needed to show that the bank’s actions resulted in harm to a protected class, rather than to prove “bad faith” on behalf of the bank.
The plaintiff may be able to file an appeal on the ruling, in whole or in part, so this may not be the end of the road on Nia v. Bank of America. However, if allowed to stand, this ruling effectively validates the status quo in which banking access can be denied for tens of thousands of members of impacted communities on the basis of nationality, national origin, or national heritage, while limiting options for challenging those discriminatory policies in the courts by granting banks the benefit of the doubt in their enforcement.
If not overturned, options for challenging discriminatory actions by banks will shift away from the courtrooms and toward U.S. government policymakers. The U.S. Government should care whether the policies they impose are harming their citizens and persons under their jurisdiction. As senior Treasury Department official Brian Nelson – the Undersecretary of the Treasury for Terrorism and Financial Intelligence – recently stated in addressing the impact of account closures on Iranian Americans, “You can’t choose to discriminate against certain populations because you view them as too risky if it’s not actually based on any of our regulatory requirements.” Unfortunately, according to the court, banks are in fact denying services to certain populations due precisely to U.S. regulatory requirements.
As we now know thanks to Nia v. Bank of America, the targeting of individuals of Iranian heritage – more than 15,000 impacted individuals, according to just one financial institution – is quite extensive and this remains a major problem. We also now know that financial institutions prioritize federal guidance urging that they limit the number of foreign nationals utilizing their services above guidance suggesting that they are neither “prohibited nor discouraged from providing accounts or services to any specific class or type of customer.” And we also know that banks believe that an individual is at a higher risk of becoming “ordinarily resident” in Iran if they merely have Iranian nationality and particularly if they are here on a temporary visa, and tie their enforcement to those class characteristics.
It is incumbent on the Biden administration and the Treasury Department to protect the Iranian-American community and Iranian nationals present in the United States, along with many other minority groups, from banking discrimination. We will continue to advance equitable banking access for our community in subsequent discussions with relevant stakeholders.