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March 5, 2024

Bank of America is being sued for discriminating against Iranians

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San Diego, California – Oral arguments were held last week in San Diego for a class action lawsuit against Bank of America that has revealed the bank has closed or restricted the accounts of a staggering 15,000 individuals of Iranian heritage.

The case, Nia v. Bank of America, could have a significant impact on efforts to safeguard civil rights and equitable financial access for Iranian Americans. NIAC, which has consulted the plaintiff’s legal team and worked to combat the issue of banks closing the accounts of Iranian Americans – including numerous appeals to Bank of America over the years – had staff on hand to follow the oral arguments. 

Background on the Case

The lawsuit was filed on behalf of Mohammed Farshad Abdollah Nia, a permanent resident of the United States and an Iranian national whose account was closed by Bank of America without any notification. 

Mr. Nia came to the United States in 2011 and became a permanent resident in 2019. Like many Americans, he opened a credit card with Bank of America to help with his day-to-day expenses. Bank of America would periodically require proof of Mr. Nia’s residency, to which he always obliged. In 2019, Mr. Nia provided both a drivers license and an I-797C form, both of which Bank of America rejected as subsequent evidence of residency. Even after Mr. Nia’s multiple attempts to demonstrate proof of residency, on September 30, 2019, Bank of America restricted his account and ultimately closed it a few days later. Mr. Nia did everything Bank of America asked of him for sanctions compliance purposes, but was still punished in discriminatory fashion. 

Not only did Bank of America close the account, they failed to ensure Mr. Nia received verbal or written notice, and even after calling Bank of America representatives he was given no additional information. As a result of his account closure, Mr. Nia lost his accumulated reward points and faced a drop in his credit score, an important indicator of financial health which can lead to additional adverse effects. 

NIAC provided Mr. Nia’s legal team with key background on this issue before the class action was filed, which has been cited throughout the lawsuit. Bank of America’s initial efforts to dismiss the case were rejected in an earlier court ruling, and the parties have engaged in a back and forth discovery process that includes an examination of Bank of America’s compliance practices. As part of this discovery, Bank of America disclosed that it had restricted or closed the accounts of 15,000 individuals of Iranian heritage, a staggering total.

Oral Arguments – the Defense

The Hon. Judge Cynthia Bashant opened the hearing examining the complexity of the case, including the interplay between federal sanctions compliance obligations and anti-discrimination restrictions, and how to determine whether Bank of America operated in good-faith or bad-faith in seeking to apply its sanctions compliance obligations.

Bank of America’s legal team cited its need to comply with federal sanctions obligations in explaining the restrictions that impacted Mr. Nia and the thousands of other customers of Iranian heritage. In their opening, they asserted that their initial enforcement stemmed from Nia’s failure to comply with the bank’s due diligence requirements. On this score, it is noteworthy that Mr. Nia did – in fact – comply with Bank of America’s request to upload documents proving his residency in the United States, like many other persons of Iranian heritage who have had their accounts closed by Bank of America and other financial institutions. 

The defense continued and asserted that Bank of America, like other financial institutions, imposes additional requirements on customers with links to sanctioned countries, including Iran. They asserted that if a claim of discrimination were accepted in the case, it could have significant national security implications and restrict the ability of financial institutions to comply with existing sanctions regulations. Bank of America also asserted that it had operated in “good faith” in crafting their compliance protocols, after having been fined more than $16 million for sanctions violations back in 2014. Additionally, the defense cited a variety of existing federal regulations, including the “OFAC Risk Matrix,” which they claimed discourages banks from servicing too many customers deemed higher risk – a category defined to include foreign nationals.

In their closing remarks, the defense provocatively asserted that Bank of America had done precisely what it was supposed to with Mr. Nia, in particular, given the theoretical possibility that he could become a resident of Iran at some point in the future and that bank compliance was geared to target that potential eventuality. According to the defense’s logic, because of this hypothetical, it was entirely rational for the bank to restrict his account on the basis of such a future possibility.

On Bank of America’s arguments, NIAC will note that all financial institutions have an obligation to comply with sanctions regulations, including the stipulation that they cannot service accounts of individuals “ordinarily resident” in Iran. However, Bank of America is not obligated to terminate accounts of individuals ordinarily resident in the United States, including Mr. Nia and many other individuals of Iranian heritage who have unjustly had their accounts restricted by the bank. Moreover, existing regulations do not – under any circumstances – apply to prospective future actions, but only to where the individual is located presently. Mr. Nia was ordinarily resident in the United States, yet was targeted nonetheless, and deemed a threat due to no action of his own. 

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.” The case presents a “he said, she said” in which the U.S. government claims that sanctions enforcement does not necessitate discrimination and the banks carrying out the regulations claim otherwise. And, as Bank of America’s defense asserted at one point, discriminatory policies are not necessarily unlawful. While the bank was careful to assert that it did not believe it was implementing discriminatory policies, the remark did underscore a key tension. Federal regulators must do more to fine tune regulations so they do not encourage such discriminatory treatment on a mass scale, even as individual banks like Bank of America must do far better in striking the right balance between compliance and civil rights. 

Oral Arguments – the Plaintiff

Jason Rathod, representing the plaintiff Mr. Nia, led off his remarks by asserting – based on expert testimony – that Bank of America must observe both its sanctions compliance obligations and federal protections against discrimination, ensuring that individuals like Mr. Nia are not unfairly treated. Rathod noted that sanctions require the bank to deny service to an individual “ordinarily resident in Iran,” which is based on their present physical location, and that Bank of America went well beyond what is required by closing the account of a U.S. resident, acting in a discriminatory manner.

Rathod observed that U.S. sanctions on Iran are not supposed to target persons based on nationality or heritage – any person who is ordinarily resident in Iran is supposed to be subjected to these restrictions. Yet, Bank of America instead only imposes restrictions – via the closure of accounts – on persons of Iranian nationality or heritage. 

Rathod noted that the bank justified its actions in part on the basis of prospective future actions by Iranian customers, yet had no data to indicate that Iranians are more likely to return to Iran – and that this prospect may be even less likely for Iranians in the U.S. given the political situation in Iran. 

Rathod noted the many efforts by outside voices to point out that Bank of America was going well beyond sanctions requirements in closing accounts. This included complaints officially lodged with the Consumer Financial Protection Bureau (CFPB), which were sent directly to Bank of America, as well as complaints by Members of Congress. Rathod also cited letters sent to Bank of America by the National Iranian American Council, indicating that they clearly showed that the bank was going well beyond what was required by sanctions in restricting accounts in a discriminatory manner. However, the bank did not heed these calls for a change in course.

Reaction After the Arguments

“It was a spirited argument on both sides, and the judge asked excellent questions. So now after an hour of argument we wait for the outcome,” Rathod told NIAC. “This is a case that has the potential to impact a lot of people.”

Rathod noted that if the case is confirmed as a class action, it could impact as many as 15,000 individuals. “We think it’s really important to vindicate the rights of Iranians who have been impacted and who we believe the evidence shows were impacted wrongly by Bank of America’s conduct,” said Rathod.

 

 

Has Bank of America – or another financial institution closed your account? Please get in touch with us at [email protected] 

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