Hot Air

Chase-ing Foreigners Away

I ran a blind item here a couple of weeks ago about “[o]ne of Bloomington’s most respected and beloved citizens” who claims she was given the bum’s rush by her bank because she is “closely related to someone who works for a foreign government.” Reps of this person’s bank (she spoke with a number of people on the phone regarding the matter) said they were sorry for giving her the thumb but that’s the way their bank interpreted the Patriot Act.

I elected to withhold the names of the person and the bank until I could speak with someone from that institution (although I did slip in a huge clue by mentioning the bank in question in another context.)

Anyway, I’ve finally contacted the bank and now have its side. So, here’s a fuller version of the story:

The ex-customer whose account was disco’d is Zaineb Istrabadi, a senior lecturer in the Department of Near Eastern Languages and Cultures at Indiana University. Her ex-bank is Chase, the US consumer and commercial banking arm of JPMorgan Chase & Co.

Zaineb was told that because her brother Feisal Istrabadi once worked for the government of Iraq, Chase would terminate her account. Born in the US in 1962, Feisal attended IU as an undergrad and graduated from the Maurer School of Law in 1988. He was in private practice until 2004, during which time he worked closely with members of the opposition to Iraqi strongman Saddam Hussein.

Istrabadis

Zaineb Istrabadi (L) & Feisal Istrabadi

[Zaineb photo — Herald Times]

After Hussein’s overthrow by US-led forces in 2003, Feisal was rewarded by the new Iraq government with an ambassadorship to the United Nations. He returned to Bloomington in 2007 to take a job with his alma mater law school, where he is a professor of practice. He specializes in “research on the processes of building legal and political institutions in countries in transition from dictatorship to democracy.”

Feisal’s own Chase account, acc’d’g to Zaineb, was terminated “years ago,” ostensibly because he’d worked for the government of Iraq.

Zaineb, who lives with her ailing mother, says she received a call one morning from her Chase branch office. After some hemming and hawing, the rep said, “Your business is no longer welcome at Chase.”

Zaineb says she’s been a customer of the same bank for at least 10 years. JPM Chase was the third company to own the bank during her term as a customer there. The way Zaineb sees it, she should have been considered a Chase customer for all those ten-plus years.

When Zaineb asked why Chase was taking this action, she was told the Patriot Act was to blame. Or, at least, Chase’s interpretation of same. Zaineb adds that all the Chase reps she spoke with were “extremely apologetic.”

Nevertheless, Zaineb was left looking to park her cash in another bank, which she’s done. She’s also hurt and angry. She says she’s contacted some Arab-American advocacy groups to see what hell they might be able to raise about the situation.

For its part, Chase says it’s operating within the guidelines imposed on it by federal regulators. A Chase employee on the regional level told me, “It’s not the Patriot Act,” that led to Zaineb’s account termination.

Zaineb, acc’d’g to this Chase employee, “is a politically exposed person according to our regulators.” This person says Chase will not offer accounts to anybody with connections to “non-US people” working for foreign governments. This person says the practice is “due to the regulators.”

The person explains: “The regulations are so strenuous around these accounts that we never do business with these accounts anymore.”

Here’s Chase’s corporate line: “This decision is not a reflection on how these customers have handled their accounts, but rather a result of our focus on internal controls.”

Chase Bank is regulated by the federal Office of the Comptroller of the Currency (OCC), a bureau of the Department of the Treasury. Parent JPMorgan Chase & Co. is a multinational banking and financial services holding company with assets of more than $2.5 trillion. That’s trillion. With a T. It is regulated by the Federal Reserve. The regulations my Chase source is talking about come from the OCC.

Chase Architecture

Zaineb Istrabadi’s experience with her ex-bank is not unique. Arab-Americans around the country are receiving termination notices from their banks. The Arab-American Civil Rights League has filed a class-action lawsuit against Ohio-based Huntington Bank in the US District Court in Detroit. The Council on American-Islamic Relations–Michigan appealed to the OCC to investigate Chase Bank‘s mass account terminations this past spring. The Council on American-Islamic Relations in Florida has asked the US Justice Department to sniff around for racial or religious discrimination in the national rash of account closures. Sofian Zakout, who heads American Muslims for Emergency and Relief Inc., had both his business and personal accounts terminated. A Minneapolis dentist begged TCF Bank to allow him to reopen his joint account with his wife but was rebuffed.

Much of this purging of Arab-Americans from banks’ customer rolls is due to various institutions’ interpretations of the OCC’s regulations. Here’s how Chase Bank interprets them:

Chase is no longer offering personal and business banking accounts to current or former senior non-U.S. officials, their immediate families, or close associates, given the significant and ongoing regulatory requirements to maintain the accounts. 

Regulatory guidance requires that banks perform specialized oversight and monitoring of these types of clients – requiring a significant amount of resources to support a relatively small group of customers. 

The above paragraphs arose in response to a June, 2013, guidance document issued by the Financial Action Task Force. The FATF describes itself this way:

The Financial Action Task Force (FATF) is an independent inter-governmental body that develops and promotes policies to protect the global financial system against money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction. The FATF Recommendations are recognised as the global anti-money laundering (AML) and counter-terrorist financing (CFT) standard.

Some 34 nations as well as the European Commission and the Gulf Cooperation Council are members of the FATF. They are joined by dozens of associate members and observer organizations. It’s an all-star cast of players in the international monetary game.

In short, certain foreign gov’t officials and their kin are under suspicion. Their financial transactions must be strictly monitored. Such oversight costs time and money. The banks, ergo, figure it ain’t worth it.

Bye bye, Istrabadis — and countless other Arab-Americans. It’s not clear at this point if the same monitoring is required, say, of consuls and ambassadors from the United Kingdom or Monaco. In any case, Zaineb Istrabadi wonders how any foreign official working in the United States can pay her or his credit card bill. “How do they do their banking?” she says.

She only knows she and her brother are not doing their banking with Chase anymore.

3 thoughts on “Hot Air

  1. Candy says:

    Good post!

  2. David Paglis "..be not of that number who remain ignorant in spite of experience." says:

    I think so too. Good arguments on both sides,

  3. nrhiller says:

    I bet The Peoples* State Bank would welcome her. I followed Russell Percifield and Judith Scott, two former managers at my last bank, to Peoples early this year. It’s the oldest surviving bank in Monroe County.
    *This is the correct spelling, without an apostrophe.

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