Published on February 24th, 2014 | by Farideh Farhi12
Iran Sanctions Hit the Aloha State (via Bank of Hawai’i)
by Farideh Farhi
Let me begin by saying that I have been a long-standing critic of US sanctions against Iran. Irrespective of my distaste for Iran’s structure of governance, I have not been shy in calling out the sanctions regime as collective punishment of the Iranian people. I have also been worried that they will eventually ensnare Iranians living in the United States.
The comprehensive, “crippling” nature of financial sanctions and the attempt to go for the jugular of the Iranian economy belies the boiler-plate argument that the sanctions are directed at the institutions of the Islamic Republic. Obvious to anyone who travels to Iran, the squeezed are the people who have lost jobs because of a contracting economy, those who have difficulty accessing or must pay atrocious prices for life-saving medicines, and the parents who suddenly have to generate three times as much income to support their children studying abroad. The list, which goes on, includes the sanctions-related difficulties some of Iran’s best and brightest students face when they seek admission to US universities, some of which were recently examined by Steven Ditto of the Washington Institute.
All this is to say I am not usually surprised when I hear about the problems Iranians face in order to study abroad, attend academic conferences, or send money for their children living abroad. But even I was taken aback when a friend showed me a letter sent at the end of December by the Bank of Hawai’i (BOH) to Iranian citizens residing in the state notifying them that their accounts will be closed due to US sanctions against Iran. To see this happen in the midst of negotiations between Iran and world powers — which may eventually lead to the lifting of at least some sanctions — is even more surprising and a telling example of the depth, breadth, and perhaps potential staying power of these sanctions even if the negotiations prove successful.
In retrospect, however, BOH — the largest independent financial institution in Hawai’i — is taking a confusing and harmful law to its logical conclusion: discrimination against Iranian nationals wherever they live, including the United States. I suppose one can even go as far as commending BOH for its honesty in acknowledging the transfer of its burden to its Iranian customers. Let me explain.
In December 2013, BOH began informing Iranians residing in Hawai’i of the unilateral termination of their accounts because of their “Iran citizenship.” The letter requests the BOH customer with Iranian citizenship to withdraw his or her money voluntarily or the bank will close their account by a certain date and send a check to the last address of record. Iranians who have received these notices include Green Card-holders who are residents of Hawai’i as well as Iranian students at the University of Hawai’i at Mānoa and Hawai’i Pacific University. At least one Iranian-American also received a similar letter but proof of US citizenship prevented the closure of their account.
The argument used by BOH is that it is trying to address the predicament in which it has been placed in by US financial sanctions against Iran, administered by the Treasury Department’s Office of Foreign Assets Control (OFAC). The relevant directive that imposes the predicament on BOH can be found on page 2 of this explanatory Treasury Department document.
The regulation states that “U.S. depository institutions, including foreign branches, are prohibited from servicing accounts of the Government of Iran, including banks owned or controlled by the Government of Iran (as in Appendix A) or persons in Iran” (emphasis is mine). The OFAC directive does not explicitly require the closure of accounts owned by Iranian citizens residing in the United States. Indeed, this is something the BOH letter acknowledges by including the first word in the following sentence, “although we are aware that your account address in our records is a US address”, before attempting to justify the account closure because it is “not able to prevent the operation of your account if, or when, you are in Iran.”
In effect, fearing potential punishment by OFAC, the bank has chosen to take preemptive and discriminatory action against anyone who has Iranian citizenship. In order to avoid the hassle of figuring out exactly what this notion of “persons in Iran” means in its own dealings, the bank has chosen to broaden the category to include Iranian nationals in the United States. This is irrespective of the fact that, taken to its logical conclusion, the notion of “persons in Iran” can potentially include US citizens of any background; even presumably the “true blue” ones who do not carry a suspiciously Iranian name like I do. Most Iranian-Americans who travel to Iran these days know that they shouldn’t try to access their bank accounts from Iran for fear of their account being blocked. I certainly hope that the increasing number of American tourists who are going to Iran these days also know this.
Erich Ferrari, an attorney well-versed in Iran sanctions laws who I was put in touch with through the National Iranian-American Council (NIAC), told me via email that there have been other, similar cases of account closures by US banks. But in this case BOH has gone a step further. In the other cases there was always some bank-related activity conducted within Iran. In those instances, the banks “could make an argument that a particular account holder was being targeted due to the risk profile created by his or her activity in Iran.” But this BOH action, according to Ferrari, is “just a buck shot approach at anyone who has Iranian citizenship.” He goes on to state, “I have to say, this is as strong a case for discrimination as I have seen in any of these bank cases.”
BOH’s action becomes even more troubling when one considers the potential far-ranging repercussions for Americans of Iranian descent. Under Iran’s citizenship laws, all persons born in Iran automatically carry Iranian citizenship. Moreover, individuals born outside of Iran whose father is an Iranian national — including my Hawai’i-born children — also automatically carry Iranian citizenship. Indeed, Iran’s approach to citizenship leaves no other way for Iranian-Americans and their US-born children to travel to Iran without using their Iranian citizenship and passport — a fact recognized by the US Government and State Department. Taken to its logical conclusion, BOH’s focus on Iranian nationality can potentially place US citizens at risk as well.
The Bank of Hawai’i must be called out for its lazy reading or reaction to US sanctions law on Iran, but the complex and intimidating nature of the laws themselves are ultimately responsible. Indeed, numerous stories have appeared in the news over the past few years about financial institutions and other business entities being fined large amounts for violating US sanctions on Iran in one way or another. Taking this into consideration, it’s easy to see why this relatively small bank opted for the easiest and safest route in making sure it’s not violating OFAC rules (assuming no one launches a civil suit against them).
Attempts by Iranian-American residents of Hawai’i to convince BOH to reverse its clearly discriminatory policy have so far been unsuccessful. But state authorities and relevant civil rights groups have been informed, and watchful NIAC is thankfully communicating with the bank. As far as I know, BOH is the only bank in the nation that has chosen this discriminatory route. But its honest reasoning reveals the reckless, far-reaching, and prejudicial nature of US sanctions laws against Iranian nationals wherever they live, even in the Aloha State, which is known for extending its gracious and welcoming spirit to immigrants and visitors from all over the world.