August 06, 2021
The propensity of some bankers to close the bank accounts of Iranian expatriates, which started in the United States many years ago, continues to work its way around the world and has now popped up New Zealand.
TSB Bank is accused of but denies racial profiling after closing an Iranian-born man’s account, claiming he may be planning to transfer money from a sanctioned country Iran.
Arsalan Abdollahi a New Zealand citizen says TSB appears to have wrongly assessed him as being at risk of money laundering or financing international terrorism because of his ethnicity. He is now planning legal action against the bank, which he plans to sue for significant financial damages, and has filed a discrimination complaint with the New Zealand Human Rights Commission.
An internal email he obtained from the bank under the Privacy Act shows a TSB manager wrote: “He had dual citizenship with Iran so should have been dealt with differently from the start.”
TSB has apologized to Abdollahi for its initial handling of his case but says he was not targeted because he is Iranian. “We pride ourselves on treating all customers equally,” a TSB spokeswoman told the New Zealand Herald.
“The rationale for termination of Mr. Abdollahi’s banking relationship with TSB was the potential that a TSB account might receive funds from Iran. His Iranian descent was not the reason for which the account was closed.”
The bank is refusing to provide compensation. But it says it will consider reopening Abdollahi’s account if he provides further information satisfying the bank’s risk assessment criteria relating to the Anti-Money Laundering and Counter Financing of Terrorism Act (AML/CFT Act), and regulations relating to “high-risk jurisdictions.” In other words, the bank is citing the banking rules of the Financial Action Task Force (FATF) as the reason for cracking down on Abdollahi.
Abdollahi, 39, runs a legal research and advocacy company. He holds two Auckland University master’s degrees and is due to graduate with a law degree next year.
He believes he had been treated unfairly due to his country of origin and that TSB has made “false accusations” against him without proper evidence.
Born in Iran, he immigrated to New Zealand in 2010 and was granted citizenship there in 2017.
He maintains the account was only to be used for New Zealand transactions and he had no intention of transferring any funds from Iran.
After Abdollahi provided requested information, including disclosing that he was the beneficiary of a family trust in Iran with assets worth about $15,000, TSB opened an account for him in June last year. But the account was closed 10 days later following an “enhanced customer due diligence” (ECDD) process to assess his risk under the AML/CFT Act. (The sum of 15,000 New Zealand dollars is worth about 10,000 US dollars.)
“Unfortunately, we have determined that the way you intend to use the account is outside our bank’s current risk appetite,” a manager wrote.
Another internal email obtained by Abdollahi shows a bank staff member saying: “Customer is going to receive $150k soon and we might like to stop that!” TSB admits this figure was an error and it had no evidence that he planned to bring funds into the country.
Abdollahi complained to the bank and received an email in August apologizing, saying: “We did not handle this well at the outset and did not follow our internal processes…. I want to assure you that we have conducted an investigation into what happened to ensure that this situation does not happen again.”
But the bank is standing by its decision to close his account.
A spokeswoman told the Herald Abdollahi’s disclosure that he was the beneficiary of assets in Iran that were being sold “alongside other communications were enough to put TSB on notice that funds may be transferred to TSB from Iran.”
Massey University Professor David Tripe said TSB’s response appeared to be an “over-reaction.” International sanctions do prevent New Zealand banks from receiving money from Iran—as the transfers usually involved US dollars—and mean they could face hefty financial penalties, he said. But he believes the bank could easily have run Abdollahi’s account for New Zealand business transactions while monitoring for potential international money transfers.
“Refusing to open a bank account’s not quite the way to proceed because the way international payments are processed they would be flagged immediately. I think they’ve gone a little bit overboard,” Massey told the Herald.
The Human Rights Commission said it was concerned to hear of any allegations of bank customers being treated differently on the basis of their ethnicity or national origin. “Ethnicity and national origin is a prohibited ground of discrimination under the Human Rights Act.”
Banking Ombudsman Nicola Sladden said all banks were required to treat customers fairly and reasonably, in good faith, in a consistent and ethical way. “Banks can close bank accounts but should not do so without good reason. A bank may need to consider closing accounts if it is unable to meet regulatory requirements, such as anti-money laundering legislation. Banks are obliged under the Human Rights Act to not discriminate on the grounds of country of origin. We encourage any bank customers to make a complaint if they have concerns.”
