By Rasha Elass
As a law-abiding U.S. citizen, I never thought I would suffer the consequences of U.S. Counterterrorism measures. But when I reported to duty as a correspondent in Beirut for a U.S. media company to cover the war in Syria, I suffered just that. It happened when I set out to open a bank account, a place to deposit my paycheck and pay local bills. I was shocked to learn that no bank would service me. Not one!
“We get that you’re a U.S. citizen, but you were born in Syria, and U.S. Treasury has sanctions on Syria, and we just don’t want to touch it,” one bank manager explained. “Look, if you don’t like it, go complain to the U.S. Treasury,” said another.
I did complain to the U.S. Treasury, but my email must have gone into a black hole. I also contacted the U.S. Embassy in Beirut, hoping they might offer a solution to my quandary. “I’m putting cash under my mattress,” I wrote in an email, incredulous. “Can’t the Embassy offer some letter of confidence so that banks may let me open a checking account?”
The Embassy had no response. And, as it turns out, my quandary was not mine alone. I was a victim of the little-known technical term called de-risking, also known as de-banking. The term describes the behavior of international financial institutions when they refuse you service or suddenly shut down your account because, in the banks’ calculations, the potential risk of triggering a red flag with U.S. counterterrorism regulators far outweighs the potential profit generated from you. While U.S. sanctions usually spell out the names of individuals or organizations they are meant to target—the Assad regime and its cronies, for example—banks cannot justify servicing anyone who hails from that country because, as one European banker put it to me, it will open up a “dangerous line of inquiry from U.S. regulators.” Since 2008, U.S. regulators have slapped banks with over $28.4 billion in fines pertaining to counterterrorism (and anti-money laundering) violations, according to reporting by The Economist, in a process that critics say lacks transparency, precision and legal recourse. This has spooked the financial institutions into de-risking, and that is a problem because de-risking puts lives at risk, criminalizes the innocent—including humanitarian organizations and their beneficiaries—and potentially contributes to the same terrorism financing that the regulators aim to curtail.
It is impossible to know the exact number of people adversely affected by de-risking, but the broad picture suggests the number might potentially be in the millions, affecting anyone who hails from, or works with, the usual gamut of countries. These include countries throughout the Middle East (with the exception of the wealthy Gulf Arab states), North Africa, Sub-Saharan Africa and Muslim-majority southeast Asia; they also include countries in Latin America, which faces de-risking due to counter money laundering measures. Of the individuals affected, many might be refugees or dual citizens of the U.S., Canada or the EU.
U.S.-based aid organizations have also not been spared. Of the 8,600 charities doing work abroad, at least 50 percent have problems accessing financial services, according to the D.C.-based Charity and Security Network (CSN), which has been lobbying on behalf of non-profits. “Even if you work for USAID, banks will tell you: ‘We don’t care about USAID. We care about DOJ,’” says Andrea Hall, an attorney at CSN.
The current de-risking problem began shortly after 9/11, when Congress hastily amended the Bank Secrecy Act (BSA) with measures to counter terrorism financing. The new rules took all but six weeks from inception to law, with little or no debate about unintended consequences. Now, almost two decades later, the ripple effects of BSA continue to snowball. And there has been little response from the regulators who created the problem.
“On the Hill, generally people are sympathetic. But what elected official is gonna stand for easing counterterrorism measures?” says Hall.
The U.S. Treasury has also resorted to a head-in-the-sand approach. One high-level official who served in counter-terrorism during the Obama Administration told me privately that Treasury was “well-aware of the problem but no one likes to hear about it.”
Several press queries sent to Treasury about de-risking remain unanswered.
It doesn’t help that those affected by de-risking are reluctant to publicly come forward. “There’s a stigma attached,” says Sherine El Taraboulsi-McCarthy, a researcher at the London-based Overseas Development Institute. “A lot of the organizations we interviewed were initially reluctant to say they’d been de-banked. They risk damaging their reputation being associated with terrorism even though they’re just a humanitarian organization interested in helping affected communities.”
The process of getting flagged as a banking risk is opaque, reminiscent of the “no-fly list” that infamously included infants and U.S. elected officials before Congress promptly addressed the problem. But with de-banking there is no legal recourse, and it can happen with any corresponding bank when you’re doing business all over the world.
“If your bank is on Moscow Street, we get a letter. Depositing $25 in a U.S. bank? We get a letter,” says Deirdre Collings, co-founder of the Canadian-based SecDev Foundation, referring to letters of inquiry from banks that threaten to freeze her funds. One day, Collings woke up to discover that the worst had happened: The Foundation’s bank accounts were frozen all over the world. The banks sent letters to the funders, spooking people and leaving the Foundation on the brink of shutting down. Collings leaned on the Canadian government to help expedite a resolution and convince the banks that SecDev was a legitimate non-profit, but the delays came at a cost. The Foundation was unable to pay its field team inside Syria, which left the humanitarian aid workers who were operating inside a war zone without salaries for six months. Collings barely managed to avoid laying off her own staff in Canada by acquiring a last-minute bridge loan. “But not everyone can be so lucky,” she says.
Many humanitarian organizations quietly endure their own de-banking debacle and the terrible consequences that follow. One organization was unable to respond to a cholera outbreak because it had already used up all of its allocated money in delays and administrative costs with banks; a small U.S.-based NGO returned a $3 million endowment to the funder because it was unable to meet the banks’ arduous compliance requirements; the Beirut-based Arab Women’s Collective was forced to shut down because it was frozen out of financial services. The list goes on, leaving vulnerable populations open to maligned actors. “It’s a huge propaganda tool for these groups, because guess who shows up with rice and aid,” says Hall.
Individuals also endure de-banking fallout in the shadows, for there is no organization that currently lobbies on their behalf. In the U.S., members of affected communities have to resort to creative but risky measures. Syrian-Americans, for example, can only send money back home as cash with a human mule, which opens up the door to fraud, robbery or worse. The Somali and Yemeni communities have been using systems like Hawala or Sarafin, invented for the purpose of circumventing traditional banks. Though well-established, these systems still allow for “individual money brokers who may be shadowy, thus making the system less safe for users and counter-productive in fighting terrorism,” explains Taraboulsi-McCarthy. It is as if the regulators were pushing people to do things under the table instead of helping everyone do things with transparency, she laments.
As for my own quandary, I eventually convinced a French bank to give me checking privileges under the umbrella account of the U.S. media company that was paying me. Ironically, my time there coincided with the rise of the terror group ISIS and its fast-accumulated wealth, estimated at $2 billion; wealth somehow gathered, deposited, moved around and withdrawn to pay fighters and buy weapons, all under the nose of the same counterterrorism measures that have left me and countless of innocent people de-banked and at the mercy and goodwill of others.
Rasha Elass is a journalist who has covered the Middle East for over 15 years. She is also a former banker.