Bank acted correctly in putting hold on money from Iraq

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Bank acted correctly in putting hold on money from Iraq

Categories:

Processing payments,

Summary:

In late 2020, Zara opened a foreign currency account at the bank and arranged for the transfer of $US385,000 into the account from a bank in Jordan. When the money arrived, the bank did not put it into Zara’s account, instead contacting her to discuss the source of the funds. Zara said the funds originated from Iraq, and the bank replied that it would have to send the money back to Jordan because its sanctions policy provided that it would not be involved in any transaction involving certain countries, including Iraq. The following day, the bank agreed to consider her request to pay the funds to her account on an exceptional basis if she supplied more information about the funds and their source. Three months later, when Zara provided the information, the bank promptly deposited the funds into Zara's account. Zara complained that the bank’s policy was broader than it needed to be to comply with international sanctions. She also said she had contacted the bank before opening the account and having the funds sent from Jordan to check whether there would be any difficulties in having Iraq-sourced funds sent to her account, and she complained that the bank had failed to warn her about its sanctions policy. She wanted the bank to compensate her for the costs incurred in transferring the funds, as well as compensation for the stress she suffered and the lost opportunity of not having access to her money for three months. The bank denied acting wrongly, but offered $3,000 as a goodwill gesture. Zara did not accept this and asked us to investigate.

Published:

June 2022

Our investigation

The bank’s policy stated that it would not become or remain involved in any transaction involving Iraq. This was broader than required by international sanctions relating to Iraq, but the bank was able to take a risk-based approach towards its compliance with the sanctions. We were satisfied the bank did not have to pay the funds into her account as it followed its sanctions policy

We could find no evidence the bank had misled her about her ability to have funds from Iraq put into her account. However, we considered the letters the bank sent to customers to confirm the opening of foreign currency accounts could have been clearer, and we recommended the bank rewrite these letters to draw attention to the potential impact of its sanctions policy on international payments.

We found the bank acted fairly after receiving the funds. It told Zara it could process the payment once she had provided specific information, and it was not the bank’s fault Zara took three months to obtain this information.