A federal appeals court ruled Monday that Bank of America cannot be held liable for closing the account of an Iranian citizen living in the United States, citing federal laws designed to protect banks that act in “good faith” to follow international sanctions.
The U.S. Court of Appeals for the Ninth Circuit affirmed a lower court’s decision to grant summary judgment in favor of the bank.
The case, Abdollah Nia v. Bank of America, N.A., centered on whether the bank’s internal compliance policies—which led to the erroneous closure of Mohammad Farshad Abdollah Nia’s account—were protected by the International Emergency Economic Powers Act (IEEPA).
The dispute began because of the bank’s Consumer Residency Monitoring (CRM) policy. Under this program, the bank requires citizens of countries under heavy U.S. sanctions, such as Iran, to periodically prove they actually live in the U.S. and not in a sanctioned region.
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Federal regulations generally prohibit U.S. banks from providing services to people residing in Iran. To manage this risk, Bank of America tracks customers with citizenship in those nations.
In 2019, Nia submitted a Form I-797C (an application for permanent residency) to the bank. While the bank’s own correspondence at one point mistakenly listed that form as “permanent” proof of residency, the bank later flagged it as “temporary.” When the bank’s internal expiration date for the document passed and Nia did not provide further updates, his account was restricted and eventually closed.
Nia argued that the bank should be liable because its actions were not “compelled” by federal law, but were instead the result of an internal policy that the bank applied poorly.
However, the three-judge panel, led by Circuit Judge Lawrence VanDyke, disagreed. The court focused on the IEEPA’s “liability shield,” which states:
“No person shall be held liable in any court for or with respect to anything done or omitted in good faith in connection with the administration of, or pursuant to and in reliance on, this chapter, or any regulation, instruction, or direction issued under this chapter.”
The court held that this protection is not limited to actions the government forces a bank to take. Instead, it covers any actions a bank takes in “good faith” to try and comply with sanctions. The judges noted that the Office of Foreign Assets Control (OFAC) explicitly encourages banks to use “risk-based” programs that consider a customer’s citizenship when assessing sanctions risk.
The court found that while Bank of America made clerical errors regarding Nia’s paperwork, those mistakes did not prove a lack of good faith.
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“Nothing in the record suggests that the Bank’s mistake was not in good faith,” Judge VanDyke wrote. The court also dismissed Nia’s arguments that public criticism of the bank’s policies or a small number of consumer complaints proved the bank was acting with bad intentions.
By affirming the district court’s ruling, the Ninth Circuit has reinforced a broad interpretation of the legal immunity granted to financial institutions as they navigate the complex landscape of international sanctions.
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