Customers or terrorists? Use of lists assailed

WASHINGTON — Private businesses such as rental and mortgage companies and car dealers are checking the names of customers against a list of suspected terrorists and drug traffickers made publicly available by the Treasury Department, sometimes denying services to people whose names are similar to those on the list, a civil-rights group said.

The Office of Foreign Asset Control's list of "specially designated nationals" has long been used by banks and other financial institutions to block financial transactions of drug dealers and other criminals.

But an executive order issued by President Bush after the Sept. 11 attacks has expanded the list and its consequences in unforeseen ways.

Businesses have used it to screen applicants for home and car loans, apartments and even exercise equipment, according to interviews and a report by the Lawyers' Committee for Civil Rights of the San Francisco Bay area to be issued today.

"The way in which the list is being used goes far beyond contexts in which it has a link to national security," said Shirin Sinnar, the report's author. "The government is effectively conscripting private businesses into the war on terrorism, but doing so without making sure that businesses don't trample on individual rights."

Dozen cases

The lawyers' committee has documented at least a dozen cases in which transactions involving U.S. customers have been denied or delayed because the customers' names were a partial match with a name on the list, which includes 3,300 groups and individuals.

No more than a handful of people on the list, available online, are U.S. citizens.

Yet anyone who does business with a person or group on the list risks penalties of up to $10 million and 10 to 30 years in prison, a powerful incentive for businesses to comply.

The law's scope is so broad and guidance so limited that some businesses would rather deny a transaction than risk criminal penalties, the report finds.

"The law is ridiculous," said Tom Hudson, a Hanover, Md., lawyer who tells car dealers to use the list to avoid penalties. "It prohibits anyone from doing business with anyone who's on the list. ... The local deli, if it sells a sandwich to someone whose name appears on the list, has violated the law."

Molly Millerwise, a Treasury Department spokeswomen, acknowledged there are "challenges" in complying with the rules but said that the department has extensive guidance.

She said most businesses can root out "false positives" on their own. If not, the Office of Foreign Asset Control (OFAC) suggests contacting the firm that provided the screening software or calling the office hotline.

"So the company is not only sure that they are complying with the law," she said, "but they're also being good corporate citizens to make sure they're doing their part to protect the U.S. financial system from abuse by terrorists or [weapons] proliferators or drug traffickers."

Tom Kubbany is neither a terrorist nor a drug trafficker, has average credit and has owned homes in the past, so the Northern Californian was baffled when his mortgage broker said lenders were not interested in him.

Reviewing his loan file, he discovered something shocking. At the top of his credit report was an OFAC alert provided by credit bureau TransUnion that showed this middle name, Hassan, is an alias for Ali Saddam Hussein, purportedly a "son of Saddam Hussein."

The record is not clear on whether Ali Saddam Hussein was a Saddam offspring, but the OFAC list stated he was born in 1980 or 1983. Kubbany was born in Detroit in 1949.

Under OFAC guidance, the date discrepancy signals a false match. Still, Kubbany said, the broker decided not to proceed.

Kubbany and his wife are applying for another loan, though he worries that the stigma lingers. "There's a dark cloud over us," he said.

Chicago native Saad Ali Muhammad is an African American who converted to Islam in 1980. When he tried to buy a used car from a Chevrolet dealership three years ago, a salesman ran his credit report and saw a reference to "OFAC search," followed by the names of terrorists including Osama bin Laden.

The only apparent connection was the name Muhammad.

Alert remains

The credit report, also by TransUnion, did not explain what OFAC was or what the credit-report user should do with the information. Muhammad wrote to TransUnion and filed a complaint with a state human-rights agency, but the alert remains on his report, Sinnar said.

Colleen Tunney-Ryan, a TransUnion spokeswoman, said in an e-mail that clients using the firm's credit reports are solely responsible for any action required by federal law as a result of a potential match and that they must agree they will not take any adverse action against a consumer based solely on the report.

The lawyers' committee documented other cases, including that of a couple in Phoenix who were about to close on their first home, only to be told the sale could not proceed because the husband's first and last names — common Hispanic names — matched an entry on the OFAC list.

James Maclin, a vice president at Mid-America Apartment Communities in Memphis, which owns 39,000 apartment units in the Southeast, said the screening has become "industry standard" in the apartment-rental business.

Georgetown University law professor David Cole studied the list and at one point found only one U.S. citizen on it.

"It sounds like overly cautious companies have started checking the list in situations where there's no obligation they do so and virtually no chance that anyone they deal with would actually be on the list," he said.