Business Blacklists

The Bush administration is deputizing business to track terrorists — but consumers are getting snared.

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Muhammad Ali’s name is a problem. Early this year, the New York-born Muslim went to his local Western Union in Brooklyn to wire $80 for schoolbooks to a friend in Connecticut. Thirty minutes later, Ali received a phone call from the company’s offices in Missouri. His order had been blocked, he was informed, because his name had turned up on a government list of known terrorists. Ali, whose name is as common among Muslims as “John Smith” is among Mormons, protested, but to no avail. “They told me I couldn’t even get a refund until they got a valid photo ID and proof of my country of birth,” Ali recalls, still angry at being singled out. “It was name profiling.”

Such profiling has become common since September 11, as the federal government increasingly requires private businesses to do the work of law enforcement. Banks have long faced steep fines and even prison time for those responsible if they do business with anyone on a list of suspected terrorists, money launderers, and narcotraffickers maintained by the U.S. Treasury’s Office of Foreign Asset Control (OFAC). But two weeks after the terrorist attacks, President Bush issued an executive order extending those sanctions to all businesses, and the administration began adding the names of hundreds of suspected terrorists to the OFAC list. In addition, the USA Patriot Act, passed in October 2001, mandates that financial institutions maintain programs to check every new customer against OFAC’s online database, which now contains 10,000 names and aliases, and federal officials are currently drafting rules that would require customer screening at casinos, insurance companies, car dealerships, travel agencies, pawnbrokers, and gem dealers. “The fact is, private companies are becoming agents of the government — and they are doing this with almost no guidance,” says Khurrum Wahid, a New York attorney representing Ali.

When a company finds a match, it is required to halt all transactions with the customer and turn that person’s name over to federal authorities. If OFAC determines that the customer is not the same person as the one on the list, the agency clears the company to proceed. Last year, businesses asked the Treasury office to investigate more than 45,000 customers. “There is no question that the number of requests has increased,” says Tony Fratto, a department spokesman. “Not only do you have more people checking — you have more names to check.”

The computerized dragnet is creating problems for Americans who share names with those on the lists. The OFAC database lists hundreds of common Arab and Hispanic names, often with few other identifying facts about the suspects. Muhammad Ali’s name matches those of at least four different terrorist suspects from Egypt and Kenya. In New Jersey, a title company reportedly delayed a real estate deal because the name of the customer — Miguel Lopez — was confused with that of a Cuban banker barred from doing business in the United States. “If you are dealing with more common names, you are going to have all kinds of problems,” says Peter Fitzgerald, an expert on government blacklists at Stetson University in Florida. “Your false positives are going to go way up.”

Customers have experienced similar problems with other terrorist watch lists that the government has circulated to businesses since September 11. Mark Deuitch, a North Carolina financier, was briefly denied a rental car at Budget last year based on an FBI list called “Project Lookout” that later proved to be riddled with errors. Larry Musarra, a former Coast Guard helicopter pilot, was stopped nearly a dozen times at airports last year because someone with his name appears on a federal list of suspected terrorists, and Johnnie Thomas, a 70-year-old black grandmother from Montana, was repeatedly detained because she shares a name with a 28-year-old white male whom the FBI had already arrested on murder charges.

As more companies check names, some Arab Americans have changed the way they do business, avoiding transactions like money orders. “A lot of people have cut back on activities that are not illegal at all,” says Mohammed Abdrabboh, an immigration lawyer in Dearborn, Michigan, who had a Western Union transfer of his own delayed because of a mistaken name match.

There is also concern among Hispanics who rely on neighborhood financial services. “It puts business in the shoes of law enforcement,” says Angela Arboleda, civil rights analyst for the National Council of La Raza, “and it further alienates the community from getting services — whether it be a pawnshop or Western Union.” At least 1,200 pawnbrokers are now screening customers, and the National Pawnbrokers Association recently met with Arboleda. “For us to scare our client base — or even worse, accuse them of being a terrorist — would just be a nightmare,” says Morgan Jones, who heads government relations for the pawnbroker group.

The number of irate customers is likely to increase in the coming months. In February, the Treasury issued a new rule allowing federal authorities to require financial institutions to conduct secret searches of customer lists for suspected terrorists without a court order. “Asking private companies to share information with the government is fraught with peril,” says Ed Mierzwinski, a privacy advocate at the U.S. Public Interest Research Group. “These databases are full of mistakes.”

They may also prove ineffective. At Western Union, Muhammad Ali was not asked to show identification when he filled out his money order. It seems unlikely that a terrorist in Ali’s place would have used his real name — especially since he could have checked the Treasury database online to see if his name was on the blacklist


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