Don't be too quick to condemn TD for shutting Iranian accounts - Macleans.ca

Don’t be too quick to condemn TD for shutting Iranian accounts

It takes a little pain to ensure Tehran doesn’t gain

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It takes a little pain to ensure Tehran doesn’t gain

Cole Garside/Ottawa Citizen

Sanctions are meant to hurt. In lieu of declaring war or taking other military action, embargoes and sanctions have been used throughout history to inflict pain on other nations to convince them to behave. Of course, this sort of economic weaponry also has an impact on the country doing the imposing. So it should come as no surprise that Canada’s sanctions on Iran are causing some unpleasantness at home.

As we argued on this page in February, economic sanctions against Iran are a good thing. And the tougher the better. The country poses the single greatest threat to world peace due to its efforts to produce nuclear weapons and destabilize the Gulf region. There’s also plenty of evidence the current round of sanctions by Western countries is having the desired effect. Following the European Union boycott of Iranian oil this spring, petroleum exports from Iran have fallen dramatically. In fact, Tehran recently announced a major “maintenance” program at its oil fields in lieu of actually pumping the stuff. It’s also declared a ban on reporting the impact of the sanctions.

Since Canada doesn’t buy oil from Iran, our role in isolating Iran has taken the form of monetary and commercial measures. Exports of oil and gas technology have been forbidden, as have most financial transactions between Canada and Iran. And in enforcing these new rules, Toronto-Dominion Bank recently closed the accounts of dozens of Iranian-Canadian customers. This has provoked much public outrage, including calls for a boycott of TD. Nazanin Afshin-Jam, the wife of federal Defence Minister Peter MacKay and an Iranian-born human rights activist, claims the bank is “harming innocent Iranian-Canadians.” Some have likened it to racial profiling or the displacement of Japanese Canadians during the Second World War. It seems like yet another reason to hate banks.

Keep in mind, however, that Canada’s financial sanctions are quite sweeping by design. The federal rules forbid Canadian banks from providing services “to, from or for the benefit of . . . any person in Iran.” (An exception is made for non-commercial transactions of up to $40,000, so there would seem to be plenty of room for the diaspora to send money back to relatives.) According to TD spokesperson Barbara Timmins, these strictures mean any customers with active employment or residence in Iran, or who have previously conducted significant transactions with Iran, must be denied banking services. TD took an all-or-nothing approach: if a customer fell into one of the above categories, their mortgage was also denied renewal, even if the mortgage alone posed no obvious benefit to Iran’s ruling mullahs. As other banks have escaped publicity for enforcing the sanctions, it seems they’ve interpreted these rules less strictly.

It is certainly possible to go too far in enforcing sanctions against Iran. Last month, for example, staff at an Apple store in Alpharetta, Ga., refused to sell an iPad to college student Sahar Sabet when she was overheard speaking Farsi, citing a U.S. government prohibition on exporting technology to Iran. It’s unquestionably wrong to deny anyone service based solely on their ethnicity or language. But perhaps we ought to have a bit of sympathy for TD and its current public-relations nightmare.

Banks are increasingly required to enforce a myriad of domestic and international rules and regulations, many of which have nothing to do with the business of banking in Canada. Canadian banks, for example, have been hit by numerous extraterritorial American laws regarding taxation and investing. And with a constant barrage of international banking scandals, including the current allegations of Libor interest-rate rigging, it should come as welcome news that a bank has sought out the strictest possible interpretation of any law. Finally, with different banks taking substantially different interpretations of the sanctions, perhaps Ottawa could have done a better job writing its own rules.

It may be that TD was overzealous in implementing the sanctions. Timmins told Maclean’s her bank is now offering to review some of its previous decisions to cancel accounts. Good for them. And anyone denied service at TD also has plenty of other banks to choose from. But we need to remember that sanctions, in order to work, must be as broad and biting as possible. This may cause some unexpected pain in Canada but the alternative?international military action to put a stop to Iran’s nuclear program?will be much more painful for all concerned.