A U.S. appeals court on Monday ruled that Bank of America cannot be sued over its closure of an Iranian American customer’s account after finding the bank was protected by a federal liability shield for actions taken in good faith to comply with U.S. sanctions laws. 

The 9th U.S. Circuit Court of Appeals said the shield in the International Emergency Economic Powers Act barred claims by Mohammad Farshad Abdollah Nia, an Iranian citizen living in the United States whose account was closed after the bank mishandled paperwork related to its residency-verification policy. 

In a 13-page opinion by Circuit Judge Lawrence VanDyke, the San Francisco-based court said the statute protects more than actions expressly required by sanctions regulations. It also covers good-faith conduct undertaken “in connection with the administration of, or pursuant to and in reliance on” the law and related regulations, the panel said. 

The dispute centered on Bank of America’s “Consumer Residency Monitoring” policy, which requires customers who are citizens of comprehensively sanctioned countries such as Iran to periodically submit documents showing that they are not present or permanently resident in sanctioned countries. The bank adopted the policy to comply with Iranian sanctions regulations that prohibit U.S. financial institutions from providing services to accounts of people ordinarily resident in Iran unless they are outside the country. 

Nia opened his account in 2015 and had submitted residency documents to the bank for years. In 2019, the bank mistakenly told him that Form I-797C, a notice related to an application for permanent U.S. residency, qualified as permanent proof of residency. It later treated that same form as temporary and insufficient, restricted his account on Oct. 1, 2019, and closed it on Oct. 21, 2019, after he failed to provide different documents. 

Nia sued under Section 1981, the Equal Credit Opportunity Act, California’s Unruh Civil Rights Act and California’s Unfair Competition Law. A federal judge in San Diego granted summary judgment to the bank, and the 9th Circuit affirmed. 

The appeals court rejected Nia’s argument that the bank’s policy fell outside the federal liability shield because sanctions rules did not specifically require it to use citizenship as a screening criterion. The panel said Treasury’s Office of Foreign Assets Control encourages banks to maintain risk-based sanctions compliance programs and explicitly permits them to account for citizenship in comprehensively sanctioned countries in administering those programs. 

The court also said Nia had failed to show a genuine dispute over whether the bank acted in bad faith. While acknowledging that the bank had erroneously mixed up whether his document counted as permanent or temporary proof of residency, the panel said the record showed it was mistake, not an act of bad faith. 

Read the ruling here