Sunday, June 2, 2024

Banking as a Muslim in America: A Nightmare


Ramadan is a month of fasting, prayer, and devotional giving for millions of Muslims in America. While survivors of recent earthquakes in Turkey and Syria recover from the devastating tremors, American Muslim charities are working tirelessly to respond to this and other areas of need by preparing for their busiest season of donations. However, banking while Muslim has become an experience that involves dealing with systemic, deep-rooted institutional discrimination.

LaunchGood, a crowdfunding platform similar to GoFundMe for the global Muslim community, has raised over $300m for critical causes across the world. Most recently, it raised $10m for earthquake relief in Turkey and Syria. But LaunchGood has nearly been killed by “banking while Muslim” three times.

In 2019, LaunchGood’s payment processor kicked them off suddenly and without warning. LaunchGood had just met with the processor three weeks prior, in person, and were assured the Muslim-led crowdsourcing platform was in good standing. There was no indication there was an issue, nor clarity provided on what the problem was, nor the chance to challenge it or rectify their standing. When LaunchGood asked their account manager why she didn’t warn them, she made it clear she had no warning herself and that this was a decision from their banking partner.

LaunchGood moved to another payment platform. That summer this platform was acquired by a large US Bank. Sure enough, problems emerged almost immediately. As the payment platform switched to the large bank’s compliance software, 50 percent of LaunchGood’s donors in the United Kingdom were rejected. When they prodded further, they found that they had “too many Muslim and Arabic names” that were throwing off their software. Sadly, yet predictably, six months later, they received an email from their account manager at the platform saying their parent bank had made the decision to offboard LaunchGood. Similarly to the previous payment platform, there was no justification, warning, nor opportunity to challenge the decision.

So LaunchGood moved on to their third processor in a year. The crowdsourcing platform executives built a personal relationship with the payment firm’s CEO, even working with his daughter to help raise money for a school in Indonesia. Their chief compliance officer was amazed at how thorough and cautious the LaunchGood team was: Their incredibly low chargeback rate (a measure of fraud) made them an excellent customer. Yet a few months later, a board member of the payment platform happened upon the LaunchGood website and, based on nothing but emotion (and prejudice), demanded that it be off-boarded as a customer. Once again, without warning, without a chance to challenge the decision, or take steps to placate fears, LaunchGood was kicked off this payment processor.

LaunchGood has been forced to invest an absurd amount of time and effort to build a new payment system with multiple partners and multiple points of redundancy simply to survive. It could have used this time and resources to improve its product, expand partnerships, and execute its mission. The company estimates these issues with payment platforms have cost over $100m in donations, and, for LaunchGood, over $5m in revenue.

According to a new report published last month by the Institute for Social Policy and Understanding, in partnership with Islamic Relief USA and LG, Muslims are by far the most likely faith group in the United States to face challenges while banking. Challenges may include – but are not limited to – not being allowed to open an account, having an account suspended or closed, or having payments placed under investigation. At 27 percent, Muslims are twice as likely to report challenges at financial institutions than the general public (12 percent) and Jews (14 percent) and on par with Black Americans (23 percent). Muslims (29 percent) are more than twice as likely as the general public (14 percent) to have had a personal bank account placed under investigation for sending payments to others. The study is based on a 2022 nationally representative survey of American faith and non-faith groups.

But where Muslims really are singled out is when it comes to business and nonprofit accounts, which impact not just one person’s financial situation, but potentially a whole community’s. Of those who report challenges, Muslims (64 percent) are more than twice as likely as the general public (26 percent) to have difficulties with business accounts. Common challenges include: 22 percent who had a business bank account placed under investigation for sending payments to others; 21 percent who were not allowed to send or receive money from business accounts on payment platforms; and 19 percent who couldn’t send payments to others from a business account or had a business credit card closed.

Nonprofits, like the ones Muslims give to during Ramadan, fare no better. Of those individuals who report challenges, Muslims (62 percent) are nearly four times as likely as the general public (17 percent) to face challenges with nonprofit accounts. These include having a credit card closed for a nonprofit account (21 percent) and not being allowed to open a nonprofit bank account (20 percent) to begin with.

Some justifications given by financial institutions for these difficulties are understandable reasons like a low credit score or an over-drafted account – concerns that the banking sector would have with any customer. But other justifications reek of discriminatory profiling, and were disproportionately more likely to be given to Muslims. For example, 29 percent of Muslims were told that “international transactions were restricted” or that they were “sending or receiving money from an unfamiliar person” – both more likely than the general public (2 percent and 13 percent, respectively). One-quarter of Muslims (24 percent) who faced banking challenges were told a keyword in their transaction was a red flag, compared with 4 percent of the general public.

In recent years, Muslim individuals, businesses, and nonprofits have reported facing potentially discriminatory practices at some of the nation’s largest banks. These experiences of disparate treatment while opening or maintaining a bank account can be found in different regions across the country. A growing sense that such incidents are not isolated has pushed a group of lawmakers to urge financial institutions to “modernize” policies that implicitly discriminate based on ethnic and religious background.

Policy makers must continue to pursue solutions to this issue that not only infringes on a community’s financial rights, but their religious freedom as well.

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