Deputizing the Private Sector


The latest chapter in the troubling trend of the federal government asking private companies to police the transactions of their customers:

Tom Kubbany is neither a terrorist nor a drug trafficker, has average credit and has owned homes in the past, so the Northern California mental-health worker 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 that his middle name, Hassan, is an alias for Ali Saddam Hussein, purportedly a "son of Saddam Hussein.

Kubbany's the victim of a list of suspected terrorists the Treasury Department forbids American companies from doing business with. The burden is on private companies to sniff out false positives, but given that they can face fines of up to $10 million and 10-30 years in prison for violating the law, and face nothing other than lost business for over-compliance, most would rather err on the side of compliance. That sucks if the "OFAC" warning appears at the top of your credit report, and you happen to be innocent.

"The law is ridiculous," said Tom Hudson, a lawyer in Hanover, Md., who advises car dealers to use the list to avoid penalties. "It prohibits anyone from doing business with anyone who's on the list. It does not have a minimum dollar amount. . . . The local deli, if it sells a sandwich to someone whose name appears on the list, has violated the law."

I happen to know someone (who's about as far from a terrorist as one could imagine) on the airport "watch list." Once the federal government has flagged you with one of these labels, it's extremely difficult to clear your name.