In September 2014, Arab Bank, a Jordan-based bank with $46
billion in assets, was found liable
in federal court, for having knowingly
provided assistance for acts
of terrorism. This liability stemmed from financial transactions conducted
by the bank, on behalf of certain customers. Linde v. Arab Bank (referred to in
this piece as Linde) carries
wide-ranging implications for the fight against terrorism, and more specifically,
the role of financial institutions in this effort.
For a variety of legal as well as procedural reasons, the
verdict against Arab Bank was highly flawed; in fact, this case should have never
even proceeded to trial. The law under which Arab Bank was sued was never intended to allow victims of
terrorism to bring suit against banks, and applicable rulings in similar
matters heavily weighed against permitting such litigation. Furthermore, at
trial, a series of rulings by a federal district judge considerably hindered
Arab Bank’s efforts to present it’s case.
There are also
numerous policy arguments for why this type of litigation is highly
problematic, and might in fact complicate efforts to stop terrorism. First,
holding banks liable for transactions carried out on behalf of customers, without having some actual knowledge that such transactions involved terrorism, is fundamentally
unfair in that it is quite difficult for banks to develop awareness of which
customers might be involved in terrorism, and to track and prevent such
transactions. Also, demanding that, outside of basic compliance with all
applicable federal laws, banks play an additional investigative and preventive
role in halting this type of financial activity, places a dangerous amount of power,
and an excessive degree of responsibility, in their hands.
Additionally, anti-terrorism lawsuits targeting banks are also
likely to limit access to banking services in certain developing countries and
conflict zones, which can further hinder economic development, and create a
fertile environment for extremism. Furthermore, aggressive litigation by banks,
and the subsequent protective measure that banks will take in the face of such
a financial threat, is also quite likely to drive the funding of terrorism
further underground, which will complicate efforts to stem the flow of money to
terrorist organizations. Lastly, allowing victims of terrorism to sue foreign
banks may actually hinder international cooperation aimed at stopping
terrorism, even by close allies of the United States, and could also lead to
retaliatory measures against American banks.
Arab Bank was sued in 2005 in federal district court in Brooklyn,
New York, by American citizens who were the victims (or survivors of deceased
victims) of a series of suicide bombings carried out by the Palestinian
terrorist group Hamas, against civilians in Israel during the early 2000’s. After
years of procedural motions, and disputes over the admission of certain pieces
of evidence, in 2014, a jury found in favor of the plaintiffs, with damages to
be determined in a separate
proceeding. Arab Bank has since appealed
this verdict. Arab Bank was found liable under the Antiterrorism
Act of 1990 (referred to for rest of this piece as The Act), a federal law
which allows victims of terrorism, and their survivors, to sue those
responsible, in federal court.
This verdict comes at a pivotal moment for anti-terrorism
litigation under The Act. Insurance companies, along with victims of the
September 11, 2001 terrorist attacks in New York and Washington DC, are suing
the Kingdom of Saudi Arabia, as well as several banks and charities affiliated
with the Saudi government, seeking to hold them responsible
for their alleged financial support and facilitation for the 9/11 attacks. In
June 2014, the Supreme Court refused
to hear an appeal of a Second Circuit Court of Appeals ruling, which had allowed
the litigation to proceed. As a result, the defendants will have to defend
themselves against these allegations in federal court.
The Second Circuit is also allowing a suit
against National Westminster Bank (popularly known as NatWest), the largest
commercial and retail bank in the United Kingdom, to proceed. The plaintiffs, who
were also victims of Hamas attacks, are suing NatWest under The Act, for
providing banking services for a charitable organization which was tied to
support and funding of Hamas. In another recent suit
under The Act, family members of American soldiers killed in Iraq are seeking
damages against HSBC, Barclays, Credit Suisse and other banks, alleging that
these firms transferred funds of behalf of the government of Iran, which was
deeply involved in assisting militant groups fighting the American presence in
Iraq.
Background
Due to the global nature of banking in today’s world, and
the United States’ status as a major financial hub, hundreds
of major banks based outside the nation maintain at least one branch,
subsidiary or representative office in the United States, most commonly in New
York. Arab Bank, which has a branch in Manhattan, operates in more
than 30 countries, and is one of the largest banks based in the Middle East, as
is the largest
financial institution in Jordan. This branch of Arab Bank, like every outpost
of a foreign bank located in the United States, must abide by
US laws, and is subject
to regulation and supervision by the Federal Reserve. It is this branch of Arab
Bank which processed some of the transactions that form the basis of the Arab
Bank litigation.
Understanding this case also requires a basic knowledge of
how the US federal government informs banks that a particular customer might be
involved in terrorism. Currently, the Office of Foreign Asset Control (OFAC), an
agency within the US Department of the Treasury, maintains a list
of individuals, the Specially Designated Nationals (SDN) list, whom
American citizens and permanent residents (wherever they currently reside) as
well as businesses incorporated in the United States, and their foreign
branches, are forbidden from conducting business with. The SDN list is made up
of those believed to be involved in international terrorism, drug trafficking,
and other illegal activities of an international nature. Arab Bank, because of
it’s presence in the United States, is bound by OFAC restrictions.
It is also critical to have a basic grasp of the law upon which Arab
Bank, and other banking institutions, have been sued. The Antiterrorism Act of 1990
was passed in order to provide American victims of terrorism (and their survivors)
with a simpler, more effective means of bringing suit against those responsible
for carrying out, facilitating and otherwise actively supporting international acts
of terror. Specifically, this legislation was passed in response
to the murder of Leon Klinghoffer, an elderly, wheelchair bound Jewish-American
man from New York, who was brutally murdered by members of the Palestine
Liberation Organization (PLO), during the hijacking of a cruise ship off the
coast of Egypt. Klinghoffer’s family, as well as the survivors
of those killed in Pan Am Flight 103 (an airliner allegedly downed in 1988 by
Libyan terrorist operatives working on behalf of the late Libyan dictator Muammar
Gadhafi), faced significant challenges in bringing suit against those allegedly
responsible for the attacks.
The Act was designed
to overcome some of these hurdles, by allowing victims (and their survivors),
to bring suit in federal District Court, and recover damages, as well as
attorney’s fees and other costs, associated with such a lawsuit. The Act does specify that the
Attorney General may seek to restrict such suits, if it will interfere with a
criminal prosecution, or national security operations, which relate to the same
terrorist act from which the lawsuit stems.
The Act was designed
to target terrorist organizations, not financial institutions
In assessing The Act, as with any piece of legislation, it
is helpful to consider the intent with which these laws were passed, and how they
have been interpreted over time. Geoffrey Sant, an attorney with the New York
office of national law firm Dorsey & Whitney, and a professor focusing on
banking litigation at Fordham University School of Law, explored some of these
issues in a recent law review article
in the Arizona State Law Journal (it should be noted that Sant himself has
worked on litigation relating to The Act).
As Sant’s study makes clear, The Act’s language heavily
focuses on, and seeks to target, international terrorists, rather than
uninvolved third parties, such as financial institutions. Sant first looks to
the plain language of the statute, which allows victims of terrorism, and their
survivors, to bring suit in federal court, if such an individual were “injured in his
or her person, property or business by reason of an act of international
terrorism.” What counts as an act of “international terrorism?” Basically,
actions that “involve violent acts or acts dangerous to human life that are a
violation of the criminal laws”, and are designed to coerce or create fear
within a civilian population, or affect the conduct of a government through such
coercion and intimidation.
Additionally, in reviewing the statute of limitations (which
sets finite time periods during which a suit can be filed) for The Act, Sant
observes that the statute is tolled (or made to stop running), for those
periods of time when a defendant is outside of the United States, or when the
defendant’s “whereabouts” are under some sort of “concealment.” This language
suggests that the defendant is an individual terrorist, or a terror group,
since, as Sant notes it would be rather difficult for a bank to be “leaving and
returning from the United States.”
Sant also observes that those portions of The Act which
detail the venue and jurisdiction of federal courts which apply under The Act,
are quite lengthy and detailed in nature, and comprise much of The Act’s focus.
Nowhere in this discussion of terrorism, however, are banks, or, for that
matter, any other third parties, contemplated as potential targets of The Act. Given
that including such groups under the provisions of The Act would be a rather
significant expansion of The Act’s reach and scope, it seems like precisely the
sort of detail which The Act would explicitly mention.
Sant then looks to Congressional hearings surrounding the
passage of The Act, as a means of discerning the intent of those who advocated
it’s passage. These hearings focused heavily upon the efforts of the victims of
terrorism (or their survivors, who are treated similarly for the purposes of
this discussion) to bring suit against terrorist organizations. At the time The
Act was passed, incidents of international terrorism which occurred outside of
the borders of the United States, and injured or killed American nationals, often
didn’t fall under the purview of federal courts.
Thus, American victims of terrorism, like
Klinghoffer’s family, or the survivors of Flight 103 victims, faced significant
challenges in bringing suit against those responsible for the deaths of their loved
ones. The Act sought to change this dynamic, by putting foreign-based terrorists
within the reach of the American federal civil system. In her testimony, one of
Leon Klinghoffer’s daughters expressed hope that passage of The Act would allow
for Americans to bring suit against “the terrorist who harms them overseas. It
would facilitate bringing suit against foreign terrorists.”
Yet, because The Act was designed primarily to target international
terrorists, who rarely maintain major financial assets inside the United
States, some key architects of The Act in Congress admitted that The Act’s
provisions would be more symbolic than practical, in terms of their actual
impact. In fact, while Senator Charles Grassley (R-Iowa), one of the bill’s key
backers, argued that passage of The Act would allow victims to “find terrorists’
assets and seize them”, Grassley also acknowledged before his colleagues in
Congress that “this legislation is, in part, symbolic, I confess.”
Several prominent legal experts also shared Grassley’s
views. Alan Kreczko, who at the time was a top legal adviser for the Department
of State, testified before Congress, that since few terrorist organizations
maintained assets in the United States, as a “practical matter,” even if a
plaintiff prevailed under The Act, it would be challenging to collect any funds
from terrorist organizations (this would hardly be a concern if plaintiffs were
permitted to target banks, who by their very definition are meant to be flush
with assets).
Noted litigation
expert Wendy Perdue, who at the time was a law professor at Georgetown University,
also offered extensive testimony, and stated that The Act, as it was written, created
a very limited scope of remedies for victims of terrorism, since it seemed to
only cover “violent acts dangerous to human life”, and thus might not even
apply to terrorist financiers or weapons suppliers.
Nowhere in the statements of any of the legal experts who
testified on The Act before Congress were banks ever contemplated as a
potential target of suits under The Act. From all of these facts, it is quite clear
that The Act was written to provide a legal cause of action (that is, a reason
to sue), under which terrorist organizations or individuals, rather than
financial institutions, could be held liable in US federal court. Yet, in some
recent cases, courts have looked past the manifest intent behind the statute,
and actually interpreted it in an overly expansive, broad manner.
The Boim cases incorrectly expand liability
under The Act
As Sant observes in his discussion of how The Act has been
used since it’s passage, during the first decade after approval of The Act
(which ended in 2000, just before the 9/11 attacks), there was not a single federal
court ruling which referenced the civil suit provisions of The Act (meaning
that no lawsuits under The Act went forward).
Only shortly before 9/11 did plaintiffs start to bring suits citing
The Act; after the attacks, many more such suits were filed. As federal courts began considering this type of litigation, the
importance of causation was repeatedly emphasized; that is, courts required a showing
that a particular defendant had actually caused a plaintiff’s injuries. One
instructive example of this is seen in Stutts v. De
Dietrich Group, where American soldiers who had been injured by the destruction
of chemical weapons in Iraq brought suit against banks that provided letters of credit
to the
Iraqi government; the soldiers argued that these letters of credit helped make
it possible for Iraq’s government to purchase chemical weapons.
The court
refused to accept this argument, finding that a banks’ actions could hardly be
said to have caused the injuries suffered by the plaintiffs; as Sant points
out, the court also noted that nothing about the banks’ actions constituted the
type of coercion required under The Act to qualify as an act of terrorism.
The landscape around The Act shifted with the landmark Boim litigation. In Boim, the Boim family brought suit
in the death of their 17 year old son, David. David was an American citizen who
was attending high school in Israel. On May 13, 1996, while waiting at a bus
stop in the West Bank with fellow students, was shot and killed by Hamas
militants, who fired at David and his classmates from a passing car.
The Boim’s brought suit in federal district court in
Illinois, against two US-based non-profits, including the Quranic Literacy
Institute, as well as now-defunct
Holy Land Foundation, both of which had allegedly provided financial support to
Hamas, by raising money through donors in the United States, and laundering and
distributing those funds to support various Hamas operations. The Quaranic
Literacy Institute also employed Mohammed
Salah, a prominent Illinois-based alleged fundraiser for Hamas.
As Sant notes in his analysis of this case, over the course
of this rather complex matter, Boim’s legal counsel sought relief under several
different, but closely related, legal theories. First, they argued that donating
to terrorist organizations was an act of “international terrorism” under The
Act (that is, through their alleged financial support for Hamas, the Holy Land
Foundation and other defendants were liable for David’s death).
Next, they pressed
for liability under those parts of The Act that create liability for “material support” of
terrorism, which includes such actions as providing financial support, shelter,
weapons and training for terrorists.
Lastly, they set forward the rather novel
argument that the Holy Land Foundation and other organizations should be held
liable for aiding and abetting terrorists (however, aiding and abetting isn’t
mentioned or discussed in the section of The Act under which the Boim’s brought
suit).
In 2002, a panel of federal judges on the Seventh Circuit
Court of Appeals, based in Chicago, refused to find that raising funds for a
terrorist organization was in itself an act of terrorism, such that it would
create liability under The Act. This panel noted
that treating financial support of terrorism as equivalent to committing acts
of terrorism would give The Act an almost “unlimited reach” and that at a
minimum, the plaintiff’s needed to show that acts like the murder of David Boim
was “a reasonably foreseeable result of making a donation.” The panel also
declined to apply the material support provisions in the Boim case.
However, the panel decided to allow liability as to the
Boim’s third claim, that funneling money to Hamas was an action which aided and
abetted terrorism. In justifying these findings, the panel stated that even
though Section 2333 of The Act, under which the suit was filed, did not discuss
aiding and abetting terrorism as a grounds for liability, “failing to extend
section 2333 liability to aiders and abettors is contrary to Congress' stated
purpose of cutting off the flow of money to terrorists at every point along the
chain of causation.”
The panel took note of Central Bank of Denver, N.A. v.
First Interstate Bank of Denver, N.A, a 1994 Supreme Court
case concerning securities fraud. In Central Bank of Denver, the Court
refused to allow private plaintiffs to sue the defendants for aiding and
abetting fraud, in violation of Section 10b of the Securities
Exchange Act of 1934, a federal law which
governs the sale of stocks, bonds and other financial instruments.
However,
they distinguished Boim from Central Bank of Denver, holding that
since The Act (in a different section) expressly allowed plaintiffs to sue
terrorists (unlike Section 10b, where such a right was only implied), and
because The Act defined terrorism in terms of criminal laws, Congress must have
intended for The Act to “make civil liability at least as extensive as
criminal liability”, where one can be prosecuted for aiding and abetting
terrorism.
In his discussion of the panel’s ruling, Sant again refers
back to the Senate hearings debating the passage of The Act, and recalls Senator’s
Grassley’s admission that The Act was meant to be largely symbolic in nature.
Sant also references Senate testimony from Joseph Morris of the Lincoln Legal
Foundation, who, in a detailed discussion of the “chain of causation”
requirements proposed under The Act, referenced only the specific acts
surrounding an incident of terrorism; for example, acquiring weapons, or
arranging for a victim of terrorism to be in a particular location, where they
might be most easily attacked.
Sant once again points out that nowhere in this discussion
do Morris, or anyone else testifying before Congress, cite the funding of terrorism
as a cause of liability under The Act. Sant’s analysis raises serious questions
about the panel’s reading of The Act, since they apparently adopt an unprecedented understanding of financial support of terrorism, as a reason
for liability under The Act. The Boim’s returned
to federal district court, and won a $156 million judgment against the
defendants.
Finally, after a series of procedural maneuvers, in a 2008
en banc ruling
(where all of the judges serving on a particular federal court of appeals,
rather than just a smaller panel of judges, decides a case), the Seventh
Circuit, by a 4-3 margin, overturned the earlier panel’s ruling, but found a
different means by which to holder the defendant’s liable.
In it’s holding, the broader court found that there was no
legal basis for liability on these grounds, since, they correctly noted, aiding
and abetting terrorism was never discussed in Section 2333 of The Act. This court then went on to craft a different,
even more questionable basis for liability under The Act, known as statutory
incorporations by reference, where the court linked together two separate,
seemingly unrelated portions of The Act, in order to create “an alternative and
more promising ground” for liability.
In doing so, the court employed an
unusual analogy, arguing that giving money to Hamas or another terrorist
organization was similar to handing a loaded gun to a child, since both actions
were “act(s) dangerous to human life” and created a “substantial risk of injury.”
The court cited cases where individuals had been held liable for giving guns to
children.
As Sant observes, there are several glaring problems with
this analogy. Money, unlike a gun, isn’t inherently dangerous, and can’t be
used to inflict immediate damage. Additionally, terrorists, unlike children,
enjoy considerable agency, and have a choice as to how funds donated to them
might be used.
Outside of Sant’s arguments, it is also helpful to consider
how many terrorist organizations actually operate. Many groups, including Hamas
and the Pakistan-based Lashkar-e-Taiba (an Islamist organization responsible
for the 2008 Mumbai attacks, amongst other militant actions targeting India)are
often deeply involved
in operating various charitable and humanitarian projects, largely designed to
build a base of support amongst their target constituencies.
As a result, while these organizations are undeniably
malevolent in their aims towards their enemies, it is difficult to prove that donations
are inherently dangerous, given the varied uses to which these groups might put
such funds. This isn’t to suggest that donating to Hamas or Lashkar-e-Taiba is
in any way commendable or morally defensible; surely, there are much more effective
approaches to supporting humanitarian efforts, than through donations to militant
organizations. Still, the varied use of funds by these groups greatly weakens
the argument that donations are “inherently dangerous.”
Sant also draws upon a variety of statutes and scholarly
works which seek to define the nature of terrorism (an oft-challenging
task, given the highly contested and politicized nature of this term), most of
which focus on the political motivations of terrorism (as opposed to primarily criminal
motives), as well as the violent aspects of terrorist activity.
Studying these
texts, he observes that engaging in or facilitating violent actions, primarily
for political reasons, is a major component of most widely used definitions of terrorism,
and that monetary support for a terrorist organization, while deplorable from
an ethical standpoint, doesn’t seem to meet the test for terrorism, as required
to find liability under The Act.
Ultimately, Sant notes, the Seventh Circuit, over the course
of the Boim litigation, found
“multiple and shifting rationales for permitting ATA claims against donors.” As
indicated by the language used in the final, en banc holding (“alternative and
more promising ground”), the court was concerned that if it did not find a
reason to hold the defendants liable, The Act would be rendered largely
meaningless. As a result, there was a strong desire to find any basis under which
to hold alleged Hamas fundraisers liable; the reality that The Act wasn’t
intended to create such a cause of action was of minimal importance for the
Seventh Circuit in Boim.
Courts are supposed to apply the facts of a case to existing
laws and precedents, and interpret these laws according to their stated and
implied intent. Often, appeals courts also consider the impact of a ruling in
terms of public policy. Yet, in Boim,
the Seventh Circuit was instead focused on finding a means through which to
interpret the law to find liability, based on the facts of this case. Why was
this?
Sant argues that the court’s approach is in major part a
product of the sympathetic nature of the victims of terrorism, and that such
sympathy has led courts to misguided decisions. Citing to language in Boim and other cases, Sant shows just
how this actually works. In one case,
where the government of Libya was the defendant, a federal court included
descriptions of the deceased plaintiff as an “incredible father” and someone
who “taught his children about conservation and environmentalism.” In the Boim litigation,
David Boim was described in highly personal terms, citing to “his hug and his
smile”, and his mother’s description of him as a “peacemaker.”
Sant correctly observes that such personal descriptions of the
victim are rarely applied in numerous other civil and criminal cases where
someone’s life was cut short by an act of violence. It is undeniable that the threat of terrorism
is a reality of life today, both in the West and in the developing world. Along
with the events of 9/11, acts like the 2013 Boston
Marathon bombing, the 2010 Times Square
bombing attempt, and a well-publicized plot to carry out suicide
bombings on New York City subway lines reminds Americans that terror
attacks on American soil are more than just the stuff of television plots in Homeland or 24.
As a result, not only ordinary Americans, but even the
judicial system, might not only empathize with the victims of terrorism, but also
afford them an undue degree of deference when they offer unfounded legal
arguments. It is not only natural, but commendable, to empathize with, and
offer support to, the Boim family, and all other victims of terrorism. In doing
so, however, it is not permissible to overlook the boundaries which the law
places on allowing these victims redress for their injuries.
The Linde case: Background
In Linde, all of
the plaintiffs were
victims (or their survivors) of suicide bombings in Israel, carried out by
Hamas, from September 2000 (when peace talks between Israelis and Palestinians broke
down, resulting in an outbreak of violence known as the “Second Intifada”)
through mid-2003. Most of the attacks in question occurred in densely packed
locations in Jerusalem, and targeted public buses and popular eateries.
Those
who survived these attacks often faced debilitating injuries as with Steven
Averbach, who was rendered a quadriplegic after a 2003 suicide bombing on a
Jerusalem bus; seven people died in this attack. The death toll might have been
higher if Averbach, a New Jersey native who served in elite Israeli military
units, hadn’t spotted, and attempted to stop, the terrorist who carried out
this attack, causing him to detonate his explosives earlier than planned, and sparing
numerous lives. In 2010, Averbach passed away, succumbing to complications from
his injuries. Averbach’s actions earned him widespread recognition in Israel
and elsewhere.
Another 2003 bus suicide bombing left plaintiff Mendy Reinitz,
who was at the time eleven years old, with shrapnel lodged in his body to this
very day. Reinitz’s father and younger brother, age nine, along with five other
people, were killed
in the attack. Perhaps the most well-known (and horrifying) attacks considered
in the Arab Bank suit was the August 2001
suicide
bombing of a Sbarro restaurant in Jerusalem, an attack where fifteen
people, including seven children, were killed, as well as an attack known as
the Passover Massacre, where thirty people were killed, and more than one
hundred injured, in a March 2002 suicide attack on a Passover Seder at the Park
Hotel in Netanya. Amongst the dead were several Holocaust survivors, as well as
tourists visiting Israel for religious holidays.
The victims of these various attacks brought suit
against Arab Bank because of it’s alleged role in processing financial
transactions for individuals tied to or part of Hamas, as well as charitable
organizations that were actually front organizations for Hamas, and for
transferring funds from Hamas’ financial backers, to the families of Palestinian
militants who were killed fighting Israel.
Specifically, the plaintiffs alleged that Arab Bank had
processed transactions for an account which actually belonged to Hamas itself,
as well as for some of the charitable front organizations which were a major
source of funding for Hamas.
The plaintiffs also alleged that officials at Arab
Bank had carried out transactions for an organization known as the Saudi
Committee (an organization based in Saudi Arabia, which provided financial
support to the families of Palestinians who were killed as a result of the
conflict with Israel), to transfer funds to, amongst many other beneficiaries,
the families of Palestinian suicide bombers. Some of these families were the
surviving relatives of those who carried out the suicide bombings which were
the focus of the Linde case.
According to the plaintiffs, Saudi Committee, in coordination
with Hamas, would produce a list of relatives of deceased and imprisoned militants
who were eligible for funds from the Saudi Committee. These lists were
transmitted to Arab Bank, which would set up accounts for the intended beneficiaries.
Saudi Committee would fund these accounts, and after the intended beneficiaries
verified their identities, normally by appearing at a local branch of Arab
Bank, they could withdraw funds from these accounts. The plaintiffs offered
specific examples of how this process actually functioned, like in the case
of Dia Al-Tawil, a Hamas militant who blew himself next to a bus in Jerusalem,
injuring dozens of Israelis. Al-Tawil’s father, his designated beneficiary,
subsequently collected funds from an Arab Bank branch in the West Bank town of
Ramallah.
The plaintiffs also alleged that, due to the difficulty of
conversion between the respective currencies of Saudi Arabia and Israel (which
don’t maintain formal diplomatic relations or financial ties), the Saudi
Committee would route funds from Saudi Arabia to New York. Through Arab Bank’s
New York branch, these funds were converted into the Shekel, the currency of
Israel, which is in use in the Palestinian territories. These currency
conversions formed a basis of liability under which the plaintiffs sued Arab
Bank under The Act.
Finally, the plaintiffs alleged that Arab Bank had
maintained accounts for prominent Hamas leaders, including, amongst others, spokesman
Osama Hamdan, and Hamas founder Sheikh
Ahmed Yassin.
Arab Bank’s motion to
dismiss
In 2005, Arab Bank brought a motion
to dismiss this suit, on the grounds that the plaintiffs hadn’t stated a
claim for relief under The Act. In ruling on such a
motion, a federal judge will assume, for the purposes of considering this
motion, that all of the facts set forward by the plaintiffs are true. The judge
will then determine whether these facts, in total, are sufficient to allow the
plaintiff to advance a legal claim against the defendants; that is, do these
facts allow plaintiffs to meet the legal requirements for a particular suit to
move forward? In this case, a court would have to determine whether, assuming
that all of the plaintiffs’ assertions regarding the conduct of Arab Bank were
true, the plaintiff’s would have met the minimum requirements of The Act
regarding liability, such that this suit could proceed.
In her ruling, Judge Nina Gershon, citing the precedent of
the first Seventh Circuit Court of Appeals panel in Boim, found that Arab Bank could be held liable under the same grounds
of aiding and abetting, through which the defendants in Boim were initially
held liable. Gershon also found another basis under which to hold Arab Bank
liable: civil conspiracy. Gershon stated
that since conspiracy to commit terrorism was a criminal offense, and because The
Act utilizes the same understanding of terrorism as is set forth in criminal
law, Arab Bank could be held liable under a finding of civil conspiracy, if the
plaintiffs could prove that Arab Bank had executed financial transactions on
behalf of those whom they knew to be involved in terrorism. Gershon also held that
Arab Bank’s alleged role in administering a “benefit plan,” where Arab Bank
routed Saudi Committee payments to the families of deceased suicide bombers, while
alleged aware that the Saudi Committee was involved in supporting terrorism, was
sufficient for a finding of conspiracy under The Act.
At this juncture, it is worthwhile to pause and consider
just how fully courts have been willing to stretch and expand the purview of The
Act. The Act was, at the time of it’s passage, admittedly “symbolic” and quite limited
in it’s scope, allowing the plaintiffs to bring suit against actual terrorist
organizations.
In Boim, the Seventh
Circuit, through an often-shifting array of justifications, ultimately
permitted the plaintiffs to sue those who were not themselves terrorists, but
rather, allegedly raised funds for terrorist organizations (while these
organizations were also involved in, and directed money towards, charitable
ventures).
Now, in Arab Bank, Judge
Gershon was willing to go even further, allowing Linde and other plaintiffs to
sue a bank, not because the bank was actually terrorist organization, or even
because it was fundraising and donating money to terrorist entities, but rather
because it conducted financial transactions on behalf of those whom it
allegedly knew to be involved in terrorism.
Other Second Circuit
judges consider The Act
Judge Gershon’s interpretation of The Act was not shared by
either Judge Jack Weinstein, a fellow Second Circuit district judge who also heard
a lawsuit against Arab Bank, or the Second Court of Appeals, which considered somewhat
similar claims against a different financial institution. In Gil v. Arab Bank, the plaintiff,
Mati Gil, sued Arab Bank for injuries sustained when Hamas gunmen fired from
Gaza into Israel, wounding Gil. Gil brought suit against Arab Bank for
allegedly maintaining accounts and providing financial services for Hamas, and
“it’s leaders and it’s affiliates”, including various charitable and front
organizations, as well as for administering a payment scheme for Palestinian
“martyrs” (similar to the allegations contained in Linde).
Arab Bank moved for
summary judgment, seeking the dismissal of all of Gil’s claims, on the grounds
that under the facts set forward by Gil, even if true, had not stated a claim
for relief under The Act (Arab Bank’s position was essentially that The Act did
not allow for victims of terrorism, like Gil, to recover damages from banks
under these circumstances). In October 2012, Judge Weinstein granted this
motion, dismissing Gil’s claims against Arab Bank.
In his ruling in Gil,
Judge Weinstein rejected the plaintiff’s claims regarding services which Arab
Bank provided for charitable groups and front organizations allegedly connected
to Hamas. He noted that Arab Bank had only provided “routine financial
services” to these organizations, and that these entities were not actually
designated as terrorist front groups when the transactions in question took
place.
Judge Weinstein also addressed Arab Bank’s provision of
banking services to alleged Hamas operatives. He emphasized that Arab Bank’s
provision of services to these individuals must have been done with either with
the intent of supporting terrorism, or otherwise with a reckless disregard for
the likelihood that these funds would end up being used for the sort of
terrorist attacks which harmed the plaintiff. This interpretation, just as in Boim and Linde, deviates from the intent of The Act, in that The Act never
provided for the liability of third parties such as banks, and discussions
surrounding The Act don’t appear to have contemplated this possibility either.
Still, Weinstein correctly held, based on the volume of
transactions which Arab Bank conducted on a daily basis (over 1000 wire
transfers per day, and in the case of the New York branch, around 500,000 fund
transfers per year), merely demonstrating that some of these transactions were
for alleged terrorists, without any showing of intent to aid terrorism, was
insufficient evidence for a finding of liability.
Lastly, Judge Weinstein addressed Arab Bank’s processing of
Saudi Committee payments to the families of Palestinian militants who attacked
Israelis, once again noting that there was no showing that Arab Bank was
engaging in a deliberate, willful attempt to aid terrorism. Throughout his
analysis, Weinstein noted the lapse of time between the transactions in question
(typically conducted during the late 1990’s or early 2000’s), and the attack on
plaintiff in 2008, though there is no indication that closer proximity of these
events, as in Linde, would have led
to a different outcome. Judge Weinstein’s findings are particularly noteworthy
in that he is reputed
to be “notoriously plaintiff-friendly”; yet, even in front of such a favorable
audience, the plaintiffs’ case was insufficiently meritorious to move forward.
In Rothstein v. UBS, the Second Circuit
Court of Appeals considered the trial court dismissal of another suit brought
under The Act. In Rothstein, the
plaintiffs brought suit against Swiss banking giant UBS, seeking relief because
of UBS’ financial dealings with Iran. In 1996, UBS had been authorized
to operate an Extended Custodial Inventory (ECI) facility, which permitted UBS,
along with several other banks, to hold funds on behalf of the Federal Reserve
(ECI participation also required these banks to comply with American economic
sanctions, and not conduct transactions involving restricted individuals or
nations).
UBS violated these regulations by conducting currency
conversion transactions for the government of Iran, along with Cuba, Libya and
other nations subject to US economic sanctions. As a result, UBS was fined,
and subsequently lost
it’s ECI status. The plaintiffs were victims of rocket attacks and bombings
carried out by Hamas, as well as the Lebanese militant group Hezbollah, against
Israel, between 1997 to 2006. Iran has been implicated in providing extensive
financial support
for both Hamas and Hezbollah. Because of Iran’s relationship with these groups,
and UBS’ history of currency transactions with Iran, the plaintiffs sought to
hold UBS liable under The Act. The plaintiffs’ claims were dismissed by US
District Judge Jed Rakoff, and heard on appeal by the Second Circuit.
On appeal, the Second Circuit held that the plaintiffs had
failed to state a claim under The Act. In it’s 2013 ruling, the court noted that
the plaintiffs needed to show that UBS’ dealings with Iran were a proximate
cause of the specific injuries suffered by the plaintiffs, and that the facts
set forward by plaintiffs in their suit, even if true, did not meet this
burden. The plaintiffs argued for a lower standard of causation, which the
plaintiffs rejected. In it’s analysis, the court noted that UBS had never
directly transferred money to Hamas or Hezbollah. Since the Iranian government
also has numerous expenditures outside of passing money to terrorist groups,
showing that the funds UBS handled for Iran, were then passed to Hamas or
Hezbollah, and subsequently utilized for the purpose of causing plaintiffs’
injuries, would not be possible under the facts set forward.
The court also refused to allow the plaintiffs to hold UBS
liable under the “aiding and abetting” theory, as Judge Gershon had done in her
initial ruling in Linde. The court took
note of the Seventh Circuit’s findings in it’s en banc holding in Boim, which had reversed an earlier
appeals panel’s ruling allowed the Boim family to sue under this approach. In Rothstein, the court looked to the
Supreme Court’s holding in Bank of Denver, which had required that a theory of
“aiding and abetting” be explicitly delineated in a piece of legislation, or clearly
indicated in Congressional discussion surrounding such legislation, in order to
be enforceable as a cause of action. The court found that the absence of such
language in the relevant sections of The Act, precluded bringing suit under a
theory of aiding and abetting. As a result of these findings, the case against
UBS was dismissed.
Judge Gershon’s Final
Ruling, And the Battle Over Discovery
In light of Rothstein,
Arab Bank’s attorneys moved for summary judgment, and sought to have Judge
Gershon dismiss the plaintiffs’ suit in it’s entirety. After a April 2013
hearing, Judge Gershon dismissed
all aiding and abetting claims, as well as all claims of civil conspiracy,
against Arab Bank. However, Judge Gershon, in a surprising and rather puzzling
departure from her Second Circuit colleagues’ findings in the similar cases of Gil and Rothstein, found that the
plaintiffs had set forward facts which, if proven, were sufficient for a jury
to decide that Arab Banks’ actions were a proximate cause of the plaintiffs’
injuries. Arab Bank vigorously contested Judge Gershon’s findings on causation,
and the issue will likely be resolved upon appeal. However, at the time, Judge
Gershon’s ruling paved the way for Linde to
move forward to trial.
In the interval between Gershon’s 2005 ruling, rejecting
Arab Bank’s motion to dismiss, and her 2013 ruling, allowing the matter to
proceed to trial, there were major disputes as to what documents the defendants and other third parties should
be required to produce in discovery. Since the scope of this case spanned
several countries and continents, while involving numerous witnesses, and potentially
thousands of financial transactions, there was a voluminous amount of evidence
to consider.
While Arab Bank produced many documents that were requested
by the plaintiffs and/or ordered by the court, they were sanctioned by Judge
Gershon for failing to produce information
on bank customers located in Jordan, Lebanon and the Palestinian territories, since
such disclosures would violate banking and privacy laws in those jurisdictions.
Judge Gershon’s sanctions provided that at the conclusion of
the trial, a jury would be instructed that they might infer that this failure
to produce documents mean that Arab Bank did in fact provide financial services
to terrorists. The jury was also allowed (but not required) to infer that the
bank distributed payments on behalf of Saudi committee, to terrorist
organizations, and that such actions were done “knowingly and purposefully.”
Additionally, Arab Bank was barred from informing the jury
that they did not produce these documents because of privacy laws in Jordan and
elsewhere. Without this information, a jury might instead infer that Arab Bank
withheld these documents out of a desire to conceal wrongdoing on it’s part, and
to prevent the plaintiffs from proving their case.
Judge Gershon also barred Arab Bank from introducing
evidence that it had complied with relevant banking laws and regulations of Israel,
as applied to the Palestinian territories. In 2004, the Israeli Defense Forces
(IDF), in collaboration with Israel’s internal security service, Shin Bet, raided
the Ramallah branch of Arab Bank, seizing funds and records pertaining to
various accounts, which were allegedly composed of monies from backers in
Syria, Lebanon, and Iran, and which were destined for Hamas and other
Palestinian terror organizations.
Arab Bank requested
that Israel clarify Arab Bank’s legal status, as far as whether the bank had
engaged in any actual wrongdoing. In 2009, the legal division of the IDF’s
Central Command issued a statement
explaining that the seizure and confiscation of funds in the accounts were not
“based on information that the bank or anyone working at it had any involvement
in terror activity or funding”, and that Israel did not plan on taking any
further action against Arab Bank, as a part of this investigation. This evidence
would have been quite helpful to Arab Bank in it’s defense, given that Israel
has a strong vested interest in preventing terrorism, and little reason to
defend or support Arab Bank in any wrongful conduct that the bank might have
engaged in.
Arab Bank appealed these sanctions all the way to the Supreme
Court (after the Second Circuit Court of Appeals declined to reverse Judge
Gershon’s decision), but the nation’s highest court declined to grant Arab
Bank’s petition. The case went to trial in August 2014, with Judge Brian Cogan presiding
(while Judge Gershon would not be presiding over the trial, the sanctions she
imposed remained in place).
The Arab Bank Trial
During the six weeks of trial, jurors heard testimony, from
a variety of individuals with deep knowledge of Arab Bank, it’s financial
practices, and the activities of Hamas and other militant organizations
operating in Israel and the Palestinian territories. The jury also reviewed
detailed evidence concerning the financial transactions which were the subject
of the litigation.
Brian Billard, the manager of Arab Bank’s New York branch, testified
that all of the transactions which passed through Arab Bank’s New York branch
(including those which allegedly originated with the Saudi Committee, and were
destined for the families of Palestinian suicide bombers), did not return
positive matches with OFAC lists of known terrorists, which Arab Bank
referenced before clearing cross-border transactions. Additionally, Billard
pointed out that many of the transactions involving alleged terrorists actually
passed scrutiny at multiple banks (since Arab Bank was not the only bank
involved in processing and transferring funds of this type), without raising
suspicion at any of these financial institutions.
One example of this can be seen with the transfer of funds
from the Saudi Committee to the Ramallah Zakat Committee, a Palestinian
organization with alleged links
to Hamas attacks in Israel. These transactions met internal OFAC compliance
processes at not only Arab Bank, but JP
Morgan Chase as well. Other transfers involving alleged terrorist fronts nonetheless
met OFAC compliance mechanisms at Citigroup and Bank of New York.
This demonstrates that even when banks meet all of their
legal obligations to fight terrorism, when faced with a massive volume of
transactions on a daily basis, some funds still make their way to terrorists.
Clearly, Arab Bank was not some unique bad actor, working to funnel money to
terrorists, nor were they unusually negligent or incompetent in their approach
to OFAC compliance; if so, Chase, Citigroup and other banks would not have also
conducted these same sorts of transactions.
It is also clear that hindsight is one hundred
percent; due to the non-transparent nature of terrorist financing, certain
groups or individuals might not appear on OFAC lists until further
investigation by law enforcement. Yet, banks are being asked to act in an
anticipatory manner, halting these transactions before the federal government
even informs them that a particular individual or group is suspect, and should
not be a party to business with a bank. In essence, the plaintiffs want Arab
Bank to step into the investigative role of the FBI, or U.S. Department of the
Treasury.
Jurors also heard
from Shukry Bishara, Arab Bank’s former chief banking officer, and current
finance minister for the Palestinian Authority. Bishara testified that the
Saudi Committee had made thousands of payments, most of which were humanitarian
in nature, to Palestinians who were affected by the Israeli-Palestinian conflict.
Yet, several transactions conducted by Arab Bank did raise questions about Arab
Bank’s anti-terrorism efforts.
Arab Bank had maintained an account for Osama Hamdan, a
Hamas spokesman, who is perhaps most infamous for enthusiastically propagating
the blood
libel , the anti-Semitic myth that Jewish people drink the blood of
non-Jewish children. Bishara stated
that in 1998, when Hamdan opened his account, Hamdan had listed his occupation
as an auto parts merchant, and Arab Bank had no knowledge of his involvement in
Hamas. Hamdan was not added to OFAC anti-terrorism lists until 2003,
and Bishara indicated that he was not aware of the existence of the account
until Linde and other plaintiffs brought suit. At that time, Arab Bank
contacted the Central Bank of Lebanon, as Hamdan was based in Lebanon, and
informed them of Hamdan’s status. Receiving no further instructions, Since Arab
Bank closed Hamdan’s account, and returned his funds to him (an action that
drew heavy criticism from the plaintiffs’ attorneys).
Arab Bank was also confronted over funds
transferred to the now-deceased Sheikh Ahmed Yassin, the founder of
Hamas. Unlike Hamdan, Yassin’s name
appeared on OFAC lists, and so the transaction should have been halted.
However, in it’s defense, Arab Bank showed that the spelling of Yassin’s name
on the OFAC list differed from that which appeared before Arab Bank in the
transaction documents. As a result, computers did not match and take special
note of Yassin’s name, and flag the transaction.
While this argument was received with ridicule from the plaintiffs’ attorneys, when considering the computerized,
automated nature of modern banking, and the volume of transactions processed
daily, it is quite easy to see how, because of such a discrepancy, a suspect
transaction might fly under the radar.
The plaintiffs also offered a spreadsheet that Arab Bank had
received from the Saudi Committee, which listed the intended recipients of
funds from the Saudi Committee, mostly Palestinians who had been injured or
killed in fighting with Israel. The spreadsheet stated the reason why people
were receiving money from the Saudi Committee. One recipient was listed as
being a recipient because of a “martyr operation”, which plaintiffs’ attorney
Mark Werbner argued was a reference to a suicide attack against Israelis, and
that Bishara was aware of it’s terrorist status. Bishara denied this allegation,
though it was quite likely rather harmful for Arab Bank’s defense, given that many would infer that such terminology referred to suicide bombings,
In closing statements, plaintiffs’ attorney C. Tab Turner argued
that Arab Banks’ compliance with the OFAC lists was insufficient, and that the
jurors had an opportunity to “stop terrorism” and send a message to other
banks, to the effect of “don’t you dare do what these people did.” Turner framed his arguments in large part as a
rallying call for banks to be held to a higher standard of liability, and to be
punished for conducting transactions which ultimately benefited terrorist
organizations. At one point, Turner remarked that that “how you stop ‘em is you take the money away
from them.” He painted the jury as holding a sort of grand centrality and importance
in the fight against terrorism, emphatically stating that the verdict would
“reverberate around the world.” That these transactions involved parties who
did not actually match OFAC lists was not an obstacle for Turner, who argued
for a much higher standard of liability than careful compliance with US banking
and anti-terrorism laws.
Shand Stephens, Arab Bank’s attorney, argued against such
broad accountability, warning of the negative consequences of imposing such
sweeping liability on banks. Stephens cautioned
that banks, and private businesses broadly, were being told that asked to use
their own judgment in deciding who might be a terrorist, and to “make up” lists
of terrorists. Stephens raised the specter of a customer being denied service
at Walmart because “we here at Walmart have decided you’re a terrorist, or your
brother’s a terrorist.”
Stephens also noted that more than 150 people, and 12
organizations, were accused by the plaintiffs of being involved in terrorism,
and yet, the plaintiffs acknowledged that there was no public, master list of
Hamas terrorists. Yet, the jury was being asked to find that Arab Bank should
have somehow known that some individuals and organizations were involved with
Hamas (despite their name not appearing on OFAC lists), and avoided conducting
business with them.
On September 22, 2014, Arab Bank was found liable
for having knowingly supported particular attacks by Hamas in Israel, with
specific damages to be decided in a separate proceeding. Arab Bank is currently
appealing
the verdict, and the ultimate fate of this litigation rests in the hands of
the Second Circuit Court of Appeals, and potentially the Supreme Court.
Policy Arguments
Against Holding Banks Liable For the Actions Of Terrorists
Setting aside the serious legal and procedural questions
raised by the Arab Bank litigation, there are also important policy arguments
against allowing banks to be held liable for the actions of customers who fund
and otherwise support acts of terrorism.
Tracking And Stopping
Transactions Of A Terrorist Nature Is Extremely Difficult
Perhaps the strongest argument against allowing for victims
of terrorism to sue banks under The Act is that it’s extremely difficult, often
seemingly impossible, for banks to track, stop and stem these transactions. How
is it in any way fair to punish a defendant civilly for something which, even
with extraordinary efforts, they have such limited ability to control or
prevent?
In the Boim litigation,
at the appeals stage, Sant notes that one of the few points on which both the
majority and dissenters agreed was that “terrorists’ money laundering rendered
their transactions highly confusing.” The
court in Boim noted that a terrorist
supporter might funnel money to a seemingly innocent organization, which could
then send these funds to another entity, also of an apparently harmless nature,
which might then pass the money along to terrorists, or their beneficiaries. In
such a situation, a bank has a limited ability to discern just which
organizations and transactions are of a terrorist nature, and which are
permissible. The reality that major banks process a large volume of
transactions on a daily basis makes this task no easier.
Sant also observes that the process through which money is
moved to terrorist organizations often involves not only multiple parties, but
quite often, several different banks. Each bank in the chain of transfer will
have limited knowledge as to the identity of the original or prior transferring
parties. As a result, it is rather difficult for any individual bank to gain a
sense of the bigger picture of terrorism financing, such that they might stop a
particular transfer to a specific party, one who constitutes just one link in a
long financial chain. Without such knowledge, preventing funds from falling
into the hands of terrorists is incredibly challenging.
It is important to once again note that in the Arab Bank
case, a number of the transactions in question also passed
through the New York branches several American banks, including JP Morgan
Chase, Citibank and Bank of New York, and apparently met OFAC filters at these
banks, without raising further scrutiny within these institutions. If Arab Bank
is to be held liable, many other boldfaced names in the world of banking and
finance will also face a similar fate, though there is little any of them could
have done to prevent these sorts of transactions.
An Expansive Interpretation Of The Act Will Both Allow For Overly Broad
Discretion, And Impose Excessive Investigative Burdens, Upon Banks, And Potentially
Other Private Businesses As Well.
Holding banks liable under The Act forces them to step into
the role of an investigative body, tasked with fighting terrorism. If the
verdict in Arab Bank is upheld on
appeal, diligent compliance with federal banking and anti-terrorism laws will
no longer be sufficient to shield a bank from civil liability for the actions of
terrorist customers. As a result, banks will need to conduct independent
investigations of their customers.
Placing such a burden is fraught with pitfalls. As Sant
notes in his work, a bank might form a profile of whom they consider a
high-risk customer, in major part based on a customer’s religion, race, and
national origin, and discriminate against all customers who share those traits.
In the process, numerous innocent people might be systematically denied access
to banking services, by financial institutions seeking to avoid liability under
The Act.
In today’s geopolitical environment, where most
organizations designated as terrorist groups by the United States are Islamist
in nature, it’s not hard to imagine Muslim customers, or those who are mistakenly believed to be Muslim, being excluded
or penalized by a bank hoping to avoid liability under The Act. Placing banks in
the position of stopping potential terrorist funding, in order to avoid
liability under The Act, could cause notable harm to those who have done
nothing wrong, other than be a member of a disfavored group. Political beliefs
might also become a target under such an approach, and as a result, those whose
opinions are outside the mainstream could find themselves denied basic banking
services.
If the rationale underlying the litigation against Arab Bank
is taken to it’s logical conclusions, a variety of private businesses might be
liable under The Act, for simple business transactions that would now be
considered supportive of terrorism. Suppose that a hardware store chain in
Pakistan, the equivalent of a Home Depot, were implicated in selling ammonium
nitrate fertilizer, which has been used to build deadly roadside bombs
which have maimed and killed American soldiers, as well as Afghan civilians.
This retailer might have limited knowledge of who was buying fertilizer, and
for what purposes.
If a group of plaintiffs, perhaps American aid workers in
Afghanistan, were injured or killed by these bombs, and their survivors brought
suit under The Act, they might successfully argue that that this business
should have taken stronger preventive measures to screen the few customers who
purchased this product for violent purposes, out of thousands who likely bought
the product for standard agricultural use. The overly broad interpretation of
The Act, as seen in the Arab Bank case, could create causes of action against a
variety of entities, simply for engaging in everyday commerce, and conducting
transactions which they had no reason to believe was of a terrorist nature.
Punishing banks for
the terrorist acts of their customers could deepen the financial isolation of
certain geographic regions, which could further aggravate violence and
terrorism
Similarly, allowing Linde-like
suits to proceed, could lead to the financial isolation of certain geographic
regions. Perhaps a bank like HSBC or Barclays will decide that the potential
benefits of conducting transactions on behalf of people in the Middle East and
parts of South Asia simply isn’t worth the legal risk; over time, more banks
might follow suit, and these regions will find themselves increasingly financially
isolated. While the connection between terrorism and poverty remains an
unsettled question, and is the subject of intense debate, completely
starving a region of financial services probably isn’t very helpful in
furthering economic growth and productivity, or stemming the spread of
extremist ideology and accompanying violence.
Some might offer the economic argument that a few
risk-embracing financial institutions, will view the skittishness of other
banks as an untapped opportunity, and chose to enter such markets. However,
this assessment overlooks the reality that in today’s interlinked, global
financial system, the dollar is still a reserve
currency, and access to American capital markets, as well as the ability to
convert foreign monies into dollars, and later into other currencies, is still rather
important for most banks.
As a result, they
will find it important to maintain some sort of presence in the United States, which will expose banks to liability under The Act. The situation of Arab Bank makes this clear. Arab
Bank’s liability under The Act was based in large part on it’s New York branch,
which allegedly converted
Saudi riyals, donated by the Saudi Committee, into Israeli shekels (which was
the currency most accessible for use in the Palestinian territories), for
payment to the families of, suicide bombers.
If forced to choose between access to American financial markets, or jeopardizing such access by conducting business
in conflict-riven zones where some customers might be involved in terrorism, many
banks might chose to pull out of these regions altogether, thus further
increasing financial isolation, and stifling economic growth; both of these
conditions can be conducive to the spread of terror and extremism.
Suing banks, and thus
driving terrorist sources of funding underground, might result in the unintended
consequence of making it more difficult to track and stop terrorist funding.
Creating causes of action against banks under The Act could
also have the unintended effect of driving terrorist money underground, making
it even more difficult to track and stem the flow of funds to terrorists. As
banks seek to limit their exposure to potentially problematic customers,
terrorists will almost certainly seek out alternate means to raise and transfer
funds. Since terrorist groups are inherently ideological, and hold considerable
personal commitment to their respective agendas, they will apply the same sort
of operational skill to financing their organizations, as was utilized to carry
out their most successful operations.
Over time, this might make it more, not less, difficult to
track and stop terrorism-related financing. The rise of ISIS is an interesting example
of how this works. Rather than evasively using the traditional banking system,
as Hamas and other militant organizations have often done, ISIS funds itself
through selling oil from Iraq’s oilfields, as well as through a network of
various criminal activities, such as smuggling and kidnapping, including direct
cash transfers, often physically dropped off in the vast territory which ISIS
controls in Iraq and Syria, by way of the Turkish border. ISIS also solicits
donations from well-heeled supporters in Qatar and Kuwait, who often skillfully
channel their donations through a variety of charitable channels. Despite
intensive efforts by the United States, European Union, and allies in the
Middle East, ISIS’ maintains considerable financial strength.
The situation with ISIS is somewhat unique, in that ISIS
controls a large swath of territory, and is basically administering it’s own
state within certain regions of Syria and Iraq. That makes it considerably
easier to fund operations in such a varied, flexible manner. Smaller, less far-reaching
organizations, which control little to no territory, might not enjoy this
advantage.
Still, the broader lessons demonstrated by ISIS, in terms of
applying an aggressively innovative approach to funding operations, are ones
that will likely be learned, with deadly effect, by numerous other militant
organizations. Rendering traditional banking services inaccessible to these
organizations, counterintuitive as it might seem, will, rather than preventing
terrorism, make the financial dealings of terrorist organizations even more
difficult and opaque, and largely impossible to track and monitor.
Permitting lawsuits
against foreign banks under The Act could hinder anti-terrorism cooperation
with other nations, and also invite legal retaliation against American
financial institutions.
Banks, as the bedrock of a country’s financial system, are
often vital strategic assets for a nation. It is worth remembering that the
Basel Committee on Banking Supervision, a global body of bank regulators and
central bank officials from more than 20 major world economies, has found that because of their size
and linkages, some banks are “systemically important”, while central banks and
lawmakers in the United States,
United
Kingdom, and numerous other Eurozone
nations have spent taxpayer assets to rescue troubled financial institutions.
Since successful lawsuits under The Act could be a source of
significant liability for banks, and thus weaken banks both financially and in
terms of reputation, this sort of litigation may be a matter of national
importance for the nations where such banks are located. In some cases, such as
with lawsuits
by American veterans of the second war in Iraq, against British financial powerhouses
HSBC and Barclays, these institutions are critical parts of the banking infrastructure
of the United Kingdom, an important friend of the United States.
Terrorism knows no national boundaries, and has a profoundly
damaging impact on any society which it touches. As a result, any sustainable,
lasting anti-terrorism effort requires deep cooperation and collaboration
across many nations. If the aforementioned suits against these British banks do
end up moving forward, especially on such questionable grounds, the UK’s
government will be forced to grapple with negative political sentiment towards
the US, which might make cooperation on broader anti-terrorism matters,
especially involving financial issues, increasingly challenging. These
consequences could be even more severe in the event of litigation against banks
based in nations which aren’t longstanding allies of the United States.
Sant presents another equally troubling scenario, where
other nations retaliate against the United States, and more specifically,
American businesses, by passing their own versions of The Act, and allowing
litigation against US-based institutions to move forward. He cites the example
of the French bank Credit Lyonnais, which is currently being sued under The
Act, also in federal court in Brooklyn, for processing transactions for a
Paris-based nonprofit organization, known as CBSP, which, while formed as a
purportedly humanitarian organization, designed to provide aid to Palestinians,
allegedly acted as a fundraiser for Hamas. While there were some concerns on the part of Credit
Lyonnais officials about CBSP, they didn’t close the organization’s accounts
until 2003, when CBSP appeared on the OFAC list as a terrorist organization.
The French government had investigated CBSP prior to 2003, and not found it to
be involved in any sort of terrorism.
As Sant argues, it is hardly implausible to imagine France,
or another government whose financial institutions face litigation under The
Act, becoming angered or troubling by such proceedings, and instituting retaliatory measures, through their
legal system, against American banks. The consequences of either reduced cooperation
on anti-terrorism efforts, or outright blacklisting of and retaliation against
American financial institutions, would be immeasurably harmful to American
national interests.
Conclusion
It is impossible for people of compassion and conscience to
be shocked and angered by brutal acts of terrorism, designed to maim and murder
civilians, and intimidate entire populations. In the Sbarro attack, which, as
noted earlier, figured prominently
in the Linde matter, 15 people,
including 7 children and a pregnant woman, were killed when a Palestinian
suicide bomber detonated himself in the restaurant during the peak of a
Thursday lunch hour.
For one Israeli family, the Schijveschuurder’s,
both parents, as well as two of their five children, were killed in the attack.
Another victim of the attacks, Chana Nachenberg (whose family brought suit in Rothstein), remains
in a vegetative state to this day, unable to communicate with her husband or now-teenage
daughter (who was present during the attack, and miraculously escaped unharmed).
When one gives thought to what happened to the Schijveschuurder
family, or Chana Nachbenberg, Steven Averbach, or for that matter, any victim of terrorism,
there is a strong desire to not let these horrific events pass forgotten or
unanswered. Indeed, committing acts of terror must carry severe consequences
for those responsible. Hamas is a group with avowedly genocidal
intentions, which has eagerly targeted Israeli civilians whenever presented
with the opportunity. Israel, like any
other nation, has a right to defend itself against those who wish to harm it’s people.
The problem is, the Linde
litigation isn’t truly about fighting Hamas, or preventing future acts of
terrorism. The plaintiffs didn’t sue Hamas operatives. Nor did they allege that
Arab Bank is a part of Hamas. Arab Bank isn’t even being accused of supporting
Hamas by donating it’s own funds or profits to the organization.
So why is Arab Bank being forced to defend itself in court? Considering
the nature of international terrorism, and specifically of Hamas, Mr. Turner
and other plaintiffs’ attorneys are unlikely to locate a deep-pocketed Hamas leader
with financial ties to the US, whom they could rightfully sue in federal court.
As a result, plaintiffs' attorneys from across the nation (such as Mr. Turner, who hails from Arkansas), have instead set their sights on a far easier target: banks which aren't actually responsible for the suffering of the plaintiffs, but holds
billions of dollars in assets, allowing for a large recovery in the event of a favorable verdict.
When one examines the statements of those sympathetic to
plaintiffs in cases brought under The Act, whether it be the judges in Boim who were searching for a more “promising”
approach to holding the defendants in that case liable, or Turner’s urging the jury
in Linde to help “stop terrorism” and
send a message that would “reverberate”, it becomes clear that many of the
actors in these cases are driven by a desire to allow those victimized by
terrorism to hold someone, almost anyone, responsible for their suffering, regardless of whether such a party was actually worthy of blame. It
also doesn't hurt the plaintiffs' case that, in light of the 2008 financial crisis, the public’s
view of financial institutions is at historic lows;
as a result, banks are seen with anger and suspicion, making them exceptionally
unsympathetic defendants.
Yet, if a society is truly governed by laws, rather than
popular sentiments or passions, courts must render rulings based on the purpose
for which a particular law was actually written, and what it is meant to
accomplish. In some circumstances, broader policy considerations are also
relevant. By any of these measures, Linde
should have never proceeded to trial. The only way for the judicial system
to correct this miscarriage of justice is by overturning the verdict on appeal,
and setting a precedent which prevents such blatant misuse of The Act in future cases. Terrorism must be stopped. But this isn't the way to achieve that goal.
