From the Financial Crimes Blog of Kenneth Rijock’s, banking lawyer-turned career money launderer-turned compliance officer:
In September, a federal jury found Arab Bank liable for knowingly supporting terrorism efforts connected to two dozen attacks in the Middle East, marking the first time a bank has been held liable in a civil suit under the Antiterrorism Act. The verdict is expected to have a strong impact on similar legal efforts to hold financial institutions responsible for wrongdoing by their clients, and has made the effects of American law felt in far-off places.
The Union of Arab Banks (UAB), in an Amicus Curae brief, filed in support of Arab Bank’s motions to overturn its liability verdict, has raised a well-founded fear that, due to their strict bank secrecy laws, other Middle Eastern banks will also soon find themselves facing potentially huge jury verdicts for damages, with little chances of success on appeal.
What the UAB is stating is, their members’ strict bank secrecy laws, which the banks chose not to violate in court proceedings, will result in possibly fatal damage awards, in connection with cases brought under the Anti-Terrorism Act. If a bank providing financial assistance to terrorist organizations with international sanctions is sued under the Anti-Terrorist Act, in the US, it will lose, and may be forced out of business and become a pariah in the financial community.
The UAB’s stated fear is well placed, but it ignores the possibility that member banks may indeed be guilty of providing material support to terrorist organizations.
Since bank secrecy in the Middle East will not be going away anytime soon, we should expect to see a serious increase in American private civil suits, targeting banks in the Middle East, for ATA violations, as dirty money is a major profit center for a number of banks in the region, and that includes funds being moved for Hamas, Hezbollah, IRGC, and the various branches of Al-Qaeda.
The landmark Arab Bank case could provide an effective weapon against banks who work with designated terrorist organizations. Perhaps the trial bar, acting for clients injured through terrorism, can do what regulators and the Department of Justice are unable to accomplish: shut down the banks that facilitate terrorism by bankrupting them through large judgments.
Read the full post here.