Consortium Against Terrorist Finance Aug. 14, 2015, 4:15pm

The U.S. Anti-Terrorism Act (ATA), passed in the immediate aftermath of the 9/11 attacks, contains a number of components to stop the provision of financing to terrorist organizations and to deter companies from engaging in business with those who may be helping to finance terror.

On Friday 14 August it was announced that Arab Bank reportedly reached a settlement with more than five hundred victims and victims’ family members of Hamas attacks in Israel and the West Bank in the early 2000s in the case Courtney Linde et al v Arab Bank. The case was to go before a jury on Monday 17 August. This phase of the trial was to determine the amount of compensation to be paid by the bank to the families. The Jordan-based Arab Bank had been held liable for the attacks under the ATA, and the law states that whatever the jury had awarded would have been be tripled. The amount of the settlement is not yet known, but it does avoid going before a jury for the compensation portion of the case.

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This case is controversial because Arab Bank has claimed in an earlier phase of the trial that they applied appropriate, industry-standard oversight measures and were not doing business with any individual or organization sanctioned or banned by the U.S. Government at the time of the transaction. The plaintiffs successfully argued that the bank, doing business in the West Bank at the time of the Second Intifada, should have known that some of its customers were associated with Hamas.

Arab Bank had repeatedly objected to the way the trial was being carried out and even got all the way to the U.S. Supreme Court where they unsuccessfully tried to obtain a rare mid-trial dismissal of the case on the grounds that they were being treated unfairly by the judge.

The outcome of this trial is obviously very important to anyone who cares deeply about stopping the flow of money to terrorists. The ATA was intended to force foreign businesses and institutions, even those who may not agree with U.S. foreign policy, to think long and hard about whom they are doing business with overseas. One side of the argument is that the outcome in the Arab Bank case shows that this goal is succeeding. The other side of the coin is that when U.S. courts push too far into the realm of foreign policy, they risk angering important allies (sometimes allies that are needed in the fight against terror), they also risk damaging the very foreign policy priorities and initiatives that the legislation is meant to advance.

Banks the world over are also taking note and will likely change their behavior based on the outcome of this trial. At least two other European banks are being sued by the same plaintiffs. With Arab Bank apparently left feeling it had no further recourse in this case other than to settle, other banks now may dramatically cut back their operations in the Middle East and Africa. This is called de-risking, and once again, it may undermine the very U.S. foreign policy priorities that the ATA was seeking to advance. If businesses in countries wracked by instability and terrorism are denied access to legitimate sources of capital, then they become more likely to turn to illicit sources. The instability that is causing the de-risking also may become more severe in countries and regions that are cut off from the international business and financial communities.

Finally, the outcome of this case could have major implications for the future of relations between Iran and the rest of the world. Iran is acknowledged by the U.S. Government as the world’s leading state sponsor of terror, and it could be about to receive hundreds of billions of dollars in sanctions relief. There is a very real possibility then, that companies and financial institutions that do business in Iran in the future could be sued just as Arab Bank has been, whether or not they are actually doing business with sanctioned companies or individuals. Furthermore, there is the real risk that if after a relaxing of sanctions, companies that enter the Iranian market could be punished or suffer a total loss of their investment if there is a major international terror attack for which Iran is held culpable.

Stopping the flow of financial resources to terrorists and those who support them must be a priority for any and all nations that seek to combat the threat of international terrorism. Laws are in place to promote this policy. How these laws are enforced and interpreted, however, is one of the critical questions of our time and requires attention and vigilance from those engaged in the issue.

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