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November 11, 2014 – Barclays Plc (BARC), HSBC Holdings Plc and four other banks were accused in a lawsuit by U.S. soldiers of helping Iran process billions of dollars in transfers and finance terrorists who attacked Americans serving in Iraq.
Lenders including Standard Chartered Bank (STAN), Credit Suisse Group AG (CSGN) and Royal Bank of Scotland NV conspired with Iran and its banks to withhold certain data from transactions, enabling them to circumvent monitoring by U.S. regulators, the soldiers said in a complaint yesterday in federal court in Brooklyn, New York.
The conspiracy, dating back to 1987, provided Iran with a means to transfer at least $150 million to Hezbollah and other terrorist and militant groups, allowing them to carry out dozens of roadside bombings and other attacks against the U.S. military, according to the complaint.
“This is a lawsuit that could materially alter the U.S. banking landscape,” Sandy Chen, an analyst at Cenkos Securities Plc in London, said in a note to clients. “If these allegations are shown to be true, an avalanche of anti-terrorism legislation would tumble upon these non-U.S. banks” including a “possible suspension of U.S. banking licenses,” he added.
Each bank “understood that its conduct was part of a larger scheme engineered by Iran,” according to the complaint. “Each defendant also knew, or was deliberately indifferent to the conspiracy’s purposes and criminal objectives.” A U.S. soldier walks through a flash checkpoint in Ali Ayun, Diyala Province, in 2010.
Soldiers wounded in attacks and families of those who were killed are seeking unspecified damages.
Representatives of Barclays, HSBC, Royal Bank of Scotland, Credit Suisse and Standard Chartered declined to comment on the lawsuit. A call to the offices of another defendant, a U.K. unit of Iran’s Bank Saderat, wasn’t immediately returned.
Standard Chartered agreed in August 2012 to pay $340 million to the New York Department of Financial Services for its role in hiding or disguising the identity of Iranian clients in billions of dollars worth of wire transfers. In December of that year, the bank agreed to pay $327 million to resolve similar issues with the U.S. Justice Department, the Federal Reserve, the Treasury Department’s Office of Foreign Assets Control and the Manhattan District Attorney.
New York and U.S. officials have re-opened their investigations to determine whether Standard Chartered withheld evidence of Iran sanctions violations, two people familiar with the matter said in October.
The soldiers’ lawsuit follows a verdict in September in a separate terrorism financing case against Jordan’s largest lender, Arab Bank Plc. Jurors found the lender was liable for deaths and injuries of U.S. citizens in about two dozen attacks carried out by Hamas in and near Israel.
Arab Bank said it didn’t intend to conduct transactions for terrorists and was subject to an unfair trial. It’s seeking permission to appeal. Damages haven’t been determined in the case.
Barclays, HSBC and other banks accused of helping terrorists in Iraq “knowingly participated in the conspiracy,” said Gary Osen, a lawyer who represents plaintiffs in that case and the one against Arab Bank. “All of them took steps to make it happen.”
Attacks at issue occurred from about 2004 to 2011 and included an incident on Jan. 20, 2007, when terrorists gained access to a compound where U.S. military officers were meeting with Iraqi counterparts.
Terrorists with the militia group Asa’ib Ahl al-Haq, disguised in U.S.-style military uniforms, arrived at the compound in a convoy of black GMC Suburban trucks, according to the complaint. They detonated explosives, killing one U.S. soldier who jumped on a grenade, and then abducted and murdered four other soldiers, according to the complaint.
The attack was alleged to have been masterminded by a Hezbollah operative with other Iran-backed groups also involved in planning and overseeing it, according to the complaint.
The conduct of Iran and the militant groups “violated the laws of armed conflict,” plaintiffs said in the complaint. “No declared war or armed conflict existed between the governments of United States and Iran, and the injuries plaintiffs sustained were not the result of a declared war with Iran.”
The case is Freeman v. HSBC Holdings Plc (HSBA), 14-cv-06601, U.S. District Court, Eastern District of New York (Brooklyn).