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Septmber 22, 2014 – A federal jury on Monday found Arab Bank liable for knowingly supporting terrorism efforts connected to two dozen attacks in the Middle East, the first time a bank has ever been held liable in a civil suit under a broad antiterrorism statute.
Arab Bank, a major Middle Eastern bank with $46 billion in assets, was accused of knowingly supporting specific terrorist acts in and around Israel during the second Palestinian uprising of the early 2000s.
The verdict is expected to have a strong impact on similar legal efforts to hold financial institutions responsible for wrongdoing by their clients, even if the institutions followed banking rules, and could be seen as a deterrent for banks that conduct business in violent areas.
The plaintiffs in this case, about 300 victims of 24 terrorist attacks, said the acts had been carried out by Hamas, and accused Arab Bank of supporting the organization by handling transfers and payments for Hamas members.
“Terrorist organizations are dependent on the financial system to operate,” Gary Osen, a plaintiffs’ lawyer, said after the verdict. “They’ve been able to thrive largely because folks like Arab Bank and others have turned a blind eye.”
Damages will be decided in a separate trial, which has not yet been scheduled. The plaintiffs have not asked for a specific amount.
The burden of proof in the trial, held at Federal District Court in Brooklyn, was high: The plaintiffs had to prove that the terrorist attacks were indeed conducted by Hamas, and that the bank’s support of Hamas was the “proximate cause” of the events. In addition, the plaintiffs had to demonstrate that their injuries were “reasonably foreseeable” as a consequence of the bank’s acts.
The trial was held in Brooklyn because the plaintiffs are United States citizens, some of whom live in New York. The 297 plaintiffs represent those who were killed, injured or had a family member killed in the Hamas attacks.
Several similar lawsuits are pending; one case, filed by victims of terrorist attacks against the National Westminster Bank, was reinstated on Monday by a federal appeals court.
“What this has done is it’s made the effects of American law felt in far-off places, and that is significant,” said Jonathan Schanzer, vice president for research at the Foundation for Defense of Democracies and a former terrorism finance analyst for the Treasury Department. “I don’t think any country, any bank, would want to be cut off from the U.S. financial sector, and they’re going to start thinking very carefully about whether they accept financial transactions” even from people or groups who are not on designated terrorist lists.
Shand S. Stephens, a lawyer for Arab Bank, said he was confident that the Second Circuit Court of Appeals was “going to reverse” the jury’s decision.
The case focused on transactions Arab Bank handled during the second Palestinian uprising. The plaintiffs accused Arab Bank of handling transactions for a number of well-known terrorists, and helping to route transactions for a charity called the Saudi Committee. That charity, the plaintiffs argued, sent payments to the families of Hamas suicide bombers, pointing to a Saudi Committee spreadsheet that included the names of relatives of some of those bombers.
Arab Bank holds that of all the accounts and transactions it processed in that period, only a few are in question, along with the large number of payments it processed for the Saudi Committee. It said the Saudi Committee is a legitimate charity that was never listed as a terrorist organization by the United States. And it said it properly checked all accounts and transactions against the appropriate blacklists, and any transactions that did go through were because of errors, such as different renderings of names in Arabic and in English.
Even if the terrorists were not on the relevant blacklists, the plaintiffs argued, Arab Bank employees should have known that the people were terrorists.
Mr. Stephens countered that designating terrorists is the government’s job. “The proposition that’s being floated here,” he told the jury, is “that private businesses, including banks, are supposed to make up their own lists of terrorists. Imagine, actually, what that would do, if a bank did that.”
The jury, which returned a verdict after two days of deliberations, was apparently unpersuaded. One juror who agreed to speak to the news media, Jill Rath, echoed the plaintiffs’ arguments, saying that “the money and the financing is the oxygen for the terrorists.”
Even before the case went to trial, it had drawn the attention of the Obama administration and the Supreme Court, and led to rulings that Arab Bank says hampered its ability to tell the jurors about its efforts to identify transactions connected to terrorists.
The bank refused to turn over a large number of the requested documents in the case, citing the privacy laws of the countries where it does business. As a result, a judge who oversaw the case issued sanctions, including one that prevented Arab Bank from telling the jury why it withheld those documents, though the plaintiffs were free to tell the jury that the documents had been held back.
The bank then asked the Supreme Court to overturn the sanctions. The Obama administration was split: The State Department pushed for Supreme Court intervention; Jordan, where the bank has its headquarters, is a loyal ally, officials there said. Others wanted the court to stay out of it: Tax and treasury officials did not want banks to hide behind foreign bank-secrecy laws in their investigations, and other justice divisions felt that the department should not be intervening against American victims of terrorist attacks.
The Supreme Court declined to hear the case, and it went to trial with a version of the sanctions in place. Along with the ruling about document withholding, those sanctions specified that jurors “may, but are not required to, infer” that the defendant provided financial services to Hamas, and that the defendant did so knowingly, according to instructions from the judge, Brian M. Cogan.
In their closing arguments, the plaintiffs’ lawyers made a point of Arab Bank’s withholding of documents. “Why are they doing those kinds of tactics? Because they don’t have a defense. Because they are caught red-handed. Because the documents that show they are doing business with Hamas are all over their files,” said Tab Turner, one of the plaintiffs’ lawyers, asserting that the bank had come up with a way to “twist and distort and hide, hide the documents, conceal the documents.”
Mr. Stephens, the bank’s lawyer, said after the verdict that “evidence this thin would never have resulted in a verdict unless there were errors in the admission of evidence, errors in the instructions, and errors in imposing a sanction that the United States has already told the Supreme Court was improper.”
In a statement released after the verdict, Arab Bank said that “any proceeding conducted under the district court’s improper sanctions” would be “nothing more than a show trial.”