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August 13, 2014-
The judge called it the Beirut account.
It was a basic bank account at Arab Bank’s Al-Mazra branch in Beirut, Lebanon, unremarkable except for the name on the account: Osama Hamdan, a spokesman for the terrorist group Hamas.
For the six years Mr. Hamdan maintained the account, at least three wire transfers sent to it were earmarked for Hamas, transactions that officials at Arab Bank vetted and initialed, the plaintiffs say.
Now, the Beirut account is at the center of a trial in Federal District Court in Brooklyn, where the plaintiffs say the case will shed light on the shadowy and interconnected network that finances terrorists.
The account and ones like it make up a critical financial infrastructure for a network that, at times, operates like a Social Security system for terrorists, the plaintiffs say. Family members were instructed to go to Arab Bank branches to collect charitable funds after their relatives died in a terrorism attempt, the plaintiffs say.
While American authorities have prosecuted banks for processing tainted money, this is the first civil trial against a bank under the Anti-Terrorism Act. Opening arguments are scheduled for Thursday.
The case has a long history of controversy. It has split the Obama administration and drawn the attention of the Supreme Court, and has the government of Jordan, where the bank has its headquarters, arguing that it opens the entire Middle East banking infrastructure to severe risk. And it has some bank executives watching the trial with frayed nerves, concerned that a finding of liability here could mean that doing business in many areas of the world may become too risky.
Arab Bank contends that it properly screened for terrorists, checking names against the applicable lists of individuals and organizations designated as terrorists. As soon as Mr. Hamdan was added to one of those lists in 2003, the bank says, it shut down the account.
A series of harsh rulings, however, has limited the bank’s ability to defend itself at trial. A dispute over the bank’s failure to turn over evidence requested by the plaintiffs led Judge Nina Gershon to rule that the jury would be instructed that “it may, but is not required to, infer” that the bank provided financial services to designated terrorist organizations and individuals, and that it processed payments to terrorists for a charity called the Saudi Committee.
Judge Gershon also restricted the bank’s ability to offer information at trial that could counter that inference.
The 297 plaintiffs represent those who were killed, injured or had a family member killed in 24 Hamas attacks from 2001 to 2004. The plaintiffs argue that Arab Bank handled transactions on behalf of people or organizations it knew were associated with terrorism.
One of the plaintiffs, Sarri Anne Singer, then a New Jersey resident, was on bus No. 14A in Jerusalem in June 2003 to meet a friend for dinner. A suicide bomber a few seats away detonated his bomb, killing at least 16 people. Ms. Singer was struck by shrapnel, and survived the attack, for which Hamas claimed responsibility.
Another group of plaintiffs, the Sokolow family, lived on Long Island and was vacationing in Israel in 2002. They were exiting a shoe store near their hotel when a suicide bomber blew herself up. Mark and Rena Sokolow and two of their daughters, Jamie and Lauren, all suffered injuries.
The plaintiffs allege that charities like the Saudi Committee sent payments to terrorists and their families that the bank processed, pointing to a Saudi Committee spreadsheet that listed “the names of martyrs and their beneficiaries, as well as the martyrs’ causes of death,” according to an order from Judge Gershon.
The plaintiffs also have as evidence ads like one that ran in an Arab-language newspaper in 2002: “The relatives of the martyrs, whose names hereby follow, are requested to head for the Arab Bank branches in their places of residence in order to receive the tenth payment from the honorable Saudi Committee — a sum of 5,316.06 USD for each family.”
That sum was the precise amount a man named Shuhail Ahmad Isma’il al-Masri received via Arab Bank, according to a wire transfer record that plaintiffs obtained. Mr. al-Masri said in a television interview that he received the money as a “salary” because he was the father of the suicide bomber who attacked a Sbarro pizza parlor in Jerusalem in 2001, killing or injuring 130 people, including some of the plaintiffs in this case, as described in the judge’s order.
Arab Bank, however, maintains that it had nothing to do with selecting the Saudi Committee payment recipients; it screened the transactions against blacklists, and none were flagged (the terrorists’ relatives, who received the payments, were not listed on the blacklists, the bank says). The Saudi Committee has never been designated as a terrorist-affiliated group on an official American list, it says, and of the 180,000 Saudi Committee transactions run through Arab Bank during this period, the plaintiffs are questioning only a handful.
Some of that defense may not be heard at trial because of Judge Gershon’s order, which the bank appealed. Bank officials said they were prohibited from turning over a huge number of requested documents because of foreign bank secrecy laws.
The Court of Appeals for the Second Circuit declined to review Judge Gershon’s ruling; the appeal then went to the Supreme Court, which asked the Obama administration for guidance.
The response was hardly straightforward. State Department officials supported Arab Bank, saying Jordan was a helpful American ally. The Justice Department’s national security division did not want to intervene against American victims of terrorist attacks. And tax and Treasury officials sided with the plaintiffs because their efforts to crack down on tax evasion through foreign accounts would have been hampered had foreign-bank secrecy laws superseded those of the United States.
Jordan also weighed in, saying that “forcing Arab Bank to stand trial under the sanctions order” could harm the bank’s economic and reputational standing, and “could lead to economic and political instability in a region that can ill afford any more of either.”
The Supreme Court ultimately declined to hear the case, allowing the judge’s sanctions to stand.
The stakes of the civil case are high, and not just for Arab Bank but for the banking industry, several lawyers who handle bank business say. They say a victory for the plaintiffs could further accelerate a wide-scale retrenchment among banks doing business in strife-torn areas.
At its most extreme, a verdict against Arab Bank, some bank lawyers worry, could mean that banks could be on the hook for wrongdoing by their clients even if the financial institutions followed banking rules.
The government is simultaneously trying to prevent tainted funds from coursing through the American financial system, and those investigations have already ensnared some banking giants, including the British bank HSBC and France’s BNP Paribas.
For large European banks, processing those payments into dollars was a lucrative business — one that American prosecutors say led them to open their doors to countries like Iran.
BNP Paribas, France’s largest bank, pleaded guilty to rare criminal charges and paid a record $8.9 billion penalty for processing billions of dollars on behalf of Sudan.
Those came after a string of cases against Lloyds, Credit Suisse, Barclays and Standard Chartered. All the banks reached deals with American authorities over accusations that they did business with countries facing United States sanctions.
Together, those cases have cast a chill throughout the industry, leading a number of banks to eliminate some high-risk businesses altogether. JPMorgan Chase, Bank of America and Citigroup, for example, have all whittled down their money-transfer services to areas like Mexico.