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From Banking and Finance Law Daily, September 23, 2014

Plaintiffs gain wins against two banks under terrorism support law

By Richard A. Roth, J.D.

Victims of terrorist attacks who claim that two banks provided material support to terrorist organizations won court victories in separate cases on Sept. 22, 2014. The U.S. Court of Appeals for the Second Circuit reversed a summary judgment in favor of the British financial institution National Westminster Bank, PLC, while a Southern District of New York federal court jury decided that Jordan-based Arab Bank, LLC, was liable for injuries or deaths caused by attacks carried out by the terrorist organization Hamas.

Arab Bank suit. The complaint against Arab Bank claimed that the bank administered what essentially was an insurance plan to benefit the families of individuals who were killed while carrying out terrorist attacks, were wounded in confrontations with Israel’s security forces, or were held in Israeli custody. The bank not only maintained lists of those who were eligible for payments, it also disbursed the funds, the complaint charged. As a result, the bank knowingly provided material support to Hamas in violation of 18 U.S.C. §2339B and also violated other U.S. laws.

The jury ruled in favor of the plaintiffs, finding Arab Bank liable for deaths or injuries caused by 24 separate attacks between March 2001 and September 2004. Damages to be awarded will be determined in a later phase of the suit.

National Westminster Bank suit. The suit against National Westminster Bank claims the bank maintained accounts and transferred funds for the Palestine Relief & Development Fund, also known as Interpal, which solicited funds and supported Hamas. The district court judge entered summary judgment against the plaintiffs after finding that they were unable to demonstrate that the bank knew enough about what Interpal was doing.

The plaintiffs appealed, asserting that they had shown there was a material issue of fact as to whether the bank had adequate knowledge to have violated the law.

Scienter requirement. According to the appellate court, the district court judge incorrectly interpreted the law as requiring the plaintiffs to show that the bank knew or deliberately ignored that Interpal was funding terror activities. The proper question was whether the bank knew or deliberately ignored that Interpal was funding the activities of a terrorist organization, Hamas (Weiss v. National Westminster Bank, PLC, Sept. 22, 2014, Leval, Circuit Judge).

The court emphasized that “Money is fungible.” Terrorist organizations do not maintain strict firewalls between their humanitarian efforts and their more sinister activities. Money donated for social services easily can be diverted to terrorist activities instead. Thus, it made sense to ask only if a bank knew or deliberately ignored that a customer was supporting the activities of a terrorist organization.

The plaintiffs needed only to show that the bank provided material support for Interpal and knew or deliberately disregarded that Interpal solicited funds for Hamas. There was enough evidence to create an issue of fact as to that, the court said.

Bank’s knowledge. To begin with, the bank knew that the Office of Foreign Assets Control had named Interpal as a Specially Designated Global Terrorist specifically because the organization provided support to Hamas, the appellate court pointed out. Internal bank emails indicated the bank was aware it was maintaining accounts for persons that were connected to Hamas and that the bank set a very high standard for when it would close such an account. The head of the bank’s security and fraud office said he would not recommend closing an account for any reason short of a criminal conviction. In his opinion, proof of improper purposes would only be proof that funds in accounts were “used to buy bullets or explosives,” he wrote.

The bank’s own investigations found that Interpal made payments to five committees the U.S. government said were operated or controlled by Hamas and one organization the Bank of England said was suspected of supporting terrorism.

The appellate court conceded that several agencies within the British government—the Charity Commission for England & Wales, the Bank of England, and the Metropolitan Police Special Branch—had investigated Interpal and found no evidence linking the organization to terrorism. However, the district court judge gave the British government decisions too much weight, the appellate court said. The British agencies looked only for evidence that Interpal supported terrorist activities, which was not the proper question. They did not look at whether Interpal more generally supported the activities of a terrorist organization.

The cases are No. 04-cv-2799 (BMC) and No. 13-1618-cv.

Attorneys in Linde v. National Westminster Bank, PLC: Peter Raven-Hansen (Osen LLC) for Tzvi Weiss et al. Mark S. Werbner and Joel Israel (Sayles Werbner) for Natan Appelbaum et al. Jonathan I. Blackman (Cleary Gottlieb Steen & Hamilton) for National Westminster Bank, PLC.

Attorneys in Linde v. Arab Bank: Mark S Werbner (Sayles Werbner) for Courtney Linde. Kevin Walsh (DLA Piper LLP) for Arab Bank, PLC.

Companies: Arab Bank, LLC; Interpal; National Westminster Bank, PLC; Palestine Relief & Development Fund.

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