|Photo by: REUTERS/Sharif Karim|
Lebanon War victims alter game of terror financing
By YONAH JEREMY BOB
Ruling by NY court in favor of victims of Hezbollah rocket attacks could block terror groups’ access to transactions in US dollars.
Terror groups may no longer be able to do transactions in US dollars after a
groundbreaking ruling by the highest state court in New York, Shurat Hadin
announced on Wednesday.
The New York Court of Appeals issued the ruling
on Tuesday in favor of victims of Hezbollah rocket attacks from the Second
Lebanon War in 2006 who are citizens of the US, Canada and Israel.
decision could be a game-changer in the global economic war on terror
Until now, terror financing could avoid scrutiny in the US by
making fund transfers through American correspondent banks.
correspondent bank essentially serves as a middle bank for fund transfers for
banks that do not have local US branches.
Avoiding having US branches has
meant not having to worry about US banking licenses or regulations that are
tough on oversight and emphasize revealing funds involved in terror
As long as the terrorist-affiliated banks had no local branch
in the US, they were insulated from any legal consequences and the correspondent
bank could plead ignorance regarding the transactions.
However, using a
new interpretation of an existing law, the appeals court ruled that
correspondent banks will now be held liable for civil damages under anti-terror
financing laws if it is found that they facilitated transactions that ultimately
can be traced back to terrorist groups.
This places the onus on
correspondent banks to do more careful policing of where fund transfers are
eventually going and investigate what can sometimes be many layers of straw
companies set up to hide the fact that terrorists are receiving the
Most importantly, many correspondent banks simply may cease to be
involved in any transactions where they have doubts about a possible terror
connection in order to avoid even the possibility of heavy civil liability and
The lawsuit was filed in 2008 and has mostly been in federal
court, but came to state court when the Second Circuit Federal Appeals court
asked the New York Court of Appeals to decide how to interpret a New York law on
It was filed against the Lebanese Canadian Bank, USA who had
used American Express Bank as its correspondent bank in the US.
Canadian Bank, USA made and received transfers from an organization that was a
front for Hezbollah and used American Express Bank as its doorway to much of the
financial world in dollars.
Hezbollah is defined by the US as a terrorist
organization and any financing of Hezbollah can subject an entity to having its
Essentially, Hezbollah and Lebanese Canadian Bank, USA
were using American Express Bank and countless other correspondent banks to get
around anti-terror financing laws in the US.
Although technically, the
terrorists can try to avoid the US entirely, the fact is that banks worldwide
often prefer and are more able to use US dollars for global
The ruling may even stop terrorists from using major
clearinghouses like SWIFT, the largest wire transfer organization in the world,
as many SWIFT transactions are performed in US dollars, which at some point
could be traced back to a American institution that could have
“This is a ruling with double leverage,” said attorney Nitzana
Darshan Leitner, head of Shurat Hadin.
“First, it will open a huge
Pandora’s box of past transactions,” said Leitner, saying that her organization
had sued and will continue to sue financial institutions who “we know from our
sources are making fund transfers for terror organizations and state supporters
Once we sue these institutions, they will “not be able to
do business with anyone in the United States,” Leitner stated.
that the ruling was also “significant for the future,” noting that “from now on
the lives of terrorist organizations will be much more difficult” since some
maybe “can do without French or German currency, but they will have great
difficulty to get by in our world without dollars.”
Shurat Hadin has
succeeded in obtaining rulings for billions of dollars against terror
organizations and also brought insurance lawsuits, which indirectly prevented
many ships from participating in the most recent flotilla attempting to break
Israel’s blockade of Gaza.