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.

The decision could be a game-changer in the global economic war on terror financing.

Until now, terror financing could avoid scrutiny in the US by making fund transfers through American correspondent banks.

A 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 financing.

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 money.

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 bad press.

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 the issue.

It was filed against the Lebanese Canadian Bank, USA who had used American Express Bank as its correspondent bank in the US.

Lebanese 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 assets seized.

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 transactions.

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 liability.

“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 of terrorism.”

Once we sue these institutions, they will “not be able to do business with anyone in the United States,” Leitner stated.

She added 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.

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