InsideCounsel » May 2008
Dirty Banking
Financial institutions face suits over alleged Antiterrorism Act violations.
Armed with the conviction that they are empowered by Congress to act as private attorneys general, a small group of plaintiffs’ lawyers has opened a new front in the war on terror. Their targets are the major international financial institutions they say move large sums of money for terrorist organizations every day.
“There are a lot more dirty banks out there than people would like to believe,” says Gary Osen, a member of Osen and Associate in Oradell, N. J. “The number that are actually caught is smaller.” Since 2004, Osen and his co-counsel have launched three civil actions against international banks in federal courts: Linde v. Arab Bank, Weiss v. National Westminster Bank and Strauss v. Crédit Lyonnais.
The cases, brought on behalf of terrorist-attack victims, seek damages under the Antiterrorism Act from banks that allegedly channeled money to the perpetrators. All three cases have survived motions to dismiss and are currently in discovery.
These suits highlight the increased pressure on banks to monitor where the money has been prior to a transaction and where it goes afterward. They also are testing how large a role civil lawsuits can play in the effort to stem the flow of money to terrorists.
A Weak Link
In the years before the Sept. 11 attacks, Osen had developed a specialty in Nazi-era restitution cases that gave him an understanding of international banking.
“Shortly after Sept. 11 there was a telethon on Saudi TV raising money for the terror campaign in Israel,” he recalls. “It struck me that this might be a weak link in the terror network.”
Osen knew that if money was being raised in Saudi Arabia and sent to terrorist organizations such as Hamas or Hezbollah, it would likely have to travel through New York because the U.S. dollar is the main currency of global terrorism.
“The Jihadis depend on dollars as the fungible currency—the universal adaptor,” Osen explains. “Dollars are a reliably convertible currency.”
The conversion process, called dollar- clearing, generally relies on major New York banks. Money is transferred from a bank in country A to New York, where it is converted into dollars before being transferred again to a corresponding bank in country B. Clearing the deal through a stable currency ensures that the fullest value reaches the end of the transaction. It also brings the transaction into U.S. jurisdiction.
The 1992 Antiterrorism Act allows victims to bring civil suit against anyone who provides material support to terrorists. A 1996 expansion of the law, the Antiterrorism and Effective Death Penalty Act, added extensive criminal penalties in response to the Oklahoma City bombing.
