Bill S-7 Suing Terror Sponsors

Case Studies

The Arab Bank Case Leads to New Bank Regulations and Policies

In the last few years, lawsuits seeking hundreds of millions of dollars in damages have been filed in New York against the Jordan-based Arab Bank. These claims allege that the Bank has knowingly aided and assisted Hamas and other terror organizations by distributing compensation money to the families of suicide bombers. Plaintiffs argue that the terrorists, secure in the knowledge that their families would financially benefit from their deaths, were thereby induced and encouraged to commit these horrific acts.

Judge Nina Gershon found that the Arab Bank did provide a conduit for money laundering and financial assistance to relatives of suicide bombers, and ruled that it amounted to providing an incentive for terrorism. The judge decided that the Arab Bank would have to defend itself against nearly 1,600 lawsuits that have been filed. Though based in Jordan, the Bank operates locations in several countries and has a branch in New York City.

The allegations, along with U.S. pressure, influenced a stream of new laws in Jordan that aim to tighten laundering and enforce harsh penalties, including a comprehensive anti-trafficking bill. The suits also triggered a probe by U.S. bank regulators and a Justice Department criminal investigation. FINCEN and the Office of the Comptroller of the Currency announced on August 17, 2005 that they would fine the New York Branch of the Arab Bank $24 million for violating the Bank Secrecy Act. The Bank was charged with not implementing an adequate anti-money laundering program and only fulfilling the requirement for reporting suspicious activities after the OCC began to review its funds transfer activity in July 2004. According to reports from individuals familiar with the Bank’s operations, only a few suspicious transactions from among hundreds of terror-related bank transactions were reported by the Bank to the U.S. government, even though a federal law requires such reports. U.S. regulators only noticed these transactions when they were exposed in the civil suit launched by the victims.