Opinion

Alison Frankel

Arab Bank terror trial claim: ‘It wasn’t routine banking’

By Alison Frankel
August 14, 2014

According to Arab Bank, the world’s primary defense against terrorist financing is computer software. As Arab Bank lawyer Shand Stephens of DLA Piper told a Brooklyn federal jury Thursday morning, banks run programs that instantaneously monitor transactions to make sure money transfers don’t involve people and organizations on international terrorist lists. “It is the government who decides who should be designated as a criminal and put on the lists,” Stephens said during opening statements in the much anticipated trial of civil terror financing claims against the Jordan-based bank. “That is the way banking works.”

Except when it doesn’t. Stephens told jurors about four Arab Bank transactions that put money in the hands of officially designated terrorists during the time of the second Palestinian Intifada against Israel from 2000 to 2004. In two of those transactions – one of them a $60,000 transfer to an Arab Bank account held by the founder of Hamas – Arab Bank’s compliance software failed to detect variations in the spelling of the names of U.S.-designated terrorists. The other two transactions, both transfers to an ostensible charity deemed to be a front for Hamas, were “by mistake,” Stephens said.

He told jurors that these were only four transactions out of the millions Arab Bank processed during the four years at issue in the case. He also said that screening software is better now than it used to be. But there’s still something unsettling about Arab Bank’s depiction of how the international financial system fulfills its obligation to choke off funding for terror operations. The U.S. Treasury’s Office of Foreign Assets Control has 10,000 names on its terrorist list, which runs to 545 pages, according to Stephens. And apparently, a tiny variation in the spelling of any of those names can result in the transfer of tens of thousands of dollars to a militant as notorious as the founder of Hamas.

You can see why lawyers for the Americans suing Arab Bank – almost 300 plaintiffs who were injured or have family members who were killed in Hamas bombings during the Second Intifada – argue that Arab Bank is an exception, not the rule. “They weren’t doing routine banking,” said Mark Werbner of Sayles Werbner, the second of three victims’ lawyers to deliver arguments Thursday morning. “It was a choice.”

Werbner told jurors about newspaper ads that ran in the Palestinian territories, advising the families of “martyrs” killed in the Intifada to come to their local Arab Bank branch to collect a $5,300 payment pledged by the Saudi Committee for the Support of the Intifada al Quds. He also said the evidence would show that Arab Bank required its employees to donate part of their salaries to the Intifada and blamed Israel’s “occupying force” for suffering in the Palestinian territories in its 2003 annual report.

Another of the victims’ lawyers, Tab Turner of Turner & Associates, said Arab Bank officials were “next door neighbors” who knew the identity of Hamas leaders, yet provided more than 10 of them with banking services. People at the bank saw big funeral processions celebrating suicide bombers, according to Turner. Posters lauding bombers were sometimes plastered on the banks’ outside walls. But that didn’t stop Arab Bank, according to the victims’ lawyers, from dishing out cash payments to the families of 24 suicide bombers, 145 families of Hamas operatives and 11 operatives themselves. In all, according to the victims’ lawyers, Arab Bank paid out $35 million from the Saudi Committee to Palestinians killed, injured or imprisoned in the uprising. Almost all of it was in cash to people who didn’t hold accounts.

The Saudi Committee even disclosed in documents sent to Arab Bank officials that some of the recipients of its largesse had been killed in “martyrdom operations,” according to slides shown to the jury by Michael Elsner of Motley Rice. The bank’s own files, Elsner said, listed the cause of death of one of the “martyrs” whose family received a payment as “car bomb.”

“That’s not a routine transaction,” Elsner said.

The bank, of course, offered alternative explanations for everything the victims’ lawyers told jurors. The Saudi Committee was a legitimate humanitarian group that has never been designated a terrorist organization by the U.S. or the United Nations, Arab Bank counsel Stephens said. And Arab Bank didn’t pick the recipients of Saudi Committee money, he said; it merely administered the payments.

Only one of the charities the victims have accused of operating as Hamas fronts has been officially listed as a terror group, and that designation came after the events at issue in the case, according to the bank. Only two of the Hamas leaders who held accounts at Arab Bank were listed as terrorists, and Stephens told the jury that when the bank found out that Hamas had published the account number of one of them on an associated website, it reported him to Lebanese authorities. (The victims said that the bank filed a “false” declaration about the account and ended up returning about $8,500 to a listed terrorist when the account was shut down.)

The two sides in this case obviously see the facts completely differently, but there’s surprisingly little dispute about what the facts are. The Brooklyn jurors will have to decide whether bank records and public documents show Arab Bank was doing what a bank should to filter out payments to terrorists, or whether it was tacitly encouraging Hamas to bomb civilians.   

For more of my posts, please go to WestlawNext Practitioner Insights

Follow me on Twitter

Post Your Comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
  •