OCTOBER 26, 2015
In its earliest years the U.S. Navy was badly outnumbered by the British Royal Navy. Under the duress of war, and in order to fill the gap, the United States issued letters of marque and reprisal to ship captains from America’s merchant fleet, authorizing them to seize enemy ships and keep such vessels and their cargos as prizes. As a result, during theRevolution and War of 1812, 2,300 Yankee privateers captured, damaged or destroyed as many as 2,600 British ships.
Today, U.S. businesses should similarly join the fight against the Islamic State. They can do so by suing banks that handle terrorists’ money under antiterrorism and racketeering statutes.
Since declaring a caliphate in June 2014, this group of bloodthirsty extremists has been increasingly taking on the trappings and characteristics of a state. One of the main facets of this effort has been gaining access to the international financial system.
The Islamic State seized at least 110 bank branches in the Levant that maintain correspondent relationships with global banks. Terrorist fundraisers publicly direct donations to other, identified banks in the Gulf and wider Middle East, and terrorists use such banks to launder hostage ransom payments. Some of these banks are subject to personal jurisdiction in the United States and hold substantial assets here.
Meanwhile, American businesses see oil and gas fields they own or invest in attacked or overrun by the Islamic State, leading to billions of dollars in losses. They pirate oil, interfere with pipelines, supplies and deliveries, and even murder energy company employees. These terrorists deprive U.S. companies of the benefits of concessions and investments under production sharing and service contracts worldwide.
Our businesses should hit back, hard. They can pursue civil claims for those losses against banks supporting the Islamic State, al-Qaeda and their ilk. Successful claims can drive blood money from the world financial system. After 9/11, Congress made Antiterrorism Act violations “predicate acts” under the powerful Racketeer Influenced and Corrupt Organization Act, known as RICO. The Antiterrorism Act prohibits the provision of material support, including financial services, to terror groups.
Last year the Court of Appeals for the Second Circuit held that if a bank acted with “deliberate indifference” aiding a terrorist organization in general, it may be liable for the specific harms perpetrated by terrorists.
RICO provides a civil remedy to Americans whose businesses are harmed by the actions of a RICO enterprise, such as a terror group and its supporters: including their deliberately indifferent bankers.
Unfortunately for them, RICO enterprise members may be held jointly and severally liable. This means a bank handling terrorists’ money may be responsible for related crimes such as conspiracy, fraud, money laundering and theft — not to mention horrific acts of violence.
In August, Arab Bank reportedly settled for $1 billion the claims of the victims of 22 terror attacks by Hamas. A Brooklyn jury earlier rejected the bank’s defenses that it did not knowingly hold accounts for terrorists, that it followed standard industry procedures and that the questionable transactions were clerical errors. It took over 10 years, but the system worked, and the banks paid the price for their dealings with terrorists.
American businesses similarly victimized by Islamic State violence should retain aggressive trial counsel. Supported by forensic accountants and other experts on terrorist groups’ fundraising, good litigators can obtain significant and enforceable judgments or settlements against deep-pocketed foreign banks on behalf of these U.S. companies and their employees and shareholders.
And going forward, bankers may hesitate to handle the Islamic State’s money.
Kevin Carroll is an Adjunct Fellow at the Center for Homeland Security & Resilience. He previously served as senior counsel to the House Homeland Security Committee, and before that a CIA and Army intelligence officer.
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