Bank Liability under JASTA: The Knowledge/Awareness Requirement of Financial Institutions

By Mimi Derle

The Justice Against Sponsors of Terrorism Act (“JASTA”) was passed by Congress in 2016, giving U.S. citizens the ability to seek relief in federal courts for acts of terrorism committed in the United States. JASTA amended 18 U.S.C. §2333 (Anti-Terrorism Act or “ATA”) to expand civil liability to include a claim for “aiding and abetting an act of international terrorism committed, planned, or organized by an organization designated as a foreign terrorist organization.”

Over the past few years, JASTA has led to many actions filed against financial institutions, including banks, seeking to hold them responsible for acts of international terrorism under Section 2333 of the Anti-Terrorism Act (“ATA”). While “providing routine banking services, without having knowledge of the terrorist activities, cannot subject [a bank] to liability,” plaintiffs can assert a claim of secondary liability against financial institutions under JASTA which extends liability to “secondary actors who, while not committing international terrorist acts themselves, facilitated such acts by others.” Under JASTA, these secondary actors may be held liable if they aid and abet an act of international terrorism and the plaintiff can show the secondary actor “knowingly provide[d] substantial assistance or who conspire[d] with the person who committed such an act of terrorism.”

The issue of what knowledge or awareness is required of secondary actors was addressed in a recent case in the Southern District of New York, Kaplan v. Lebanese Canadian Bank, SAL, 08 Civ. 7253 2019 4869617 (S.D.N.Y. Sept. 20, 2019). The Court dismissed the complaint brought by victims of rocket attacks in Israel in 2016 by Hizbollah, alleging the defendant, Lebanese Canadian Bank, SAL, provided banking services to members of Hizbollah, and so materially supported an act of international terrorism. The plaintiffs’ primary argument was that the bank had general awareness, or should have known, the accountholders were members and leaders of Hizbollah because it was public knowledge provided by various news articles, reports, and Hizbollah’s own media sources. However, plaintiffs did not allege that the bank read or was aware of such sources. Plaintiffs also alleged that if the defendant bank did not have actual knowledge, it should have known because it had a duty to perform due diligence on its customers and monitor and report suspicious or illegal banking activities, including not providing banking services to terrorist organizations. Finally, plaintiff showed evidence of the U.S. Treasury’s designation of the defendant bank as a “primary money laundering” concern in 2011 and a forfeiture action brought against the defendant in December 2011 which included allegations that the bank was involved in a money laundering scheme with links to Hizbollah.

The plaintiffs’ aiding and abetting claim under JASTA failed because the plaintiff could not show the bank provided assistance and had a general awareness that by providing financial services to certain accountholders, the bank itself assumed a role in the terrorist activities. The Court in Kaplan held a “general awareness” requires a showing of something more than the provision of material support to a designated terrorist organization and that the bank’s failure to perform due diligence on clients or “to adhere to sanctions and counter-terrorism laws do not, on their own, equate to knowingly playing a role in terrorist activities.”

Similarly, four days before Kaplan, the Eastern District of New York granted a defendant bank’s motion to dismiss because the plaintiff did not make “any non-conclusory allegations that any specific transaction facilitated by Defendants went directly to a terrorist organization or directly accrued to its benefit.” The plaintiffs in this case presented a different argument than in Kaplan, by asking the Court to infer the appearance of intent based on Defendants’ “knowledge of the high probability (indeed, substantial certainty) that at least some of the funds they illegally provided, concealed, and disguised for Iran would be used for terrorist acts.” The Court rejected this argument because the allegations did not support such an inference and only appeared to show Defendants were motivated purely by the opportunity to make money.

In contrast, in a case decided just a few months before Kaplan and Freeman, the Eastern District of New York held the plaintiffs adequately alleged the defendant bank was generally aware of its role it played in the terrorist attack where the Arab bank provided banking services for years, administered an insurance scheme that essentially rewarded acts of terrorism and further enhanced the terrorists’ ability to conduct acts of violence by routing payments and maintaining accounts for terrorists and terrorist organizations. Further, the court found the most plausible inference from the complaint is that the Arab bank knew it was doing business with terrorists.

The Miller case seems to be straightforward with the knowledge requirement, but the dismissal of the Kaplan complaint and the Freeman case proves plaintiffs need to show more than failure of a bank’s due diligence on their clients, the designation of a “primary money laundering concern” by the U.S. Treasury Department, evidence of past actions brought against the defendant bank, and knowledge of high probability that at least some of the funds provided would be used for terrorist acts. 

#JASTA #Kaplan #MaterialSupport #civilliability #financialinstitutions #Terrorism

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