One hundred and sixty years ago, Thomas Carlyle cited Frederick the Great (and/or Napoleon) for the famous proposition that an army travels on its stomach, thereby recognizing the critical role that logistics plays in military operations. A mere 20 years ago, Representative Deborah Pryce stood on the floor of the United States House of Representatives and stated a modern truth about terrorism, that “money is the lifeblood of these ruthless organizations, and if we cut off their flow of funds, including the blocking of financial transactions, we will surely diminish their ability to carry out these cowardly, heinous acts here at home and abroad.”
On that day in April of 1996, the House of Representatives passed the Antiterrorism and Effective Death Penalty Act of 1996 by a vote of 293-133, which sought to build on counterterrorism legislation passed in 1994 by providing the means to counteract terrorism beyond the battlefield of heinous civilian targeting, by imposing criminal and civil liability on those who provided material support that allowed terrorist organizations to commit their violent attacks.
The plain and unambiguous intent of Congress was to ensure that individuals and entities alike who facilitated the financial lifeblood of terrorist organizations either overtly or by merely looking the other way in processing their accounts would themselves be held accountable. Less than a decade ago, the Supreme Court held that “Congress plainly spoke to the necessary mental state for a violation of §2339B [18 U.S.C. §2339B, and it chose knowledge about the organization’s connection to terrorism, not specific intent to further the organization’s terrorist activity.”
And yet, as this author among others has previously noted, neither the text of the statute nor the Supreme Court’s holding has prevented defendants from attempting to rewrite the statute to mean that their intent was to further acts of terrorism per se. In 2011, convicted arms dealer Monzer Al Kassar and two codefendants tried this ploy after their convictions, but the Second Circuit Court of Appeals was not persuaded.
But what about financial institutions in particular? To build on the analogy of money as the lifeblood of terrorism, financial institutions are very much the arteries carrying it along.
Section 2339B includes additional specific provisions for financial institutions, namely that “any financial institution that becomes aware that it has possession of, or control over, any funds in which a foreign terrorist organization, or its agent, has an interest, shall--
(A) retain possession of, or maintain control over, such funds; and
(B) report to the Secretary the existence of such funds in accordance with regulations issued by the Secretary.”
However, holding banking institutions liable proved to be considerably more problematic. Most recently, the Second Circuit Court of Appeals vacated and remanded a major ruling against the Arab Bank, which had “admitted that, during the period relevant to this action, it processed 282 fund transfers, totaling $2,563,275, for relevant foreign terrorist entities and individuals” as well as “transfers totaling approximately $32,000,000 on behalf of purported charities known to funnel money to Hamas”.
This action, Linde v. Arab Bank, was brought by families of people murdered by Hamas terrorists under 18 U.S.C. § 2333(a), which provides a civil remedy for victims of acts of international terrorism. The appellate court held that when the lower court instructed the jury that providing material support itself constituted an act of international terrorism, that it was error on the part of the lower court.
From a legal practitioner’s perspective, the Court’s reasoning makes sense. Courts are reluctant to extend liability, particularly as here where even the Arab Bank’s turning a blind eye to millions of dollars of transactions to Hamas is not the same as being the source of such funding. Still, under other circumstances, the Court’s extremely narrow parsing of the term “act of international terrorism” would merit significant skepticism based not merely on the legislative history, but the jurisprudential canon of in pari materia, namely that similar statutes should be interpreted similarly, unless legislative history or purpose suggests material differences.
However, as the Court noted in its decision, Congress has already acted to close this loophole. The passage of the Justice Against Sponsors of Terrorism Act (JASTA) in 2016 would explicitly include actors like Arab Bank, since the newly enacted section 2333(d)(1) specifically provides that a civil action may be brought “as to any person who aids and abets, by knowingly providing substantial assistance, or who conspires with the person who committed such an act of international terrorism.”
Indeed, Congress stated in its bill that the purpose of JASTA “is to provide civil litigants with the broadest possible basis, consistent with the Constitution of the United States, to seek relief against persons, entities, and foreign countries, wherever acting and wherever they may be found, that have provided material support, directly or indirectly, to foreign organizations or persons that engage in terrorist activities against the United States."
While the parties in Linde v. Arab Bank rightfully entered into a settlement agreement that makes further contemplation of that specific case somewhat moot, there is one final part of JASTA that is unusual and important enough to be underscored. JASTA applies to civil claims arising from terrorist acts committed after September 11, 2001, which is to say that it has retroactive effect. The conditional limitation that made it inapplicable to the plaintiffs in Linde was simply that this action was commenced in 2004, and therefore not after JASTA’s enactment as required.
And so, despite the pre-JASTA expectations of many – this author included – Linde v. Arab Bank will almost certainly not turn out to be the seminal decision it might otherwise have been. It will be civil lawsuits brought pursuant to section 2333(a) after September 28, 2016 that will bear close scrutiny.