US-Israeli grip looming over regional banking system

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A New York Branch of the Arab Banking Corporation is viewed at 3rd Avenue on August 14, 2014 in New York. (Photo: AFP-Don Emmert)

By: Nizar Abboud

Published Saturday, September 6, 2014

Even though the Arab Bank, considered one of the oldest and largest Arab banks with assets in the tens of billions of dollars, left New York nine years ago because it was investigated on account of its Palestinian connection, US authorities continue to go after the bank threatening it with total bankruptcy. The case is not a new one but its developments demonstrate how far Israeli groups will go to destroy the Palestinian financial sector and even Jordanian and Lebanese banks with the assistance of the US legal system. The trial began in August and it is still going on amid fears of the negative repercussions on the Arab Bank in particular and the Arab banking system in general.

New York – The issue began when lawsuits were filed against the Arab Bank in US courts 10 years ago by 297 Israelis demanding compensation for damages suffered as a result of attacks by Palestinians against Israeli targets in the first half of the last decade. The plaintiffs claim that the bank was responsible for transferring funds to Hamas. The Arab Bank asked the US Supreme Court to review an order issued by a federal court imposing stiff sanctions on the bank for its failure to turn over secret records belonging to its depositors and clients.

The order to impose sanctions on the Arab Bank was issued by U.S. District Judge Nina Gershon. The bank argued that it cannot meet the demands of US authorities without violating Jordan’s banking secrecy laws which will subject it to criminal fines. It argued that Judge Gershon’s ruling means that all foreign banks are subject to the same destructive pattern of indictments. The prosecutor can ask any foreign bank to hand over all their clients’ statements and if the bank refuses, it will be sanctioned.

The Arab Bank appealed the sanctions order to the Supreme Court, but the court refused to hear the appeal in early July. Jordan asked for President Barack Obama’s help by recommending that the Supreme Court order Judge Gershon to reconsider her ruling and the State Department supported the appeal. But the Justice Department found Gershon’s decision useful in ending bank secrecy worldwide.

The Arab Bank is being tried in a court in Brooklyn, New York under the Anti-Terrorism Act issued in 1990. The charges against the bank include aiding Hamas on three levels.

One, by transferring funds provided by the Saudi Committee to 55 Palestinian families of suicide bombers. Two, by having accounts for dozens of charitable organizations that the Israeli plaintiffs say were a mere front for Hamas. Three, the bank had personal accounts for 30 Hamas leaders, including the late Sheikh Ahmed Yassin who had been placed on the US terrorism list since 1995 and the late leader Salah Shehadeh, founder of Hamas’ military wing. According to the prosecutors, the bank knew these people’s relationship to Hamas, designated as a terrorist organization by the US.

The Arab Bank denied the charges saying that no account was opened for a person that was on a US terrorism list. The only exception was one transfer to Sheikh Ahmed Yassin’s account which was the result of a mistake by an employee. The transfers from the Saudi Committee were part of thousands of transfers that the group made to families in need and therefore for humanitarian purposes. US courts have refused any defense stating that the Arab Bank merely followed local laws in the countries where it operates or that the attacks were part of a historical context of violence in the region that the bank does not bear responsibility for.

The Israeli side had dozens of witnesses including a former official in the Israeli military who told the US District Court in Manhattan that the Jordanian bank transferred millions of dollars to the families of those he described as “suicide terrorists” from Hamas. The money came from Saudi Arabia and Hezbollah-affiliated al-Shahid Foundation during the period between 1998 and 2004, with evidence focused on the period between 2001 and 2004. There were monthly payments from the Saudi Committee at a rate of $140 per family.

The Arab Bank’s defense lawyer said there is no evidence that links the transfers to anti-Israel attacks, warning of the danger of this case that puts the responsibility on the shoulder of every bank employee anywhere in the world to investigate every little thing before completing any transaction or transfer. The bank said in a statement that the case raises very important issues for the international finance system which processes trillions of dollars in transfers each day. Most of these transfers are automated and the plaintiff’s theory, “if adopted by the Court, would undermine the automated compliance systems that regulators around the world require banks to employ, and create vast uncertainty and risk in the international finance system.”

Lawsuit developments

Israeli witness Ronnie Shaked said that Hamas was responsible for everyone of the 24 attacks before the court. According to the Israeli daily The Jerusalem Post, this witness is a journalist who had previously served as an Israeli intelligence officer.

Another prosecution witness called Arieh Dan Spitzen said that 18 Hamas members were known by the staff at the Gaza branch of the Arab Bank and it is highly likely that they received thousands or even hundreds of thousands of dollars through the Arab Bank’s transfers.

The prosecution stressed that the burden of proof is on the bank which is refusing to hand over documents of accounts for individuals who are Hamas members to the court.

The bank’s defense lawyer argued that the prosecution is using Israeli laws and evidence in its suit while the bank is not allowed to rely in its defense on relevant laws in the areas where it operates in Jordan and Lebanon which have bank secrecy rules, concluding that the trial is based on double standards.

The court heard 24 testimonies by Israeli witnesses. The Arab Bank is expected to put on 21 witnesses including the bank’s director general. The defense is expected to challenge the impartiality of Judge Brian Cogan, who described an objection raised by the defense as absurde only to accept it later on without going back to the jury.

If the US lawsuit against the Arab Bank is successful, it will inevitably lead to the bank’s bankruptcy, as it might be forced to pay billions of dollars. It also means trouble for the Jordanian and Palestinian economies, as Israelis are expected to file thousands of lawsuits. The outcome might also force Arab countries to disclose all their bank secrets to the US justice system out of fear that they might be liable to similar lawsuits. This could mean capital flight and bankruptcy for these banks. The Swiss example is not encouraging in withstanding US and even European pressure.

This article is an edited translation from the Arabic Edition.

Comments

There is more than one way to skin a cat if the bank loses the case. Look what recently happened in Israeli attack on Gaza Strip, as well as previous Israeli wars on Gaza. Roughly perhaps a total of 5000 Palestinians were killed and 20,000 injured. In the court of public opinion and international law, Palestinians can sue the US Government and its banks because the US provides to Israel annually $3 billion and all weaponry needed to commit Palestinian genocide. In comparison, this type of manslaughter pales 20 or so suicide bombers. The Arab Bank is in an excellent position to counter sue.

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