http://www.nypost.com/seven/12282004/postopinion/opedcolumnists/37292.htm BANKING FOR TERROR December 28, 2004 -- AS the feds chase suspected terrorist finan ciers around the world, they're being outrun by . . . trial lawyers. The tort attorneys, rather than regulators and lawmakers, could transform international banking by defining the new business risks of operating in the terror-rich Middle East. Lawyers chasing terror money scored their first victory on U.S. soil in December - when a federal judge ruled that American donors to shadowy Islamist charities must accept the consequences when their money underwrites an act of terror abroad. Judge Arlander Keys ruled that three Muslim charities - including the Texas-based Holy Land Foundation - and one Muslim-American donor were liable for the death of American teenager David Boim in Israel at the hands of Hamas terrorists in 1996. The judge ruled that Boim's death was a "foreseeable consequence" of funneling money to groups associated with terror - and assessed a $157 million fine against the defendants. Lawyers didn't seek to hold any banks liable for transferring terror money in the Boim case - they focused on the charities. But two new civil-court cases do have the deep-pocketed banks in their sights. On the third anniversary of 9/11, trial lawyers filed suit in New York on behalf of Cantor Fitzgerald and the Port Authority - tenant and owner of the World Trade Center - against prominent Saudi princes and banks. That suit alleges that Saudis donated money to Islamist terrorists - and that some Saudi banks served as willful conduits for those donations. The suit claims that 9/11 was the foreseeable consequence - and demands billions of dollars in damages. That case could set a precedent for foreign banks. If a New York judge sets a trial here, Saudi banking titans would have to mount a defense in U.S. court - or risk forfeiting their right to do business in our markets. And a third case - filed last week in Brooklyn against Jordan-based financial giant Arab Bank - could change the way western banks do business in the Middle East. Filed on behalf of nearly 200 Israeli and American victims of Palestinian suicide bombings, the case alleges that Arab Bank established accounts in the Palestinian territories through which Saudi donors compensated the families of Palestinian suicide bombers. The complaint alleges that Palestinian government officials assigned the families of some deceased bombers unique numbers to confirm their status as relatives of a "martyr" - so that they could bring that paperwork to Arab Bank branches in the Palestinian territories for payment. This "structured financial path" from donors to terrorists was "critical to the development of the terrorist infrastructure" by Hamas and other terror groups, the plaintiffs argue - since would-be bombers didn't fear for their own families' financial fate after they completed their suicide missions. The lawyers further allege that Arab Bank used its financial assets in America to serve its Palestinian terror clients. The suit alleges that Arab Bank changed Saudi currency (which can't be used in the Palestinian territories) into U.S. dollars for terrorists through its New York branch. The plaintiffs' claim for jurisdiction in America on this point has clear implications for U.S. and European banks that do business in the terror-rich Middle East: The plaintiffs don't claim that a crime was committed on U.S. soil - only that Arab Bank's American financial infrastructure was used to help fund terror overseas. Arab Bank denies wrongdoing. But the bank chooses to operate branches in the Palestinian territories - thus assuming the financial and reputational risk of doing business in a region infested through and through with terror. American lawyers can be expected to argue that - at the very least - Arab Bank should have known that its formal financial infrastructure in the Palestinian territories inevitably would be hijacked by terrorists. U.S. banks don't have branches in the Palestinian territories. But they do warehouse investments in America for outfits like the Palestinian Authority - and PA profits made here could help to fund terror. (Two weeks ago, Bloomberg News found that American money managers had invested the late Yasser Arafat's money in a Manhattan bowling alley.) U.S. and European banks also conduct billions of dollars' worth of business in Saudi Arabia - and the feds and independent researchers have long documented that wealthy Saudis have funneled money to terrorists through formal and informal channels in the Kingdom. Now banks in the West must reassess the risk of doing business there. They must wonder if their financial infrastructure in Saudi Arabia - and their ability to access hard currency here for Saudi clients - has helped terrorist financiers. The feds don't forbid banks from doing business with the Saudis. But American banks - and foreign banks that do business in America - must follow universal "know-your-customer" rules under a money-laundering mandate expanded by the Patriot Act. Global banks with business in America now take the chance that a judge or jury in a civil court case could find that they should have known not to risk doing business in a region shadowed by terror. Creative trial lawyers could ask a judge to rule that "know your customer" expands to "know your country." A crippling verdict against Arab Bank - or the publicity that would come with a trial - could convince banks that they just can't risk having their American financial assets tainted by Mideast money destined for suicide bombers. E-mail: [EMAIL PROTECTED] Also: Beltway Bandits http://www.nypost.com/seven/12282004/business/37285.htm ------------------------ Yahoo! Groups Sponsor --------------------~--> Give underprivileged students the materials they need to learn. Bring education to life by funding a specific classroom project. http://us.click.yahoo.com/FHLuJD/_WnJAA/cUmLAA/TySplB/TM --------------------------------------------------------------------~-> -------------------------- Want to discuss this topic? 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