Lawsuits May Boost Banks’ Anti-Laundering Burden

American Banker
April 4, 2007
Cheyenne Hopkins

WASHINGTON — A number of class actions in New York have the potential to redefine how far banks have to go to vet customers for potential ties to terrorism around the world.

The plaintiffs, family members of victims of attacks in Israel, argue that three foreign banks with U.S. branches should have known to block transactions involving certain charities because they were on other countries’ terror watch lists.

The banks — Arab Bank of Jordan, Royal Bank of Scotland Group PLC’s National Westminster Bank PLC, and Credit Agricole SA’s Credit Lyonnais of France — say that they followed all relevant U.S. laws and that, in the vast majority of the events cited in the lawsuits, the Treasury Department had not yet identified the alleged perpetrators as terrorists.

Experts said rulings against the banks could have a broad impact on the anti-laundering system.

“If the plaintiffs are successful, … the practical effect will be to raise the bar to a different and much higher standard of whether the bank reasonably could have formed a suspicion, based on a search for publicly available information, that their customers were involved in financing of terrorism or other terrorist activities,” said Ross Delston, an anti-laundering consultant and the founder of

“This would be a change of volcanic proportions, literally changing the landscape for banks in their relationships with their customers, since no law, regulation, or international standard that I am aware of requires this to be done in order to combat the financing of terrorism,” he said.

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