Banks Eyed In Lawsuits On Funding For Terror

Saudi Accounts At Issue

By Marc Perelman

Published October 15, 2004, issue of October 15, 2004.
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Major European and American financial institutions, including Citigroup, are facing the threat of lawsuits alleging that they housed accounts used to finance terrorist activities.

The lawsuits would be based on allegations that Western banks allowed their Saudi subsidiaries to funnel money to Palestinian terror groups and suicide bombers after the beginning of the intifada in 2000.

Allen Gerson, a respected Washington attorney and former diplomat, confirmed a report in Forbes magazine stating that he was considering such a lawsuit against the New York-based Citigroup, the largest bank in the world, on behalf of about 450 victims of terrorism in Israel. His team of lawyers is also exploring similar actions against several European financial institutions, including ABN AMRO of the Netherlands, Crédit Agricole of France and HSBC of Great Britain.

He declined further comment.

Citigroup vehemently denied having supported terrorism.

Most terrorism-related lawsuits filed during the past decade have targeted Islamic and Arab governments, groups, individuals or financial institutions. But talk of potential lawsuits against Western banks represents a ratcheting up in tactics by lawyers representing terror victims and is sending jitters through corporate boardrooms in the West, where members are loath to see their names associated with the likes of Al Qaeda or Hamas.

“Any assertion that Citigroup supports terrorism in any way is an outrage,” Citigroup said in a statement to the Forward. “We are committed to the fight against terrorism and as part of that commitment, we have tough, verifiable standards for customer and account screening.”

Crédit Agricole also denied any terrorism link, while ABN AMRO refused to comment and HSBC did not return queries for comment.

The decision to file lawsuits against the Western banks partly hinges on the outcome of another lawsuit filed in early July in the U.S. district court of New York against the Arab Bank of Jordan on behalf of a dozen American victims of terrorist attacks in Israel.

The suit, which seeks $875 million in damages, alleges that the bank helped fund terrorism by channeling Saudi money to Hamas- and Islamic Jihad-related entities through its branches in the West Bank and Gaza.

The Arab Bank has denied any responsibility, and will reportedly file a motion to dismiss, according to Gary Osen, one of the plaintiff’s lawyers.

Last week, Osen and his team filed a preliminary injunction asking the judge to order the bank to stop its dubious financial transactions, based on federal rules requesting banks to report to the regulatory authorities about any funds destined to foreign terrorist organizations. The judge is expected to issue a ruling in the coming weeks.

Even before the specter of a lawsuit arose, Citibank in May sold its 20% stake in the company’s partly owned Saudi subsidiary, the Saudi-American Bank. The move came after Citigroup conducted an internal investigation in response to allegations raised two years ago in lawsuits and press reports that the Saudi-American Bank was dealing with associates of Al Qaeda and Palestinian terrorist groups. Citigroup officials said that they were unable to clarify the situation and, as a result, decided to sell its minority stake in the Saudi bank. According to Citigroup, no evidence has emerged indicating that any money went directly from the Saudi-American Bank to terrorists.

Some counter-terrorism experts lauded Citigroup’s decision to sell its stake. Still, they said, the move obscures the continuing role of Western banks in serving the needs of terrorists. Several such financial institutions have in fact been managing their Saudi subsidiaries for years, despite holding only minority stakes in them. This arrangement involves subsidiaries that were ordered in October 2000 by the Saudi royal family to open accounts designated to collect donations for Palestinian groups and individuals, including families of suicide bombers.

According to an October 10, 2000, dispatch from the Saudi press agency, translated by the American government’s Foreign Broadcast Information Service, the newly created Saudi Committee for the Support of Intifada Al Quds was to place the proceeds of its fund-raising efforts on behalf of Palestinian charitable committees and families of the killed and wounded in accounts at various banks, including Saudi Western banks being eyed by American lawyers. All the Western banks in question were forced in the late 1970s to sell their controlling stakes in their Saudi subsidiaries when Saudi Arabia decided to “saudize” its economy. At the time, though, the Western banks signed technical agreements ensuring they would maintain a dominant managing role.

Citibank acknowledged that its Saudi subsidiary opened accounts used to handle funds raised by the Al Quds committee. Meanwhile, Crédit Agricole denied that its subsidiary, the Saudi-Fransi bank, ever opened such accounts. ABN AMRO declined to comment; HSBC did not respond to queries.

After Israel conducted a sweeping military operation in the West Bank in the spring of 2002, the Israeli military produced a report charging that the Al Quds committee had transferred large amounts of money to families of Palestinians killed in violent events, including several terrorists. As evidence, the Israeli military released documents with the letterhead of the Al Quds committee. At the same time, Saudi Arabia held a telethon to raise money for Palestinians, eliciting criticism from the Bush administration.

Citigroup reportedly contacted the U.S. Treasury and the State Department in early 2003 after reports of the alleged Saudi-Palestinian channel emerged, and its Saudi subsidiary was named in a 2002 lawsuit filed against prominent Saudis and charities because of their alleged links to several Osama bin Laden-related companies and individuals.

Observers noted that two years passed between the announcement of the creation of the special accounts for Palestinians in the fall of 2000 and the Citigroup’s opening of its internal investigation in late 2002. Citigroup claims that it was initially unaware of the Palestinian accounts, because the kingdom’s bank secrecy laws prohibited its Saudi subsidiary from passing along such information.

The amount of Saudi money sent to Palestinians is difficult to evaluate. But a Saudi government report released in May 2002 stated that overall government and private support for Palestinians had reached $2.61 billion.

In response to American criticism over its central terrorism-financing role, Saudi Arabia announced in June that a new nongovernmental body would monitor all its charitable donations abroad. American and Israeli officials recently have said that Saudi government funding of Hamas and Palestinian Islamic Jihad had decreased.

Saudi officials repeatedly have denied funding terrorism, stressing that the money was earmarked for relief aid rather than for attacks.

But the line dividing those two spheres has shifted since the attacks of September 11, 2001, with indirect financing of terrorism now considered illegal, observers said. For instance, a recent indictment against Holy Land Foundation, a large charity shut down in December 2001 for its alleged ties to Hamas, claims that the money sent by the organization to Hamas-related charitable entities constitutes material support for terrorism.

“No court will believe the relief argument,” Osen said. This is especially true, he added, “when there is a system in place to subsidize mass murder.”

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