UBS can’t be sued for currency transfer to Iran

Hamas and Hezbollah’s victims face a setback in a new appellate ruling on Rothstein v. UBS AG.  From the New York Law Journal on Feb. 20:

Victims of Terror Cannot Sue UBS AG, Second Circuit Concludes

By Mark Hamblett

American victims of terror attacks inside Israel failed to state a claim against a bank under the Anti-Terrorism Act for violations of currency restrictions designed to isolate Iran and prevent money from flowing to Hamas and Hizbollah, the U.S. Court of Appeals for the Second Circuit ruled last week.

Upholding a lower court, the Second Circuit said UBS AG cannot be sued for damages from rocket attacks and bombings launched on Israel from 1997 to 2006 by Hamas and Hizbollah under the act, (ATS), 18 U.S.C. §2331 et seq. UBS AG was fined $100 million in 2004 by the Federal Reserve for transferring currency to Iran, and the plaintiffs in Rothstein v. UBS AG, 11-0211, claimed there was a sufficient causal connection between the transfers of funds and the attacks.

Southern District of New York Judge Jed Rakoff had dismissed the case based on a lack of standing and failure to state a claim under the act. On Thursday, Judges Amalya Kearse, Raymond Lohier and Christopher Droney disagreed with Rakoff on the standing issue, with Kearse writing that the complaint successfully alleged that “plaintiffs’ injuries in bombings and rocket attacks conducted by Hizbollah and Hamas were fairly traceable to UBS’s provision of U.S. currency to Iran.”

But “fairly traceable” was not the same thing as “proximate cause” the court said. “We are not persuaded that Congress intended to permit recovery under §2333 on a showing of less than proximate cause or that the Complaint contains plausible allegations that UBS’s transfers of U.S. Currency to Iran proximately caused plaintiffs’ injuries,” Kearse said.

While this decision may appear to undermine the legal effort to bankrupt terrorism, this case shouldn’t preclude other victims of terrorism from suing banks that facilitate transfers to terrorist organizations.  Alison Frankel of Thomson Reuters reports:

…Lawyers for terror victims told me that Rothstein is distinguishable from the other ATA cases against banks. UBS was not accused of transferring money directly to terror groups but of indirectly funding terrorism through money transfers to Iran, a state sponsor. The other ATA cases accuse banks of engaging in banking activities directly on behalf of groups like Hamas. “Had UBS supplied cash money directly to Hamas, the outcome would have been different,” said Robert Tolchin, who represents the Rothstein plaintiffs. “I don’t think the decision will be too broadly applicable.”

UBS closes Islamic Relief account over terror risk

The U.K. based Muslim charity Islamic Relief has had its account closed and zakat donations to its account blocked by Swiss bank UBS due to counter-terror concerns.  Islamic Relief is the world’s largest Islamic non-governmental organization, and Israel has previously accused it of funding Hamas.

UBS’s action is similar to the decision made by Minnesota banks to cease remittance services to Somalia.  The risk that such transactions will be used for terrorism is simply too great a risk for the banks to bear.

Bravo to UBS for its gutsy and sensible move.  No doubt European financial regulators will attempt to investigate and excoriate UBS for the action…

Banking sector nerves blocking international relief, says Islamic Relief FD

Niki May Young| 8 Nov 2012

Islamic Relief has recently had its bank account closed by UBS, and is under constant scrutiny by other banks due to nervousness about counter-terrorist regulations, the charity’s director of finance told an audience of international charity regulators yesterday.

Islamic Relief, a charity launched in the UK 30 years ago with an income now over £80m annually, has both incoming and outgoing transactions stopped on a daily basis either temporarily or permanently, said Haroun Atallah, who is a former auditor…

Islamic Relief blames the closure on double standards on charities working in the Middle East and over-zealous implementation of financial regulations by the banks.  If Islamic Relief wants somebody to blame for this situation, it should first blame itself for working with Hamas and affiliating itself with Muslim Brotherhood leaders.

Do read the rest at at Civil Society please.  This is major news.

Top sharia banker commits 58 criminal offenses

Majid Al Refai was no ordinary bank employee–he was the managing director and founding chief executive officer of the billion dollar Bahraini sharia financial institution known as Unicorn Investment Bank.  Prior to that, Mr. Al Refai was the deputy CEO of UBS’s Islamic finance entity, Noriba.

After auditors released their findings, Unicorn sought to distance itself from Al Refai’s deeds, claiming that “The alleged criminal offences relate mainly to transactions by Mr. Al Refai which were not approved by the Board of Directors.”  Mainly, but perhaps not exclusively…  Here’s Unicorn’s press release from earlier this fall:

Towards the end of 2010, Unicorn Investment Bank submitted a criminal complaint against its former CEO, Majid Al-Refai, to the General Prosecutor of the Kingdom of Bahrain. The General Prosecutor subsequently commissioned renowned global advisory firm Deloitte to conduct an independent investigation into the matter. The Deloitte report concluded that there were 58 alleged criminal offences committed by Majid Al Refai during his tenure at Unicorn, and the General Prosecutor has now referred the case to the Criminal Court of the Kingdom of Bahrain.

It is important to note that several reports issued in 2010 by the Central Bank of Bahrain, PriceWaterhouse Coopers and Ernst & Young arrived at similar conclusions to those detailed in the above-mentioned Deloitte report. The alleged criminal offences relate mainly to transactions by Mr. Al Refai which were not approved by the Board of Directors of Unicorn; personally appropriating and squandering Bank funds; shredding and destroying over 8000 Bank documents; and deliberately preventing the Bank’s partners, associates and other authorized entities from accessing Bank documents, thereby contravening the laws of the Kingdom of Bahrain and the rules and regulations of the Central Bank of Bahrain.

The Bank has also filed two civil cases against Majid Al-Refai and two other former employees of the Bank to retrieve funds that were misappropriated. Consequently, the Bahraini authorities have placed two travel bans on Majid Al Refai in Bahrain. Furthermore, the General Prosecutor has instructed all banks in Bahrain to freeze Majid Al Refai’s assets.

Unicorn confirms that the above-mentioned legal proceedings, which are ongoing since September 2010, are all within the jurisdiction of the Kingdom of Bahrain, and do not affect the ongoing operations of the Bank.

UBS blacklists Urgence Palestine

The Swiss bank UBS has banned money transfers to Collectifs Urgence Palestine (CUP), an anti-Israel organization that funds projects in Gaza.  UBS says the decision has to do with risk, not politics.

That may be technically true.  UBS doesn’t spell out exactly what the “risk” is, but clearly that bank has made an assessment that money transferred to its customer, CUP, is at risk of funding Hamas.  That presents a level of legal and financial exposure that UBS will no longer accept.

(Now if UBS would also cease its Noriba Bank sharia financing operations, they could really be applauded.)

Here’s an excerpt from a SwissInfo article from Jan. 5 (h/t Elder of Ziyon for briefly mentioning the story):

UBS upholds ban on pro-Palestinian transfers

Swiss bank UBS has defended itself for blocking transactions to benefit pro-Palestinian groups based in Switzerland.

The bank has stopped such payments in the past but the issue was rekindled on Wednesday when the bank said it was obligated to respect “legal provisions” regarding embargoes and sanctions.

The Geneva-based Le Matin newspaper reported that about ten Swiss people or groups sympathetic to the Palestinian cause – namely Urgence Palestine – had money transfers blocked by UBS.

The decision “is not linked to political motives but to an assessment of risks associated with such transactions”, the bank said in a statement.

“UBS must respect the hundreds of legal provisions” in terms of “international decisions concerning embargoes and sanctions”, the bank added…

In 2008, the U.S. Treasury Department designated the Union of Good, which includes a Swiss charity known as the Association de Secours Palestiniens (ASP), as a terrorist entity.

Notably, the Swiss CUP is made up of individual members and smaller organizations including an organization calling itself the Association Suisse-Palestine.  It may just be a coincidence that that organization has the initials ASP, the same initials as the Swiss Union of Good affiliate.

Or like some other Islamic charities have done when they get designated by the U.S., they simply changed their name.  The Jerusalem Fund for Human Services, a Canadian Union of Good member, changed its name to IRFAN after being outed.  The Islamic American Relief Agency was formerly known as the Islamic African Relief Agency, which was designated by the Treasury Department in 2004.

If the two ASPs are the same, that would help explain UBS’s concern about doing business with CUP.