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More U.S. banks are dropping Somali money transmitters as regulators crack down on the risk of terrorist financing at remittance houses serving the war-torn East African nation. Banks are familiar with regulatory tight spots, but rarely do their responses have life and death consequences, as is the case here.
August 29 -
Politicians who blindly supported restrictive AML guidelines now proclaim disgust as a global bank severs relationships with firms that send money to Somalia. But Barclays is merely exercising understandable caution.
July 24 -
A bill scheduled for a House vote Tuesday afternoon, designed to help Somali-Americans send money home, highlights the longstanding tension between anti-money laundering regulations and global financial inclusion.
May 6
Banks have been dealing with stringent anti-money laundering and terrorist financing rules for more than a decade. These regulations have heavily impacted people in countries like Somalia, where many family members of U.S. immigrants rely remittances to pay for food, housing and other essentials. On June 22, the U.S. Conference of Mayors, led by the mayors of Minneapolis and Seattle, called on the government to relent in its overly aggressive enforcement of AML rules. Seattle Mayor Ed Murray
The pleas of Mayor Murray and his colleagues may find support in the Departments of Treasury and State. Indeed, Murray
Should U.S. regulators moderate their approach toward fund transfers to risky regions, banks would still face an increasingly aggressive U.S. plaintiffs' bar that tries to blame banks for any transfers that directly or indirectly reach any organization linked to terrorism. The problem is that it is simply not possible or reasonable for a U.S.-based bank to take on the role of investigating terrorism cells in locations like Somalia, Syria or the Palestinian territories. If banks are going to be sued for failing to spot terrorist cells faster than national intelligence agencies, the response for most banks will be to pull out of troubled regions.
Ironically, the law that plaintiffs have been citing to sue banks was intended to be used only against actual terrorists. Since its enactment in 1990, the Anti-Terrorism Act has evolved from a means of punishing terrorists and terrorist groups into a vehicle that punishes banks within and outside the U.S. with large civil judgments.
The Anti-Terrorism Act defined the "intentional terrorism" which it was designed to punish as "violent acts or acts dangerous to human life." This definition
In Boim, the court
Other U.S. intermediate appeals courts have adopted this analogy as well, most notably the Second Circuit sitting in New York in the
None of the ongoing ATA cases have yet reached Supreme Court review. Nevertheless, the solicitor general, the government's advocate-in-chief, has already indicated grave concerns about courts' application of the ATA in a 2014
It seems likely that the Supreme Court will eventually hear a case involving the ATA. If that happens, the banking industry as well as humanitarian organizations and groups like those represented in the Mayors Conference must file friend-of-the-court briefs and speak out in the media. Because of overzealous regulators and misguided court decisions, it has become far too difficult to send much-needed money to troubled regions. The best chance for relieving looming humanitarian disasters in regions like Somalia is for concerned groups to speak up.
William Primps, a partner in the New York office of Dorsey & Whitney LLP, represents large financial institutions in federal court litigation.
