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Knowing Your Customer in the Age of Terrorism, Contributed by Seth Gerber and Christopher Raftery, Bingham McCutchen LLP

Tuesday, September 6, 2011

By Seth Gerber and Christopher Raftery, Bingham McCutchen LLP

Congress has empowered civil lawyers with the ability to file lawsuits against anyone who knowingly provides material support to foreign terrorist organizations. The Antiterrorism Act of 1991 (ATA), which provides a civil cause of action for victims of terrorism, is therefore an important tool to hit terrorists where it hurts -- in their pocketbooks.

Over the past few years, a flurry of lawsuits have been filed under the ATA against a broad-range of businesses for allegedly providing funding or services to "agents" or "front groups" of terrorists. These anti-terrorism lawsuits reflect a growing trend of using civil litigation to target companies whose routine business services were used in furtherance of terrorist acts. Given that courts have typically applied an expansive interpretation of the ATA to hold liable anyone who knowingly provides material support to terrorists, the message for businesses is clear: know your customer, and be cautious even if they aren't on a U.S. Government list of terrorists or foreign terrorist organizations.

The Anti-Terrorism Act

The ATA provides a civil action for treble damages to "[a]ny national of the United States injured in his or her person, property, or business by reason of an act of international terrorism, or his or her estate, survivors, or heirs."1 Congress enacted the ATA to "fill a gap in [anti-terrorism] law by establishing a civil counterpart to the existing criminal statutes."2 Laws such as the ATA have become an avenue to allow private citizens of the United States "to pursue renegade terrorist organizations, their leaders, and the resources that keep them in business, their money."3

The ATA requires the plaintiff to prove that there has been a violation of the criminal laws of the United States or of any State in order to establish that there has been an act of "international terrorism" under its legal definition. For the purposes of this article, three federal criminal provisions under ATA are relevant. The first makes it unlawful to "provide [ ] material support or resources…knowing or intending that they are to be used in preparation for, or in carrying out, a violation of [certain federal criminal statutes, such as 18 U.S.C. § 2332]" or to attempt to or conspire to do such a criminal act.4 The second declares that "[w]hoever knowingly provides material support or resources to a foreign terrorist organization, or attempts or conspires to do so" is guilty of a federal crime.5 The third makes, it is a crime to provide or collect funds with the intent or knowledge that such funds will be used to carry out an act which violates various treaties or causes death or serious bodily injury to a civilian when the purpose of the act, by its nature or context, is to intimidate a population, or to compel a government or an international organization to do or abstain from doing any act.6

The Anti-Terrorism Act's Broad Reach

The ATA defines "material support or resources" expansively to include "any property, tangible or intangible, or service, including currency or monetary instruments or financial securities, financial services, lodging, training, expert advice or assistance, safehouses, false documentation or identification, communications equipment, facilities, weapons, lethal substances, explosives, personnel (1 or more individuals who may be or include oneself), and transportation, except medicine or religious materials."7 This broad definition of "material support or resources" implicates a wide-range of businesses, including, financial institutions, truck companies, hotels, flight schools, retail stores and hardware stores, communication companies, rental car companies, and even construction and agricultural companies which handle explosives, fuses, and ammonium nitrate fertilizer which can be used to create a bomb such as the one used by Timothy McVeigh to bomb the Alfred P. Murrah Federal Building in Oklahoma City in 1995.

The legislative history of the ATA supports a broad interpretation of the statute. As Senator Charles Grassley explained, the bill was enacted to cut off the terrorists' "lifeline, their funds."8 In order to achieve this aim, the statute "empowers victims with all weapons available in civil litigation" and "accords victims of terrorism the remedies of American tort law," presumably including causes of action for secondary liability.9

The United States Supreme Court has confirmed that the ATA has a broad application. Last year, in Holder v. Humanitarian Law Project, the United States Supreme Court upheld the ATA against a challenge that the statutory terms "training," "expert advice or assistance," "service," and "personnel" were impermissibly vague. The lawsuit also challenged the ATA on grounds that it violated the plaintiffs' First Amendment rights of freedom of speech and freedom of association.10 The lawsuit was filed by two U.S. citizens and six domestic organizations, including the Humanitarian Law Project, a human rights organization with consultative status to the United Nations. They claimed that they wished to provide support for the humanitarian and political activities of the Kurdistan Workers' Party (PKK) and the Liberation Tigers of Tamil Eelam (LTTE), which allegedly were "deadly groups" that had been designated as foreign terrorist organizations, but also engaged in political and humanitarian activities.11 The plaintiffs feared criminal prosecution if they provided monetary contributions, other tangible aid, legal training, and political advocacy to the PKK and LTTE.12

The Supreme Court concluded that the material-support provision of the ATA does not require proof of intent to further a foreign terrorist organization's illegal activities. "Congress plainly spoke to the necessary mental state for a violation of § 2339B [of the ATA], and it chose knowledge about the organization's connection to terrorism, not specific intent to further the organization's terrorist activities."13 With respect to the plaintiffs' challenge on vagueness, the Supreme Court noted that Congress added narrowing definitions of terms in the material-support statute to provide "a person of ordinary intelligence fair notice of what is prohibited."14 For example, the Supreme Court noted that "service" refers to "concerted activity, not independent advocacy." Thus, for example, "a person of ordinary intelligence would understand that the term 'service' to cover advocacy performed in coordination with, or at the direction of, a foreign terrorist organization."15

The Supreme Court further noted that providing "material support" to a foreign terrorist organization to promote peaceful, lawful conduct is prohibited. By way of example, the owners, financial supporters, and vendors of the flotilla of ships which annually attempt to break the Israeli maritime blockade of Hamas-controlled Gaza Strip could potentially be subject to suit under the ATA because Hamas is a designated terrorist organization. The risk of liability exists under the ATA even if the flotilla ships are only carrying humanitarian supplies for use by the alleged charitable-arm of Hamas. As the Supreme Court noted in Holder v. Humanitarian Law Project, "such support frees up other resources within the organization that may be put to violent ends. It also importantly helps lend legitimacy to foreign terrorist groups--legitimacy that makes it easier for those groups to persist, to recruit members, and to raise funds-all of which facilitate more terrorist attacks."16 Moreover, money is fungible and terrorist organizations do not necessarily maintain legitimate financial firewalls between those funds for nonviolent purposes and those used for terrorist attacks.17 "Thus, '[f]unds raised ostensibly for charitable purposes have in the past been redirected by some terrorist groups to fund the purchase of arms and explosives.'"18 Finally, the Supreme Court commented that "[p]roviding foreign terrorist groups with material support in any form also furthers terrorism by straining the United States' relationships with its allies and undermining cooperative efforts between nations to prevent terrorist attacks."19

With respect to the challenges under the First Amendment in Holder v. Humanitarian Law Project, the Supreme Court concluded that the ATA prohibited the plaintiffs from training members of the PKK on how to use humanitarian and international law to peacefully resolve disputes and from teaching PKK members how to petition various representative bodies such as the United Nations for relief.20 Because the plaintiffs failed to specify whether their political advocacy on behalf of the Kurds in Turkey or the Tamils in Sri Lanka would be coordinated with the PKK and LTTE, respectively, the Supreme Court concluded that the plaintiffs cannot prevail on their pre-enforcement challenge to the ATA on grounds that it prohibited their freedom of speech.21 The Supreme Court further concluded that the ATA does not penalize mere association with a foreign terrorist organization.22 By rejecting the plaintiffs' First Amendment and vagueness challenges to the material-support statute, the Supreme Court took a broad view of the ATA's prohibition on providing aid to a foreign terrorist organization.

Avoiding Liability Under the Anti-Terrorism Act

Private citizens appear to have welcomed broad congressional and judicial interpretation of the ATA wholeheartedly, initiating lawsuits against a diverse array of businesses that purportedly provide indirect support to terrorists. A number of civil lawsuits, for example, have been filed against businesses for allegedly transferring funds to agents of terrorist groups. Other civil lawsuits have been brought against multi-national corporations for allegedly "dealing with the devil" while operating in geopolitical hotspots and navigation companies for allegedly selling their satellite communication services to activists aligned with Hamas.

Given the expansive interpretation of the ATA by the Supreme Court and the recent filings of lawsuits against businesses for allegedly providing indirect support to terrorists, businesses should think carefully about who the ultimate beneficiary is for their routine services. To determine whether a customer is an agent of a terrorist organization, a business should ask for documentation proving the identification of its customer and then perform a comparison with the individuals and entities on the Specially Designated Nationals and Blocked Persons List (SDN list) maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury and the U.S. Department of State. The SDN list includes the names and aliases of "designated" foreign agents and front organizations, as well as terrorists, terrorist organizations, and narcotics traffickers. See www.treas.gov/ofac for the most recent version of the SDN list. However, if a business is otherwise put on notice from a credible source that its customer has terrorist affiliations despite not being present on any government list, the company should still act reasonably and consider whether to decline engaging in business with that customer in light of broad civil liability under the ATA.

Seth Gerber is an accomplished trial lawyer, author, and speaker on legal topics. Seth is a partner with the Los Angeles office of Bingham McCutchen LLP. His major practice areas include business and commercial litigation, intellectual property litigation, employment litigation, and international law.

Christopher Raftery is an associate in the Santa Monica office of Bingham McCutchen LLP. He advises clients on a wide range of issues, focusing primarily on complex commercial litigation.

Disclaimer

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