HSBC, Barclays, Standard Chartered Bank, Credit Suisse, Royal Bank of Scotland and a Britain-based subsidiary of Bank Saderat Iran were accused in a lawsuit brought by more than 200 veterans of helping Iran transfer at least $150 billion to Hezbollah and to other militant groups that attacked American soldiers working in Iraq between 2003 and 2011. It is alleged that these banks deliberately concealed records of these transfers from their transactions to prevent the US regulators from detecting them. The process of transfers goes back to 1987 and the US soldiers claim that the banks were fully aware of the implication and intended purpose of the transfers. Soldiers injured and families of soldiers who died in these attacks are seeking unspecified damages and a jury trial.
Some of the banks involved in the trial have already paid damages. In 2012, Standard Chartered agreed to pay $340 to the US Department of Financial Services and $327 million to the U.S. Justice Department, the Federal Reserve, the Treasury Department’s Office of Foreign Assets Control and the Manhattan District Attorney for its involvement in facilitating these wire transfers between Iran and its clients. Meanwhile Barclays paid $500 million to avoid prosecution. In total banks have paid more than $3 billion in these settlements.
A similar case has already come to light when Arab Bank, Jordan’s largest lender, was accused of being complicit in about two dozen attacks against US citizens in and around Israel conducted primarily by Hamas. The Arab Bank maintained that it was unaware of the implications of the transfer and was not deliberately facilitating terrorism. It seeks to appeal against what it claims was an unfair verdict.
The question that arises from this episode is: what will be the consequences on banking and finance procedures, especially international wire transfers, should this lawsuit decisively prove complicity of the banks involved? Given limited liability and separation of ownership from control, it is unlikely that individuals or boards of directors of any of these financial institutions will be held personally and criminally liable for the transactions or be expected to serve jail time. However, it is likely that the lawsuit will usher in a new era of stringent financial regulations imposed by the US government upon financial institutions to prevent similar transactions from going undetected in the future.