A lawsuit brought against a Lebanese bank accused of money laundering should be heard in New York, according to a lawyer for victims of rocket attacks in Israel.
Robert Tolchin told the Court of Appeals panel in that a Lebanese-Canadian Bank account that worked with an American Express Bank to wire millions of dollars to Hizbullah agents, thought responsible for the terror attack.
The Lebanese bank’s attorney, Jonathan Siegfried, contested that New York courts don’t have jurisdiction because the suit doesn’t allege injury to a New York plaintiff and doesn’t name a New York-based defendant. Siegfried told the panel that every major foreign bank has a relationship with some bank in New York, as most banks in the world prefer to deal in U.S. dollars.
The lawsuit "opens the door to a situation where any third-party stranger who claims harm by a foreign bank can then bring an action in New York," said Siegried. The court is hearing arguments at the Appellate Division, First Department, in Manhattan throughout the week.
The terror attack victims sued the Lebanese bank in 2008, claiming that it knew that the transfers were being used to fund terrorism. American Express was also sued for negligence.
U.S. District Judge George Daniels in 2010 dismissed the case against both banks. He ruled that the alleged use of the American Express account to wire funds was only incidental.
The U.S. Court of Appeals for the 2nd Circuit in March reinstated the case against the Lebanese bank and requested that the Court of Appeals weigh in on whether New York courts had jurisdiction, according to a source.
Wednesday, the Court of Appeals panel suggested a ruling in favor of the plaintiffs that could cause New York banks to be reticent to engage in wire transfers with foreign banks.
"Are banks going to start asking, 'what are these wires for?'" Judge Victoria Graffeo asked Tolchin.
Chief Judge Jonathan Lippman said that question is not consistent with "the nature of banking relationships."
However, Tolchin told the court that greater scrutiny of transactions conducted by foreign banks through American banks may serve as a check on money laundering.
"We don't want New York to become the Liberian port of (foreign) banking," said Tolchin.
If the high court rules in favor of the plaintiffs, the case will be brought back to federal court.
The case is Licci v. Lebanese Canadian Bank, New York State Court of Appeals, No. 183.