The past decade has seen a surge in the number of cases brought against financial institutions and other major corporations under the Anti-Terrorism Act, 18 U.S.C. § 2331 et seq. (“ATA”). Plaintiffs alleging injuries by acts of international terrorism have sought to recover treble damages for their injuries from financial institutions on the theory that the financial institutions supplied, directly or indirectly, financial services to the terrorist groups. The frequency with which such suits are filed is unlikely to diminish, particularly because Congress recently extended the statute of limitations for ATA claims from four to ten years, and in some circumstances even longer. On February 14, 2013, the United States Court of Appeals for the Second Circuit issued a significant opinion with respect to the ATA’s causation requirements. In Rothstein v. UBS AG, the Court held that the plaintiffs had failed adequately to allege that UBS’s transfers of funds for the government of Iran were the proximate cause of the plaintiffs’ injuries suffered in terrorist attacks by Hamas and Hizbollah in Israel. Rothstein will be an important precedent for financial institutions and other companies in defending themselves against ATA lawsuits.
Posts Tagged ‘Michael Wiseman’
On November 20, 2012, the New York Court of Appeals issued an opinion that is of substantial importance to international banks and financial institutions that maintain and use correspondent banking accounts in New York. In Licci v. Lebanese Canadian Bank, SAL (N.Y. Nov. 20, 2012), the Court of Appeals held that a non-U.S. bank’s maintenance and use of such an account to effect “dozens” of wire transfers, worth millions of dollars, on behalf of a non-U.S. client was sufficient to form the basis for personal jurisdiction under the New York State long-arm statute, N.Y. C.P.L.R. § 302(a)(1). Due to the prevalence of U.S. dollar-denominated financial transactions, many non-U.S. banks maintain and use correspondent accounts in New York. As a result, the Licci decision has the potential to increase plaintiffs’ ability to establish personal jurisdiction over non-U.S. financial intuitions in state and federal courts in New York.
The corporate governance of banking organizations has become the focus of intense examination in the wake of the financial crisis. Because of the complexity that surrounds both the causes of the financial crisis and the weaknesses and vulnerabilities it exposed in the banking system and financial markets, it is manifestly unreasonable to suggest that better corporate governance practices at banking organizations alone could have prevented, or even substantially ameliorated, the crisis. That said, good corporate governance, including a well-functioning board of directors, is critical to a financial institution’s ability to manage its risks prudently, while operating profitably and contributing to economic growth.
In recognition of the importance of good corporate governance in the banking system, the Clearing House, an association comprised of some of the world’s largest commercial banks, has developed and submitted for public comment its Guiding Principles for Banking Organization Corporate Governance (the “Guidelines”). These principles focus on the role of the board of directors, as a cornerstone of the governance structure.
The U.S. banking system is unusual in that banking organizations in the United States, especially larger ones, are typically organized in a bank holding company structure. There is a holding company, organized as an ordinary business corporation, as the top-tier entity, which in turn owns one or more commercial banks and other operating subsidiaries. The Guidelines address governance at both the top-tier entity and bank subsidiary levels, but recognize that many risk management and governance issues may be best addressed on an organization-wide basis at the top-tier entity level.