A jury in Brooklyn found that Arab Bank knowingly supported terrorist activities during the second Palestinian intifada (2000 to 2005), and was therefore legally responsible for compensating American victims of Hamas-sanctioned terrorist attacks. The unintended cause of this is that banks like HSBC are abandoning some markets and curtailing money transfers to some countries.
Holding banks to greater account for their clients’ behavior is, on the whole, desirable. The United States has been newly aggressive toward international financial institutions in this regard, leading recently to settlements like BNP Paribas paying $8.97 billion for doing business with Iran, Cuba, and Sudan, and HSBC paying nearly two billion dollars because of money-laundering activities in Mexico and other sanctions violations. But there is one real danger in this posture, which is that, instead of making banks more rigorous and careful in their evaluation of customers, it may lead them to abandon regions of the world where they believe the risks are too great and the task of evaluating customers too difficult. This isn’t an abstract concern. After two women from Rochester, Minnesota, were convicted in 2011 of sending money to the Somali terrorist group the Shabaab, a bank in Minneapolis, which has a large Somali community, stopped transferring money to Somalia entirely. After the HSBC settlement, some major U.S. banks have similarly curtailed their money transfers to Mexico.