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August 27, 2008 8:12 PM

Chinese Bank Denies Claims That Negligent Wire Transfers Helped Terrorists

Posted by Rachel Breitman

Officials of the Bank of China are denying charges that the bank negligently transferred money to terrorists in Israel, as reported today by the Associated Press.

The claims stem from a lawsuit filed August 21 in Los Angeles Superior Court on behalf of more than 100 family members of Israeli terror victims. The suit charges Bank of China Ltd. with "intentionally, recklessly, and negligently providing extensive banking services to the Palestine Islamic Jihad and to Hamas, which caused, enabled, and facilitated terrorist attacks." Bank of China's West Coast headquarters are in Los Angeles, explaining the choice of venue.

The plaintiffs--who include the mother of Afik Zahavi, a 4-year-old boy killed during a 2004 rocket attack in Sderot, Israel--are being represented by managing partner Federico Sayre and senior associate Kent Henderson of the Law Offices of Federico Sayre in Santa Ana, California. Sayre is a civil rights lawyer who previously represented the Council of American Islamic Relations in housing discrimination claims and Rodney King in a civil suit against the Los Angeles Police Department. His firm is working with Nitsana Darshan-Leitner, the founder and director of The Shurat HaDin Israel Law Center in Romat Gan, Israel, and with Robert Tolchin, of counsel at Jaroslawicz & Jaros in New York.

Plaintiffs are seeking unspecified compensatory and punitive damages, citing negligence, breach of statutory duty, and vicarious liability, among other things. 

A statement released today by China's third largest lender calls the suit "nonsense," saying the bank adhered to U.N. requirements on money laundering and terrorism financing. Bank representatives did not return calls for further comment.

Sayre tells The Am Law Daily that his firm expects Israeli law--which doesn't include a charge of wrongful death--to be selected when the American court decides on choice of law .

The complaint alleges that transfers were made to a Guanzhou, China account in the name of S.Z.R Alshurafa y  Said al-Shurafa, a Hamas operative, then transferred through the Bank of China's American branches to terrorists in Israel, the West Bank, and the Gaza Strip. The complaint also says bank officials were warned by members of Israel's counterterrorism division in an April 2005 meeting that these wire transfers were taking place, and alleges the bank did nothing to stop them.

"They were warned, given the name of the Hamas official, and even given the dates and amounts of the transfers," says Nitsana Darshan-Leitner. "The bank should have been paying attention to transfers made for just under $100,000 each, which is the amount frequently used to cover up money laundering."

According to the rules of the Financial Action Task Force, the bank was responsible for monitoring, reporting, and refusing to execute these transfers. Under China's anti-money laundering law, passed in 2007, banks must record and report large and suspicious transactions.

In May, Darshan-Leitner and Tolchin filed a similar lawsuit in New York on behalf of terror victims' families against UBS AG, claiming the bank's financial services to the Islamic Republic of Iran helped support terrorist acts. Two  additional suits were filed in New York and Montreal in July against American Express Bank Ltd. and Lebanese-Canadian Bank, SAL over wire transfers to Hizbollah.

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