The White Collar Appeal: Second Circuit gives “substantial assistance” to banks seeking to avoid liability under the Anti-Terrorism Act

• Last week, the Second Circuit set an awfully high standard for banks to face liability under the Anti-Terrorism Act—so high, in fact, that it would seem to surpass the standards that government agencies must meet to impose far more draconian consequences on banks.
• In affirming the dismissal of ATA claims, the court held that a plaintiff must plausibly allege the bank’s knowing, culpable participation in specific fraudulent or terrorist acts: even if banks “open[] their doors to criminals with ties to terrorists to clean their money—a portion of which [is] likely to end up in [identified terrorist groups’] pile of resources[, t]hat is insufficient” to state a claim under the ATA.
• That standard far exceeds what FinCEN recently alleged against three Mexican banks when it cut them off entirely from the U.S. financial system.  It also seems to exceed the recent DOJ guidance on FCPA enforcement.  It even exceeds what is required for a criminal charge of material support of terrorism.  As a result, foreign banks should not assume that the benefits of a robust compliance program are any less valuable in avoiding costly litigation or regulatory scrutiny.

Background

Under the ATA and the Justice Against Sponsors of Terrorism Act (“JASTA”), a U.S. national injured by international terrorism can recover damages from any person who “aid[ed] and abet[ted], by knowingly providing substantial assistance, or who conspires with the person who committed such an act of international terrorism.”  18 U.S.C. § 2333(d)(2).  In a recent ATA case involving claims against Twitter, the Supreme Court held that aiding-and-abetting liability under the ATA requires more than “passive nonfeasance” that did not suggest “a strong showing of assistance and scienter.”  Twitter v. Taamneh, 598 U.S. 471 (2023).  (This note omits internal quotation marks, citations, alterations, and footnotes from citations and quotations.)

In Ashley v. Deutsche Bank, No. 23-132 (2d Cir. July 21, 2025), the plaintiffs alleged that Deutsche Bank, Standard Chartered Bank, and Danske Bank had aided and abetted terrorist attacks by virtue of banking services they provided to two Pakistani fertilizer companies the banks knew to be tied to improvised explosive devices used to harm American soldiers in Afghanistan, along with other entities that facilitated terrorist groups active in Afghanistan.  Among their detailed allegations, Plaintiffs claimed that:

• Senior Standard Chartered executives were aware that two of its clients—a set of closely related Pakistani fertilizer companies—were the nearly sole suppliers of fertilizer used in IEDs in Afghanistan that accounted for 90 percent of U.S. casualties in Afghanistan.  In multiple meetings, including with senior executives in New York, U.S. military personnel pleaded with SCB to cut off the foreign exchange and export finance services that SCB was providing to the companies.  This would have prevented the companies from supplying fertilizer at the scale necessary to sustain the IED campaigns.  Similarly, a U.S. congressperson suggested in public remarks that members of the Pakistani intelligence agency who wanted to “destabilize the Afghan government” were facilitating the fertilizer companies’ supply to terrorists in Afghanistan.
• SCB—which had admitted to weak anti-money laundering controls and prior instances of engaging with transactions with fronts for Hezbollah and other Iran-backed terrorist groups—engaged in more than $5 million worth of transactions with a known money launderer for Al Qaeda and affiliated terror groups active in Afghanistan.
• Both Deutsche Bank and Danske Bank have facilitated widescale money laundering, including by conducting transactions with entities known to be affiliated with money laundering for Al Qaeda.

The district court dismissed their claims on the basis that, although the complaint “go[es] into great detail about the complex interplay between different criminal players, and how those criminals or terrorists contributed to Plaintiffs’ injuries,” it nevertheless failed “to establish the necessary nexus between any Defendant and the alleged terrorist acts that injured Plaintiffs.”

Holdings

The Second Circuit affirmed the dismissal. It held that the allegations about SCB’s continued banking relationship with the fertilizer companies plausibly demonstrated that the bank was “generally aware of its indirect role,” not that it “provided knowing and substantial assistance” to terrorist activities.  Notwithstanding multiple pleas from U.S. military officers and a member of Congress about how specific SCB customers were directly involved in 90% of American casualties in Afghanistan, those allegations focus “primarily on the value of SCB’s services,” not “whether SCB culpably associated itself with” its customers’ or the terrorists’ wrongful actions.

As for the banks’ broader facilitation of money laundering, the Second Circuit rejected the inference that because the banks “engaged in widespread money laundering” for terrorist money launderers, that implies that “some of the money must have gone to the terrorists’ violent activities.” 

Finally, the court held that an ATA claim premised on aiding and abetting a sustained campaign of international terrorism did not suffice because it failed to link the banks’ alleged wrongdoing to specific acts of terrorism.

Key Takeaways

Banks operating in high-risk jurisdictions no doubt will celebrate the difficult ATA pleading standard that the Second Circuit required in Ashley. But that may be cold comfort in light of the many risks of government enforcement they face based on far less detailed allegations.

Recent FinCEN actions imposed far more damaging consequences seemingly based on far less evidence.  On June 25, 2025, the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) designated three Mexican financial institutions— CIBanco, Intercam, and Vector Casa de Bolsa—as institutions “of primary money laundering concern” under 21 U.S.C. § 2313a.  The result: a full prohibition on U.S.-based financial institutions transacting with them in any way—a virtual death sentence for any financial institution.  The bases for these orders, however, consisted of alleged conduct far less detailed than that at issue in Ashley.  As to Vector, for example, FinCEN alleged little more than transactions between Mexican and Chinese companies suspected to be related to fentanyl production and generally being seen by Cartel-affiliated money launderers as a “reliable mechanism through which to transfer illicit funds.”  That pales in comparison to the standard Ashley would require to state a claim under the ATA.  And because FinCEN is able to take such actions based on little due process and subject to arbitrary-and-capricious review, the targeted banks face an uphill battle to undo the orders.

The conduct alleged in Ashley would render those banks subject to prosecution under recent DOJ guidance regarding FCPA enforcement.  In his recent guidelines for FCPA enforcement, the Deputy Attorney General announced that “one primary consideration in deciding whether to pursue an FCPA investigation or enforcement action is whether the alleged misconduct … utilizes money launderers or shell companies that engage in money laundering for Cartels or TCOs.”  As a result, notwithstanding the Trump Administration’s prior moratorium on the foreign bribery cases, apparently now it is considered sufficient to prosecute bribery schemes so long as there is any commingling of funds involved in the bribery scheme with funds tied to transnational criminal organizations. That stands in stark contrast to the Second Circuit’s rejection of the “fungibility theory” in Ashley.

Remarkably, the Second Circuit even acknowledged that a charge for material support of terrorism requires less than the ATA.  Relying on its own prior precedent, the Second Circuit observed that unlike the ATA, “[i]n context of the material support statute, it does not matter whether material support is directed to promote peaceable, lawful conduct as opposed to terrorist activities because money is fungible and there is reason to believe that foreign terrorist organizations do not maintain legitimate financial firewalls between those funds raised for civil, nonviolent activities, and those ultimately used to support violent, terrorist operations.”  It thus appears that the conduct alleged in Ashley would support a 20-year prison sentence, but not a civil damages award. 

As a result, banks should not take Ashley as license to ease its AML/CFT or other compliance standards.  Each of these risks—and plenty more—could inflict far worse damage on a financial institution and its officers and employees than an ATA damages award.  And the recent FinCEN actions against Mexican banks and the focus on FCPA cases involving narcotics- and terrorism-linked money launderers suggests that U.S. regulators are more focused than ever on foreign banks with lax compliance standards.  And foreign banks no doubt will be a key target and source of information as U.S. law enforcement focuses on tariff evasion.  Foreign banks should continue to be vigilant in combatting money laundering and the financing of terrorism, including by reassessing their current processes and looking for ways to improve them.