Cadwalader attorneys examined the potential exposure facing U.S. companies under the Antiterrorism Act ("ATA"), which allows terrorist victims to seek compensation from their assailants. Lawsuits under the ATA are a growing area of liability for financial institutions and public companies.

In a memorandum, Cadwalader attorneys describe how plaintiffs' lawyers have been setting their sites on financial services, social media and other companies on the grounds that they are complicit in terrorist attacks. In order to establish the standard for liability under the ATA, a plaintiff must prove the following: (i) the acts must have occurred outside of U.S. territory, (ii) a plaintiff must be a U.S. national (or his or her estate, survivors, or heirs) and (iii) the defendants' conduct must be the cause of plaintiffs' sustained injuries or plaintiffs have the option to pursue secondary liability. The ATA failed to address the required intent needed to establish liability, though it is evident that demonstrating mere negligence is inadequate.

Cadwalader attorneys encouraged in-house counsel and compliance officers to become familiar with the ATA in order to vet clients, counterparties or business partners for possible litigation exposure. Cadwalader attorneys recommended several "defensive measures" that financial institutions and public companies with overseas operations can utilize to avoid inadvertently engaging in business with individuals or organizations linked to terrorism:

  • companies should proactively monitor the news in their countries of operations regarding potential terrorist activity;
  • companies that distribute products in markets with higher rates of terrorist activities should look into whether their products are being misused;
  • firms that are entering into markets with higher rates of corruption should review how to better comply with the Foreign Corrupt Practices Act ("FCPA") and the UK Bribery Act 2010;
  • financial institutions should make sure their Bank Secrecy Act anti-money laundering compliance programs are able to detect terrorist financing;
  • tech companies should look into whether their users are exploiting platforms in order to support terrorist-related activities; and
  • companies should consider additional training and supervision for their foreign branches and subsidiaries.

Commentary

Lawsuits under the ATA are a growing area of liability against which financial institutions and public companies should protect themselves. With the recent enactment of JASTA, and potential legislative developments in the works that may make the ATA even more expansive, U.S. firms in higher-risk markets and industries that could have indirect ties to terrorist groups should expect such lawsuits to continue with a vengeance. In addition, as has recently been the case, these lawsuits can lead to regulatory scrutiny of companies' overseas activities in the FCPA and BSA/AML space. Firms that implement and can demonstrate active measures to identify trends and avoid transactions that can be linked to terrorist groups and activities will have a much stronger defense against litigation and regulatory exposure than those that opt for a more passive approach.

Alexander Hokenson assisted in the writing of this comment.

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