The emergence of online, non-traditional financial service platforms creates additional avenues for terrorist groups to receive and transfer funds outside of the traditional banking system. One consequence of this trend is the potential for increased litigation against these providers under U.S. statutes that create civil liability for provision of material support to terrorists: the Anti-Terrorism Act (the "ATA"), 18 U.S.C. ' 2333(a), and the Justice Against Sponsors of Terrorism Act ("JASTA"), 18 U.S.C. ' 2333(d)(2).
Civil claims for damages under the ATA and JASTA have historically been brought against large banks for providing financial services to entities with alleged terrorist links. Typically in such cases, victims of a terrorist attack and/or their family members allege that the bank supported the attack by processing U.S. dollar denominated transactions to an entity with links to terrorism (often through a chain of intermediaries). In recent years, the range of entities against which ATA and JASTA claims have been brought has increasingly expanded to include companies outside of the banking sector, such as pharmaceutical companies, government contractors, and social media platforms. As terrorist groups increase their use of non-traditional financial service platforms, cryptocurrency exchanges, decentralized fintech platforms, and other similar businesses may begin to face ATA and JASTA claims.
Terrorists' Use of Non-Traditional Financial Services
Terrorist groups have long used non-bank financial services to collect funding. For example, rather than using traditional banks which create a paper trail accessible to law enforcement, terrorist groups have often opted to transact through physical couriers or the hawala system, an alternative form of remittance through which funds are transferred informally with minimal physical movement of money.
In the early days of the internet, terrorist groups began using websites to solicit funding donations. For example, beginning in the late 1990's, individuals based in the United Kingdom operated a family of websites to support the Taliban and other terrorist organizations by fundraising, soliciting donations of military equipment, and selling propaganda materials. The websites provided detailed instructions to potential donors for delivering bulk cash in amounts over $20,000 to the Taliban via its consulate in Pakistan.1
Continuing this tradition, terrorist groups in the modern era have sought to leverage new financial technology services to aid their fundraising efforts. An early publicly reported use of Bitcoin by a terrorist group was the 2016 Jahezona campaign by the Ibn Taymiyya Media Center (the "ITMC"), the media wing of the Mujahidin Shura Council in the Environs of Jerusalem that was first designated by the U.S. government as a Foreign Terrorist Organization ("FTO") in 2014. Jahezona was a social media crowdfunding campaign through which the ITMC netted "tens of thousands' worth of cryptocurrency across more than 50 individual donations" over a two-year period.2 The ITMC explicitly advertised that donations received through Jahezona, which means "equip us" in Arabic, would be used to buy weapons.3
Since then, FTOs such as Hamas and the Islamic State and their supporters have reportedly followed suit in experimenting with cryptocurrencies to seek financing, including through U.S.-based exchanges.4 Terrorist groups have also reportedly used decentralized money transfer services from internet payment service providers in order to receive funds from donors.5
Civil Liability under the ATA and JASTA
Cryptocurrency exchanges and other online financial service providers are subject to various U.S. regulatory and enforcement regimes, similar to traditional banks. These regimes range from the anti-money laundering provisions and suspicious transaction reporting requirements of the Bank Secrecy Act to sanctions regulations that prohibit dealings with designated persons or entities as a result of their link to targeted regimes or activities (including terrorism), or location in certain countries and territories (currently the Crimea region of Ukraine, Cuba, Iran, North Korea, and Syria). 6
They could also be subject to civil liability under the ATA and JASTA. The ATA provides U.S. nationals who are injured by an act of international terrorism with a civil claim for treble damages, as well as costs and attorney's fees, against the attack's perpetrators and any other person or entity who provided material support or financing for the attack. In its initial form, the ATA solely provided for primary liability.7 That changed in 2016 with the enactment of JASTA, which expanded the ATA to provide for secondary liability under certain circumstances. JASTA was originally enacted for the benefit of 9/11 victims seeking to bring claims against Saudi Arabia, but has been invoked much more widely in the years since its enactment.
Plaintiffs may bring primary and secondary liability claims pursuant to the ATA and JASTA based on the same underlying conduct. For either type of claim, a plaintiff must demonstrate that the defendant committed a predicate criminal offense (usually under one or more of the U.S. criminal statutes prohibiting provision of material support for terrorism).8 For primary liability, the plaintiff must also establish that:
- The defendant committed an "act of international terrorism," e., the defendant's actions (i) involved violence or were dangerous to human life, and (ii) appeared to be intended to intimidate a civilian population or influence a government.9
- The plaintiff was injured "by reason of" that act of international terrorism. Courts have interpreted this to require a showing of...
