Executive Summary
The Anti-Terrorism Act (ATA) created a federal cause of action enabling U.S. nationals injured by reason of an "act of international terrorism" to sue those allegedly responsible for their injuries; it was later amended to include secondary liability for aiding and abetting, so long as the act was committed, planned or authorized by a designated Foreign Terrorist Organization (FTO). 18 U.S.C. Section 2333 (a); (d). The ATA has been repeatedly used by international terrorism victims to sue financial institutions, among other defendants.
Traditionally, ATA cases have been brought by family members of U.S. nationals harmed by Middle East terror attacks. However, the universe of potential plaintiffs was vastly expanded on February 20, 2025, when the United States designated eight Mexican drug cartels and Transnational Criminal Organizations (TCOs) as FTOs. With tens of thousands dying from cartel-distributed fentanyl and thousands injured or killed directly by cartel violence, financial institutions may find themselves subject to ATA lawsuits seeking to recover damages.
Two recent district court decisions from the Southern District of New York highlight the heightened civil liability risks financial institutions, financial services companies, and MSBs face under the ATA. The recent rulings demonstrate that plaintiffs’ ATA lawsuits have a relatively straightforward path to survive Motions to Dismiss when FTO funds are handled by a financial institution. Plaintiffs need only allege general awareness by the defendant financial institution that the services provided had a role in unlawful activities from which international terrorism acts were foreseeable. That general awareness, when combined with anti-money laundering obligation shortcomings, is sufficient to allege a surviving claim.
This added civil liability issue is best addressed by a privileged review of practices and policies to assess potential risks.
ATA Liability
The ATA was enacted in 1992 to provide a cause of action and civil remedies for U.S. national victims or surviving relatives directly against entities that committed terrorist acts. Later, in 2016, Congress enacted the Justice Against Sponsors of Terrorism Act (JASTA), which provides a form of secondary civil liability when a person is injured by an FTO. This secondary liability is now explicitly included in the ATA with aiding and abetting liability for “any person who…knowingly providing substantial assistance, or who conspires with the person who committed such an act of international terrorism.”
Two recent decisions from the U.S. District Court for the Southern District of New York (SDNY) denied defendants’ motion to dismiss. The cases highlight the risks financial entities face from ATA litigation under the aiding and abetting clause if their financial services and products are used by FTOs. As discussed below, the courts held that the plaintiffs did not have to show the defendants knew and supported what the FTO was doing with the funds; the plaintiffs need only allege that the defendants generally knew that they were handling funds under the control of an FTO.
These decisions, taken together with the designation of drug cartels as FTOs, greatly increase the risk for financial institutions for two reasons. First, while traditional FTOs used the financial system to raise funds and make purchases in furtherance of their ideological aims, the newly designated FTOs are transnational billion-dollar enterprises with a much larger financial footprint. Money derived from their criminal enterprise is transmitted through the financial system, and they own and invest in companies that provide legitimate goods and services. Second, the number of U.S. national victims of drug cartel and TCO violence is substantially larger than traditional FTOs. U.S. citizens and their relatives are assaulted, killed, and die of drug overdoses on a regular basis.
While the two SDNY cases discussed below have not reached their conclusion, simply surviving the Motion to Dismiss stage of the litigation opens the door to onerous and expensive discovery, including document production and depositions. There have been prior attempts to bring suits under the ATA for drug cartel liability, but the cases were dismissed because the cartels were not yet designated as FTOs. Below, we discuss the two SDNY decisions and their impact given the recent drug cartel designations.
Raanan v. Binance Holdings and Hakimyar v. Habib Bank
On February 25, 2025, the SDNY denied motions to dismiss in aiding and abetting claims under ATA in two cases, Raanan v. Binance Holdings and Hakimyar v. Habib Bank. See Raanan v. Binance Holdings Ltd., 2025 WL 605594 (S.D.N.Y. Feb 25, 2025); Hakimyar v. Habib Bank Ltd., 2025 WL 605575 (S.D.N.Y Feb. 25, 2025).
Raanan v. Binance Holdings
In Raanan, plaintiffs, who are alleged victims or representatives of victims from the October 7, 2023, attacks committed by Hamas and Palestine Islamic Jihad (PIJ) in Israel, filed suit against the defendants under the civil liability provision of the ATA and the JASTA claiming their provision of financial services and products to Hamas and PIJ substantially contributed to those attacks. The plaintiffs claimed that Hamas and PIJ used Binance’s platform to fund their terrorist activities and that it knew or at least ignored that Hamas and PIJ used its services. The plaintiffs argued both primary liability and liability under JASTA’s aiding and abetting clause.
The court rejected the primarily liability claim, but then found that the plaintiffs sufficiently alleged that Binance was generally aware of its own role in the FTOs’ activities and provided knowing and substantial assistance to them. Therefore, the court refused to dismiss the aiding and abetting claim. General awareness, according to the decision, “[c]arries a connotation of something less than full, or fully focused, recognition” and does not require that the defendant 'knowingly and intentionally supported’ the FTO in carrying out an attack.”
The court concluded that while a direct nexus between the defendants’ alleged conduct and the attack was lacking, “the intentional circumvention of anti-terror financing regulations,” plus the defendants’ knowledge that these terrorist groups were transacting on their platform were enough to support the inference that the defendants’ assistance was knowing.
Hakimyar v. Habib Bank
In Hakimyar, plaintiffs, who were injured or had family members that were injured or killed in terrorist attacks in Afghanistan between 2014 and 2017, filed suit against the largest commercial bank in Pakistan, which also had a branch in New York until 2017, for allegedly providing banking services to terrorists with direct connections to the FTO Al-Qaeda.
As in Raanan, the court held that the financial institution did not have primary liability. However, the court concluded that the complaint’s secondary liability allegations were sufficient to survive a motion to dismiss by alleging a) enough of a link between the financial services provided by the bank and the acts of terrorism to establish a nexus between the bank’s actions and the terror attack, and b) sufficient allegations to show the bank had the requisite knowledge.
The court found that the complaint permitted a reasonable inference that the bank knew its customers were integral to the FTO’s overall terrorist campaign. The court held the complaint sufficiently alleged defendants provided knowing and substantial assistance to the FTO, noting that “knowing” does not require the defendant to know specific information about the unlawful activities being committed by the principal, and that the elements to establish “general awareness” are enough. The court stated that “[a] complaint may contain general allegations as to a defendant’s knowledge, because a plaintiff realistically cannot be expected to plead a defendant’s actual state of mind.” Plaintiffs’ allegations supporting this conclusion included that the bank provided financial services to various individuals associated with the FTO even after they were placed in the Specially Designated Nationals (SDN) and Blocked Persons list.
Legal Standard Moving Forward
The decisions in these two cases highlight the risk to financial institutions that transmit FTO funds—whether intentionally or not—from lawsuits brought by U.S. nationals or their relatives harmed by acts of terrorism. Plaintiffs in such suits may not be required to show that the defendant financial institutions have “knowingly and intentionally supported” the FTO to survive a Motion to Dismiss. Rather, the Raanan and Hakimyar courts required plaintiffs to credibly allege only general awareness by the financial institutions that the services or products they provided played a role in unlawful activities from which international terrorism acts are foreseeable. Finally, the court in Ranaan relied heavily on the existing anti-money laundering obligations of the financial institution and its efforts to avoid know your customer obligations as sufficient proof that the financial institution assisted the FTO.
Money Service Business Concerns
Recent actions by FinCEN further heighten the risks of civil liability. In early March 2025, FinCEN issued a Geographic Targeting Order (GTO) to combat criminal activities and money laundering conducted by Mexico-based cartels along the U.S. and Mexican border. Pursuant to the order, money services businesses (MSBs) located in the area specified by the GTO must file Currency Transaction Reports (CTRs) with FinCEN for any cash transaction for more than $200, as opposed to the regular $10,000 threshold. The CTRs require that the MSB include customer identifying information for these low-dollar transactions and maintain those records for five years.
The heightened reporting required by the GTO demonstrates the Administration’s focus on financial support for the cartels. Beyond that, the GTO may be significant for future civil litigation because it requires MSBs to gather additional information about their customers.
Whistleblowers
Compounding this concern are whistleblower incentives. The Anti-Money Laundering Whistleblower Improvement Act, which passed as part of the omnibus spending bill in December 2022, strengthened the protections for whistleblowers and guaranteed a floor of 10% and a maximum of 30% of any financial penalties imposed resulting from the whistleblower’s information. Additionally, the program is not limited to company insiders or even to U.S. citizens; if a Mexican national finds out that the cartel is receiving payments or conducting financial transactions by way of a U.S. MSB or other financial institution, they could qualify for a whistleblower recovery.
This whistleblower incentive, along with the increased resources U.S. law enforcement is pouring into drug cartel investigations and heightened FinCEN scrutiny, raises the chance that U.S. financial institutions will have to defend lawsuits and investigations related to potential connections to FTOs.
Conclusion
The recent SDNY decisions underscore the increased risks for potential ATA and JASTA liability faced by financial institutions and MSBs. While ultimate liability is still in question, rulings that these plaintiffs’ pleadings clear the Motion to Dismiss stage should raise an alarm bell that drug cartel FTO criminal enforcement is not the only risk to consider.
The designation of cartels as FTOs and the recent steps taken by regulators add another dimension of risks for companies in emerging financial sectors, cross border payments, and MSBs, as courts and regulators continue to scrutinize the use of financial services.
Companies, particularly financial institutions, should consider conducting a privileged review of their practices following the drug cartel FTO designation to assess their risks, ongoing due diligence practices, and related internal controls.
