Ruling [US] ¦ Anti-Terrorism Act (ATA): Ashley III v. Deutsche Bank AG

International Banks Win Major Victory in Terrorism-Related Lawsuits: Implications for Financial Institutions

In a landmark ruling, the U.S. Court of Appeals for the Second Circuit dismissed claims against three major international banks — Deutsche Bank, Standard Chartered Bank (SCB), and Danske Bank — alleging they aided terrorist organizations in Afghanistan between 2011 and 2016. The plaintiffs, American service members and civilians injured or killed in terrorist attacks, had sued the banks under the Justice Against Sponsors of Terrorism Act (JASTA). They claimed the banks indirectly facilitated terrorism by providing banking services to entities linked with terrorist funding, including Pakistani fertilizer companies whose products were used to make bombs, money laundering operations benefiting terrorist groups, and European tax fraud schemes. This ruling clarifies the scope of secondary liability under JASTA and sets a higher bar for establishing aiding-and-abetting claims against financial institutions.

Key Legal Principles Applied

The court applied the Supreme Court’s recent decision in Twitter, Inc. v. Taamneh (2023), which sharpened the standard for aiding-and-abetting liability under JASTA. The key takeaway is that plaintiffs must demonstrate “conscious and culpable participation” in terrorist activities. Mere passive involvement, routine business dealings, or failure to detect wrongdoing do not suffice.

Under this framework, three elements are required to hold a defendant liable as an aider and abettor:

1. The principal committed a wrongful act causing injury.
2. The defendant was generally aware of its role in unlawful activity connected to terrorism.
3. The defendant knowingly and substantially assisted the wrongful act.

The court stressed that government warnings alone do not establish liability and that banks must demonstrate a willingness to aid terrorist activities, not just maintain customer relationships. Further, money laundering claims based on the “fungibility” of money — that some funds inevitably reach terrorists — were rejected as insufficient without a specific nexus.

Bastian Schwind-Wagner_Follow "The Second Circuit’s ruling in Ashley v. Deutsche Bank sets a higher standard for terrorism-related aiding-and-abetting claims, emphasizing that banks must have knowingly and substantially assisted terrorist activities to be held liable. This decision offers critical legal clarity and protection for financial institutions against broad and indirect liability under JASTA."

Analysis of the Banks’ Alleged Conduct

Fertilizer Company Banking Services

Plaintiffs argued that SCB provided essential banking services to Pakistani fertilizer companies whose products were smuggled into Afghanistan and used in improvised explosive devices (IEDs). Although SCB was warned by U.S. military officials about these links and continued its services, the court found this insufficient to prove knowing and substantial assistance. The bank’s services were routine commercial transactions several steps removed from the terrorist acts, lacking evidence of intent or efforts to facilitate terrorism.

Money Laundering Operations

The plaintiffs alleged that all three banks facilitated large-scale money laundering schemes benefiting terrorist organizations. The court rejected this theory because it relied on a vague assumption that some laundered money must have funded terrorism. The court emphasized the need for concrete connections between specific transactions and terrorist activities, which were absent here.

VAT Fraud Schemes

Claims that the banks processed transactions related to European tax fraud schemes used to finance terrorism also failed. The court found no evidence that the banks were aware of their customers’ ties to terrorists when facilitating these transactions. Allegations of “red flags” were too general to establish culpable intent.

Implications for Financial Institutions

This decision provides significant protections for banks by distinguishing lawful commercial conduct from culpable support of terrorism. Banks can continue providing routine banking services without undue risk of secondary liability for their customers’ criminal actions unless there is clear evidence of intent to assist terrorism.

However, the ruling does not grant blanket immunity. Cases with direct evidence of a bank’s conscious involvement in supporting terrorist activities may still face liability.

The importance of robust compliance programs remains high. Although compliance efforts were not decisive in this case, they help demonstrate lack of intent and can mitigate legal risks.

Conclusion

The Second Circuit’s ruling marks a major victory for international banks facing terrorism-related litigation by setting clearer boundaries on secondary liability under JASTA. It underscores that liability requires more than negligent oversight or routine business relationships; it demands proof of conscious and culpable participation in terrorism.

Financial institutions should continue to strengthen compliance measures and carefully document responses to government warnings and suspicious activities to reduce litigation risks. This decision signals a judicial trend toward protecting legitimate banking operations while reserving liability for truly culpable conduct.