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Kate Toomey and Waleed Nassar

Bracing for the storm: Legal challenges of Trump's presidency

President-elect Trump will take office on Friday 20 January [Getty]

Date of publication: 16 January, 2017

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Comment: A host of likely legal challenges will confront Middle East related entities doing business in or with the United States under President Trump, write Waleed Nassar and Kate Toomey.

As the reality of the impending Trump presidency sets in around the globe, many are scrambling to predict and plan for the consequences of the inevitable policy shifts of the next four years. 

The difficulties in this endeavor are myriad - namely the lack of specifics provided on many of his platforms, or the legal obstacles he would face implementing proposals that invoke clear transgressions of established domestic and international law. 

But it is clear that a host of likely legal challenges will confront Middle East related entities that do business in or with the United States under a Trump presidency.

Because President-elect Trump has said little of substance about foreign policy or the Middle East, the tenor of his administration can only be anticipated based on what he has said on the campaign trail. 

These statements include bans of Muslim visitors and proposals for a national registration of Muslims, among other things. The aggressive tone likely signals policies of increased scrutiny of Muslims and a ratcheting up of pressure on organisations doing business with the Middle East. 

Groups doing business in the region - banks, financial institutions/advisory services, businesses and charities - may find themselves increasingly at the cross-hairs of criminal investigations and civil actions in this environment if policies are instituted to match Trump's fiery campaign rhetoric.

Today, the Treasury Department retains its virtually unchecked power to designate groups as 'terrorist organisations'

And one does not have to search back far in the history books for clues as to how this may play out. Within days of the 9/11 attacks, an energised Bush executive branch expanded the Treasury Department's unilateral authority to unilaterally freeze the assets that it considered "terrorist organisations," and federal authorities began investigating tens of Muslim charities. 

Today, the Treasury Department retains its virtually unchecked power to designate groups as "terrorist organisations" and law enforcement has incredible discretion to conduct investigations into their activities. 

While in recent years the United Nations introduced procedures to review adverse actions, no such procedure was implemented by the Obama administration, leaving the US process as opaque as it was under the Bush administration at the dawn of a Trump presidency.

The effect of the Trump administration's likely increased scrutiny of trade with the Middle East - and of Muslims in general - will be magnified by recent legislation designed to make law suits related to "terrorist" financing easier to bring.  

Congress recently passed Justice Against Sponsors of Terrorism Act ("JASTA"), which expands liability under the Anti-Terrorism Act ("ATA") to those who aid, abet or conspire with Foreign Terrorist Organisations as liable for damages under the ATA.

This expansion is likely to make it easier for victims of "terrorism" to sue banks, remittance companies, charities and other organisations that are frequently alleged to have provided financing for "terrorist" organisations. 

Each entity - not just banks but also businesses and charities - should consider its risk and how to mitigate it

The interplay of this new ATA broadening with a Trump presidency will pose significant challenges, as suits under the ATA often include allegations that the defendants have already been investigated by the government.  

The complaints rely on reports of office raids or investigations to lend credibility to their assertions of knowing assistance to a "terrorist" group.  And judges have ruled in numerous instances that such governmental actions provide sufficient bases to allow otherwise flimsy claims to proceed, amplifying the potential consequences into the civil arena as well.  

US banks also face growing pressure in the form of increasing regulatory surveillance into their anti-money laundering controls, potential reputational risk should they mistakenly bank an entity "associated with terrorism", and the threat of suit for processing transactions that fund "terrorism".

This has led to systematic "de-risking," in which banks aggressively terminate relationships with foreign correspondent banks, money services businesses, and individual clients that pose perceived risks of money laundering or "terrorist financing", effectively placing heavy strain on Middle East related business. 

So, what to do?

First, each entity - not just banks but also businesses and charities - should consider its risk and how to mitigate it. If US regulatory expectations are increased, it will present greater opportunities for banks and other entities that have more sophisticated compliance programmes. 

Given that the US cannot simply stop doing business with the Middle East, organisations with the best compliance will have a distinct advantage in maintaining and even increasing their business. 

Certain forms of discrimination are illegal in the United States, including religious and racial

Second, companies and banks should plan for "de-risking" by making sure their compliance is up-to-date and being ready to provide compliance-related information in a detailed and transparent form. 

Organisations dependent on relationships with US banks must not only be willing to provide compliance information; that information must also be of a certain calibre and crafted in accordance with their US partner's expectations and regulatory obligations. 

If, for example, a non-US bank is located in a jurisdiction commonly deemed as high risk - as is currently the case in the Middle East - the US bank will expect forthright recognition of that risk and commensurate compliance controls designed to mitigate it.

Third, individuals and entities who believe they may be targeted for increased scrutiny should obtain experienced counsel and should ask for a full briefing on their rights.

Certain forms of discrimination are illegal in the United States, including religious and racial. But more importantly, many actions - particularly actions by government agencies that improperly target communities in abuse of their discretion - can be challenged either through administrative procedures or in court.  

Organisations that do business touching Middle Eastern concerns are well served to work with legal counsel familiar with the issues facing the banks, as well as third party accountants, to develop reporting protocols and compliance regimes that satisfy the highest reporting standards. 

If direct inquiries or allegations of impropriety have been made by either government agencies or financial institutions, there may still be a window to address their concerns and competent counsel should be retained prior to adverse actions. 

And in the event that an investigation is launched or a lawsuit is filed against - either by the government, a risk-averse bank, or a private citizen suing your organisation - there still remains a bevy of laws and courts tasked with enforcing those laws.  Even in a Trump presidency. 

Kate Toomey is the managing partner of Lewis Baach's Washington DC office. Her international litigation practice focuses on cases involving sophisticated financial products, banking standards and duties, and a wide variety of financial frauds. 

Waleed Nassar is a partner at Lewis Baach llp, specializing in international dispute resolution.  He represents domestic and foreign clients on a wide variety of litigation matters, including high-stakes multinational business disputes and an assortment of human rights cases.


Opinions expressed in this article remain those of the author and do not necessarily represent those of The New Arab, its editorial board or staff.

 

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