International Business Law and Terrorism - Case Study Example

Libyan Bank Case, International Business Law and Terrorism The case of Libyan Arab Foreign Bank v Bankers Trust Co [1989] QB 728 is an indication of the new approach to banking and business in the era of terrorism. Although it pre dates September 11th 2001 it indicates the modern approach that banks, companies and financial institutions are under a duty to disclose any information are a threat to national security.1 The main difference in post-September 11th 2001 it is a duty to disclose to the international community, which is a total change to the face of modern business law. This makes the Libyan Arab Bank the common law precedent that digresses away from the traditional private international law approach. However, the case failed in actually supporting the freeze of assets; although upholding disclosure by the bank if there was a threat of terrorism therefore on one hand supporting business sovereignty, but imposing disclosure.2 This traditional approach can be seen in the case of Serbian Loans3 any contract that is not a contract between states in their capacity as subjects of international law is based on the municipal [domestic] law of some country The rules thereof may be common to several states and may even be established by international conventions or customs, and in the latter case may possess the character of true international law governing relations between states.4 Therefore when it comes to investment contracts between states then it will have elements of adhering to the contractual word of the agreement; as well as the duty of care that the obligations are met as in public international contractual agreements. There has been a suggestion that cases that are on a private international matter allows the domestic court that makes the decision have an extraterritorial effect in imposing the obligation across borders, i.e. applying the higher standard of obligation and care that public international law holds.5 On the other hand, the case of Holmes v Bangladesh Biman6 argued that foreign jurisdictions have no legitimate reason for subjecting their civil law on foreigners in their own country. Therefore these two cases make it difficult for correctly pursuing fraud, negligence or any circumstance that leads to an action when it is a case of foreign investment, i.e. where would you make the action and could you legally serve and enforce the action papers in foreign jurisdiction. However, it seems that the Libyan Bank Case was ahead of its time although it did surround a time of terrorism that was strikingly the same as the 9-11 attacks, such as the Lockerbie case. Therefore business law is under an obligation at state and at international levels to protect security, by imposing a duty for businesses to disclose any actions that would indicate terrorism, organized crime or threaten national and international security. Yet, as the following case study will illustrate that freezing assets is a common approach and duty of the bank that is mainly prevalent in Post 9-11, which the Libyan Bank Case failed to do.7 On 2 September, High Court of Justice in London rules in favor of Libya, orders Bankers Trust London to transfer to Libyan Arab Foreign Bank $131 million, plus accrued interest, that has been blocked by US assets freeze. US Treasury authorizes payment on 9 October. 2) In the era of terrorism and protection of the security of states, this means that financial institutions and international businesses are embarking on a different era of state co-operation. Companies are faced with being diligent in ensuring that they are free from fear of money laundering investigations. On of the strictest guidelines can be seen in the EU, therefore Barclays Bank Plc the fourth largest bank in the world ensures that their regulations are strict as their mother state is the UK. It has been realized that one of best methods to stop organized crime is through stricter policing of finances. The EU has become a lot stricter in this area, especially in respect to opening bank accounts and the ID required the stricter duties on companies and directors to ensure that all regulations are adhered to. An example is the securities listing and insider trading. A managing director that has the capability to list shares, on the premise of boosting the company's standing with expanding to rail safety, that if information that comes to light informs that the rail companies will not be vetting this work to independent contractors would result in temporary price fixing until the information became public knowledge and allows the individual and/or company to gain a profit from this dealing. Also it has been linked that much financial crime is connected to organized crime, therefore the fight against financial crime is important with respect the fight against organized crime8. Barclays Bank focuses on two main areas to compete with the fear of sanction, which is a strong organizational structure and adequate trained and qualified staff.9 Reputation is the key to the financial markets and organizations and without proper adherence to ensuring that reputation is protected then the risks that the financial organization is open to great. Although the problems that our company faces are not so grave there are lessons to be learned about the essential nature of reputation; therefore if the lack of an Operations Director effects the company's reputation serious actions have to be taken. The policy that has been recently introduced will be affected from the lack of operations supervision and therefore the possible negative effects have been exacerbated. Therefore the main actions that need to be taken are the implementation of an Operations Director, a re-look and re-education of the new policy. The new policy has to be efficiently implemented without causing loss for existing customers, i.e. the administration of the company has to be efficiently monitored and goals for customer service need to be implemented. Also the staff need to educated on the policy and reassured; as well as schemes to raise morale. At the same time the qualifications of the staff need to be monitored to ensure that all FSA standards are met, especially in an atmosphere of high turnover. Also staff retention has to be closely monitored because staff changing hands all the time will slow down the efficiency of organization's efficiency. There will be conflicts from implementing these measures, first of all in the organizational hierarchy because the lower management has been able to create their own rules, which a new Operations Director will challenge. In addition there will be a conflict in respect to any staff that does not have adequate qualifications; whereby they will have to be let go or put in to a position where they can legally work which inevitably will be paid lower. In keeping the new accounts policy may lead to two sets of conflicts - the existing customers and staff; however without proper evaluation, i.e. in a properly run organization it is difficult to determine whether the policy is the problem or the lack of proper organization in respect to customer operations. Finally, if the new policy does not meet the standards of the FSA then this will be in breach of compliance; however in December 2004 the FSA deregulated the standards for advice and therefore accepting customers as more product choice and competition was the aim10, therefore this is highly unlikely. Therefore any breach will have to be on the grounds of customer service/complaints standards, staff qualifications and/or reputation grounds. In short the new policy I believe has less to do with a compliance matter but the running of the customer service operations because we are not providing the level of service that the customer expects, also the lack of organizations opens the company up to possible cases of financial crime, fraud and breaches in Data Protection. The following chapter will briefly discuss the operational risks that we presently open to and the actions needed to be taken to ensure that we are fully compliant with the FSA as well as ensuring that our reputation is restored at the same time as opening up out customer base. 3) Also the EU has combated financial crime by requiring that there is a domestic organization in each state to deal with financial matters and crime, for example in the UK it is the FSA. This body deals with all areas of regulation from vetting approved individuals to deal in the financial sector to investigating financial crimes where one of their roles is enforce the duties in respect to securities. Included in these duties is maintaining a competent and complete listing of securities that is in line with the EC Official Listing of Securities Regulations 2000 (SI 2000/968). There is no requirement for new companies to be officially listed; however being listed indicates a certain standard and financial history of the company, i.e. it is a reputable company and the individual's money would be well invested in the company in order to ensure that the securities market is run by reputable individuals. The EU also imposes the duty on the FSA to deals with all areas of regulation from vetting approved individuals to deal in the financial sector to investigating financial crimes. This has improved important in combating organized crime because it gathers all the intelligence in one organization which can be passed onto EUROPOL and EUROJUST. Also with countries such as the UK fraud is dealt with by a special court and links from the organized crime unit to fraudulent acts can be easily traced. Therefore the fight against financial crime has been highly efficient in combating organized crime because it plays a major role through money laundering etc of organized crime groups. This interdependence amongst countries and financial institutions in the EU has proven to be a strong force of intelligence that it is a key player for relations with NATO and the USA in the fight against terrorism. Therefore by purely relying on only specific intelligence this will reduce the effectiveness of the fight against organized crime, especially when there is the added problem of corrupt post-communist regimes that have joined the EU after enlargement. This has been countered in the financial and employment area by numerous directives in respect to identification to stop identity fraud and financial crimes; however there are still ways round these directives if you know a corrupt official in charge of the identification schemes. Another method that the EU has chosen to fight organized and serious crime is through EUROWARRANT is re-interprets the way that a state's obligations to its citizens is being changed, with recognition that combating serious crimes requires collaboration11 throughout the EU. However, countries have to be very careful to ensure that the crimes that a member-state is accusing of an individual is reliable and not corrupt as was the case of Akhmed Zakayev who was domiciled in the UK, but previously a Chechen leader in the break up of Yugoslavia who was accused by Russia of organized crime, terrorism and armed rebellion. However, thanks to co-operation from the investigations of Danish authorities the allegations were unfounded and Britain refused extradition to Russia. The only crime of Zakayev was to champion Chechen self-determination peacefully. Therefore he was not a criminal but a social activist. Therefore this illustrates the need for co-operation within the EU. Yet, the warning of Kennedy should resound in our ears in respect to the intelligence gathered by EUROPOL and EUROJUST, which may affect the EUROWARRANT is that it only comes from specific intelligence, i.e. officials in the member states. Therefore this could be highly corrupt especially in the newly acceded countries from the post-communist regime; hence a move to include intelligence from objective sources especially in respect to leadership and crimes against humanity need to be included, e.g. Amnesty International because usually corrupt officials also may be tied up in human rights abuses and disappearances of objectors and the opposition. 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