On August 13, 2026, U.S. District Judge Eric Komitee of the Eastern District of New York issued a decision in Spetner v. Palestine Investment Bank that should command the attention of every financial institution operating in the United States. The court allowed claims to proceed under the Anti-Terrorism Act (ATA) against Palestine Investment Bank (PIB) for knowingly processing checks marked “martyr” in Arabic — payments to the families of suicide bombers during the Second Intifada. The ruling draws a clear line: When a bank processes transactions explicitly identified as connected to terrorist violence and its employees have actual or imputed knowledge of that connection, primary ATA liability is at stake. The conspiracy and aiding-and-abetting claims were dismissed, but the surviving material-support count carries a message that reverberates far beyond the Israeli-Palestinian conflict.
The practical significance for U.S. banks is straightforward: The Trump administration’s February 2025 designation of eight drug cartels as Foreign Terrorist Organizations (FTOs) has dramatically expanded the universe of entities whose connections to bank customers could give rise to ATA claims. Against this backdrop, the Palestine Investment Bank decision provides a real-time illustration of how courts evaluate “knowledge” in the banking context — and what it takes for a plaintiff to survive a motion to dismiss.
The Case: Facts and the Court’s Decision
The plaintiffs are American victims of terrorist attacks committed during the Second Intifada between November 2001 and October 2002, along with their families and estates. They alleged that PIB facilitated the transfer of U.S. dollar-denominated funds — specifically “martyr payments” — to the families of suicide bombers through the account of Rakad Salem, the head of the Arab Liberation Front (ALF), which served as Saddam Hussein’s Palestinian proxy. The complaint attached copies of checks drawn on Salem’s PIB account in the amounts of $15,000 and $10,000, payable to bombers’ families, each bearing the Arabic notation “martyr.”
Plaintiffs brought three counts under the ATA as amended by the Justice Against Sponsors of Terrorism Act (JASTA): (1) conspiracy to provide material support (primary liability under 18 U.S.C. § 2333(a)); (2) knowing provision of material support (primary liability under § 2333(a), predicated on 18 U.S.C. § 2339A); and (3) aiding and abetting terrorism (secondary liability under 18 U.S.C. § 2333(d)).
Judge Komitee dismissed the conspiracy count with prejudice, finding that the complaint alleged — at most — that PIB knew about the conspiracy, not that it agreed to join one. The aiding-and-abetting count was dismissed without prejudice because the complaint did not plausibly allege that PIB intended to facilitate the specific attacks or afforded “special treatment” to its terror-affiliated customers. But second count survived: The court held that the plaintiffs plausibly pled that PIB knowingly provided material support to terrorists, satisfying the elements of 18 U.S.C. § 2339A, which requires only that the bank knew or intended its services would be used to facilitate enumerated crimes.
The knowledge finding rested on several allegations: PIB employees manually reviewed the checks (optical character recognition could not process handwriting at the time), the memo line read “martyr,” and the checks were payable to families of identified suicide bombers. Salem was publicly known as the leader of a group notorious for incentivizing terrorist attacks. That knowledge was imputed to PIB because manual review of the checks plausibly fell within the employees’ duties. The court also found proximate cause adequately pled, noting it was “reasonably foreseeable” that processing payments incentivizing terrorism would lead to further attacks.
Implications for ATA Liability: The Cartel FTO Designations Change the Calculus
The Palestine Investment Bank ruling does not exist in a vacuum. On February 20, 2025, Secretary of State Marco Rubio formally designated eight criminal organizations as FTOs, including the Sinaloa Cartel, Cártel de Jalisco Nueva Generación (CJNG), Cártel del Noreste, the Gulf Cartel, La Nueva Familia Michoacana, and Cárteles Unidos. These designations took effect pursuant to Executive Order 14157, signed by President Trump on January 20, 2025.
The ATA provides that it is unlawful to knowingly provide “material support or resources” to a designated FTO under 18 U.S.C. § 2339B. Material support expressly includes “financial services.” Under § 2333(a), any U.S. national injured by an act of international terrorism — including terrorism perpetrated by newly designated FTOs — has a private civil right of action. Plaintiffs may recover treble damages.
Here is the nexus that compliance teams must internalize: The Palestine Investment Bank court held that a bank can face primary liability when it processes transactions explicitly connected to terrorism. Its employees knew that connection. The cartel FTO designations mean that transactions linked to entities like the Sinaloa Cartel or CJNG are now, by legal definition, transactions linked to designated terrorist organizations. If a bank processes payments for customers with known or suspected cartel ties, and the facts suggest bank personnel were aware of those ties, plaintiffs’ attorneys will point to Palestine Investment Bank and argue that the knowledge standard is satisfied.
This is not a theoretical risk. The D.C. Circuit’s 2026 decision in Atchley v. AstraZeneca has further clarified that affirmative assistance to terrorist-affiliated entities can trigger liability with a lower scienter threshold than passive inaction. Courts are converging on the principle that, where a defendant renders affirmative assistance — such as processing identifiable payments — knowledge alone may support aiding-and-abetting liability. Conversely, where the assistance is routine and the bank does not afford “special treatment,” courts remain reluctant to infer the requisite intent.
The upshot is this: The dividing line between survivable and dismissed ATA claims against banks hinges on what the bank knew, how explicitly transactions were connected to designated organizations, and whether the bank treated its terror-affiliated customers differently from ordinary ones. That standard will be tested repeatedly as cartel-connected litigation matures.
Practical Steps for Banks
For compliance officers and BSA/AML teams, the near-term implications are concrete. Institutions should take the following steps now to reduce their exposure:
- Reassess customer due diligence for cartel-adjacent relationships. Review existing customer portfolios for accounts that may be linked to FTO-designated cartels due to their geographic or industry ties. The Financial Crimes Enforcement Network (FinCEN) has issued several advisories on the topic. Enhanced due diligence is no longer merely a regulatory best practice; it is a civil litigation risk mitigant.
- Update transaction monitoring scenarios. Ensure that monitoring systems can flag transactions involving parties, geographies, or typologies associated with the newly designated FTOs. The Palestine Investment Bank court imputed knowledge to the bank because employees manually reviewed identifiable “martyr” checks. Automated systems that fail to flag identifiable cartel-connected transactions will not insulate a bank from knowledge-based claims.
- Document decision-making on high-risk accounts. If your institution maintains accounts for customers operating in regions with significant cartel presence — particularly along the U.S.-Mexico corridor — document the rationale for continuing those relationships and the controls in place. A well-documented, risk-based decision demonstrates the absence of intent, a critical factor in the court’s aiding-and-abetting analysis.
- Train frontline staff on FTO-related indicators. The Palestine Investment Bank court emphasized that bank employees’ knowledge is imputable to the institution when review of transactions falls within their duties. Ensure that staff who review wire transfers, trade finance documents, and correspondent banking transactions understand the FTO landscape and recognize red flags.
- Evaluate correspondent banking relationships. Banks providing dollar-clearing services to foreign financial institutions in Mexico and Central America face heightened exposure. The Palestine Investment Bank decision demonstrates that processing transactions on behalf of customers with documented ties to terrorism — even as an intermediary — can give rise to material-support claims.
The Bottom Line
The trajectory of ATA litigation against financial institutions is accelerating, and the cartel FTO designations have opened a new front. Courts continue to refine the knowledge and substantial-assistance standards. Still, the Palestine Investment Bank decision confirms that explicit knowledge of a transaction’s terrorist nexus — even at the motion-to-dismiss stage — is sufficient to keep a bank in court.
Banks that wait to act do so at their peril. The cost of proactive compliance investment is a fraction of the exposure that a sustained ATA lawsuit — with its treble damages, invasive discovery, and reputational harm — will impose. Now is the time to align your institution’s monitoring, due diligence, and risk frameworks with the new reality that cartel-connected transactions carry terrorism-level legal risk.
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