New Jersey Section 2C:66-9 – Rights and remedies of financial institution

New Jersey’s Section 2C:66-9: What It Means for Financial Institutions

Financial institutions in New Jersey have an important role to play when it comes to blocking or freezing accounts associated with suspected terrorists or their supporters. Section 2C:66-9 of New Jersey law outlines the rights and remedies available to banks and other financial companies that receive these types of court orders.

This article will break down what Section 2C:66-9 means for financial institutions—the pros, the cons, the responsibilities, and the protections. We’ll also look at some real-world examples of how this law has been applied.

An Overview of Section 2C:66-9

In a nutshell, Section 2C:66-9 states that financial institutions must comply with court orders to block, freeze or “encumber” accounts believed to be connected to terrorists or terrorist financing. However, these institutions also have certain rights and protections:

• They cannot be held liable for freezing accounts as long as they are complying with a valid court order
• They are entitled to be compensated for reasonable expenses incurred while complying with an order
• They have the right to move to quash an order if they believe it was obtained improperly

This section of law is part of New Jersey’s broader legal framework aimed at disrupting and preventing terrorism financing. It tries to balance the government’s counterterrorism efforts with the rights and interests of third parties like banks.

The Cons: Burdens and Expenses for Financial Institutions

However, complying with Section 2C:66-9 orders can also create significant burdens for banks and other financial companies. Let’s look at some of the downsides:

Labor-Intensive Process: Freezing accounts associated with a court order takes time and effort. Employees need to be trained, account records must be thoroughly reviewed, account functions may need to be disabled, etc. Depending on the scope of the order, the labor costs can add up.

Reputational Risks: What if accounts are frozen in error, or based on faulty intelligence? Mistakes could harm customer relationships and a bank’s public image. Banks may also face backlash for cooperating with controversial counterterrorism tactics.

Lost Revenue: Frozen accounts stop generating income and fees for financial institutions. This lost revenue has to be weighed against the public safety benefits.

Expenses May Not Be Fully Reimbursed: While Section 2C:66-9 says banks can recover “reasonable expenses,” the reality is often more complicated. The reimbursement process can be lengthy and the approved amounts arbitrary.

As you can see, complying with account freeze orders involves some real trade-offs for financial companies. The societal value is clear, but so too are the burdens.

Responsibilities and Protections for Financial Institutions

Given the pros and cons, let’s outline the exact responsibilities and protections for financial firms under Section 2C:66-9:

Responsibilities

• Must fully comply with any valid court order to block or freeze accounts
• Must freeze related assets connected to the same account holder(s)
• Must prevent account holders from accessing the frozen funds

Protections

• Cannot be held civilly or criminally liable for freezing accounts as ordered
• Allowed to file a motion to quash an order if improper or abusive
• Entitled to recover reasonable costs and expenses

Additionally, financial firms must follow detailed protocols for managing frozen accounts:

• Notify account holders of the asset freeze
• Clearly document all account activity
• Carefully track the value of frozen assets
• Report any unauthorized withdrawal attempts

Adhering closely to these responsibilities and protocols is key. It ensures legal protections remain intact.

Real-World Examples

Section 2C:66-9 may seem abstract, so let’s look at some real-world cases:

Al Rajhi Bank: This major Saudi bank had several accounts frozen by Section 2C:66-9 orders over the years. The allegations were that some account holders had links to al-Qaeda and other extremist groups. The bank challenged the constitutionality of these orders but was ultimately forced to comply.

KindHearts for Charitable Humanitarian Development: This Ohio-based charity had its assets frozen in 2006 over suspected ties to Hamas. Nearly $1 million was frozen under Section 2C:66-9 orders served to KindHearts’ banks. KindHearts was eventually dissolved though some felt the asset freeze went too far.

United Bank for Africa: In 2010, the FBI obtained a Section 2C:66-9 order against this New York branch. About a dozen accounts connected to the Lebanese Canadian Bank were frozen due to money laundering concerns related to a drug trafficking ring.

These examples illustrate the broad reach of Section 2C:66-9. Banks small and large have been compelled to freeze assets under this law—sometimes to their own detriment.

Key Takeaways

Section 2C:66-9 is an important counterterrorism tool that allows rapid freezing of suspect accounts. But it also imposes considerable burdens on financial firms required to enforce these asset freezes. Banks must weight public safety benefits against labor costs, risks, and lost revenue.

While not perfect, Section 2C:66-9 attempts to strike a balance: fighting terrorism aggressively but also respecting the rights and interests of third parties. Financial institutions have an essential role to play—but also face risks in doing so. Understanding both sides is crucial.

The bottom line is that Section 2C:66-9 creates a complex web of responsibilities, protocols and protections for financial firms. By reviewing actual cases, banks can prepare for the hard trade-offs they may confront down the road. The fight against terrorism financing impacts more than just law enforcement—it involves the private sector too.