Arab Bank is one of the largest financial institutions in the Middle East, founded in 1930 as as the first private sector financial institution in the Arab World. Headquartered today in Amman, Jordan, it serves clients in more than 500 branches in 30 countries on five continents. The company is a publicly held shareholding company listed in the Amman Stock Exchange.

The bank is a major economic engine in Jordan and throughout the Middle East/Northern Africa, providing modern banking services and capital, and facilitating development and trade throughout the region. In 2011, the Arab Bank Group reported $45.6 billion in assets with a shareholders equity base of $7.7 billion, making it an essential financial institution for the entire MENA region.^[1] According to its website, the bank is the highest ranked by market capitalization and represents 28% of the Amman Stock Exchange. The U.S. Embassy in Jordan has noted the bank as a transparent, respected and beloved financial institution.^[2]

In 2012, Global Finance honored the bank with seven awards including Best Trade Finance Provider in the Middle East, Jordan and Yemen, Best Emerging Market Bank in Jordan and Yemen and Best Foreign Exchange Provider and Best Investment Bank in Jordan.^[3] In 2010, Euromoney named it Best Bank in Jordan for the fourth consecutive year.^[4] According to its 2010 Sustainability Report, J.P. Morgan honored Arab Bank Switzerland with the Quality Recognition Award for Outstanding Achievement 2009-2010 Best in Class.^[5]

History

Founding

The Arab Bank's history is interlinked with that of the Shoman family and its founder Abdul Hameed Shoman (). Born in 1890 in the village of Beit Hanina, four miles north of Jerusalem, Shoman was raised in a stone hut, where he began his career at the age of seven as a stonemason on construction sites. Shoman emigrated to the United States of America at the age of 20 and went door-to-door selling dry-goods in New York and Baltimore. His success led him to expand and start a dress-making factory in Manhattan s garment district. Arab Bank headquarters in Amman, Jordan. Shoman decided to return to Palestine and arranged for a meeting in Cairo with Talaat Pasha Harb, the Chairman of the Board of Directors of the Banque Misr. Shoman proposed the idea of establishing a joint Egyptian-Palestinian bank, with a capital of 100,000 Palestinian Pounds; however, political developments in the region forced Harb to put the project on hold.

Shoman moved forward with his plan with seven investors, and a startup capital of 15,000 Palestinian Pounds,^[6] Arab Bank was registered on May 21, 1930, and commenced its operations in Jerusalem on July 14 of the same year.

Abdul Majeed Shoman

Shoman s son, Abdul Majeed, was born in Palestine while Shoman was away. At the age of one, his mother died and he was taken into the care of his paternal grandmother. Shoman wanted his son to join him in the US; however, he believed that the boy s education in his homeland and his mastery of Arabic were more important. He waited until his son completed his primary schooling at Beit Hanina, and his studies in al-Rawda School in Jerusalem before sending for him to come to the US. Upon Abdul Majeed s arrival to the US, he was enrolled in a Secondary School in the suburbs of New York, where he met his father for the first time at the young age of 14. Abdul Majeed obtained both his Bachelors and Masters Degree in Economics and Banking at New York University (NYU) in 1931, after which he returned to Palestine to assist his father in managing the newly established Arab Bank.

Trust and Commitment

Abdul Majeed worked hard under the guidance of his father. Both Shomans spared no pains in safe-guarding the Bank and the clients' interests. After the British Mandate Authority withdrew from Palestine in 1948, the Bank lost its branches in Jafa and Haifa. When customers who were obliged to flee outside the country asked for their deposits, the Shomans insisted on fully redeeming all claims. This decision won the Arab Bank a great reputation and became a historical turning point in its growth: it fostered a strong commitment from the Bank towards its customers and ingrained an enormous loyalty from its customers, which prevails to this day. The lost branches were re-established: Haifa branch was relocated to Beirut followed by Amman, Jaffa branch in Nablus and later Ramallah. When the branch in Jerusalem was caught up in the civil disturbance, the Bank s activities were moved to offices within the old city of Jerusalem. The Bank transferred its headquarters to Amman, Jordan, where it was officially incorporated as a public shareholding company.

A Catalyst for Arab Economies

The Arab Bank building in Z rich, Switzerland. The decades following were considered a period of rapid expansion; during the 1940s and 1950 s, the Bank expanded its network of branches in the Arab World with 43 branches extending throughout the Arab World, and a growing capital which has grown to reach JOD 5.5 Million. Through extensive investments in a wide range of new industries and public projects extending from Casablanca to Baghdad, the Shomans new Arab Bank acted as a catalyst for Arab economic developments during a period when no one was willing to take the risk. Arab Bank loans created jobs for more than 100,000 employees. In Jordan the Bank s loans for new cement, textile and food processing plants enhanced the country s growth rate to become second after oil-rich Kuwait in the Middle East. Aside from commercial loans, Shoman gave millions of his own and the Bank s money to educate hundreds of Arab students by sending them to Universities in the west. Ironically, the unschooled Shoman built a USD 600,000 teachers training college in his native village of Beit Hanina.

Nationalization

The 1960s brought along a wave of Nationalization which swept the Arab World as country after country gained independence from British and French colonial rule. Branches in Egypt and Syria were nationalized in 1961, Iraq in 1964, Aden in 1969, and finally Sudan and Libya in 1970. Within a period of ten years, Arab Bank lost a total of 25 branches. When Israel occupied the West Bank and the Gaza Strip in 1967, more branches were closed.

Undaunted, the Bank carried on its expansion. In 1961, the Bank opened its first international location, becoming the first Arab financial institution to establish a presence in Switzerland.^[7] A sister institution, Arab Bank Switzerland was established in Z rich 1962 with another branch in Geneva opening in 1964.

Even in turbulent times, the Arab Bank never defaulted on a single payment to any of its customers or partners, honoring all of its commitments regardless of the political and economical environment.

Steady Expansion

The 1970s were focused on the newly emerging oil economies of the Gulf while steadily expanding in its new home base, Jordan. Abdul Majeed Shoman became Chairman and General Manager of Arab Bank after his father died in 1974, whereby he carried on his father's mission. The Bank was already well-established with a sound financial reputation and structure. Abdul Majeed was determined to expand the Bank's activities, and set out to open new branches world wide.

Global expansion continued with the opening of branches in Frankfurt, London, Australia, New York, Singapore as well as many other cities. After the signing of the Palestinian-Israeli Oslo Peace Accords, Arab Bank was invited to return to the Palestinian territories to open a network of branches in several Palestinian towns.

Arab Bank branch in Sydney, Australia

Shoman s vision combined with courage and determination navigated the Bank through difficult periods, and expanded his enterprise beyond its goals across the Arab World and beyond.

Controversy

OCC/FinCEN investigation

In 2005, the U.S. Office of the Comptroller of the Currency and the Financial Crimes Enforcement Network investigated Arab Bank s New York branch, claiming it failed to adequately monitor transactions it processed for suspicious activity. The agencies determined that the New York Branch of Arab Bank failed to implement an adequate anti-money laundering program to comply with the bank Secrecy Act and manage the risks of money laundering and terrorist financing in connection with United States dollar clearing transactions. ^[8]

Arab Bank stated that the Consent Orders made clear for the first time that banks have a duty to conduct their own review of their customers' customers and apply essentially the same [anti-money-laundering] controls and independent testing to correspondent banking transactions as they do to their own customers' accounts. ^[9] The bank agreed to a payment of $24 million to close the investigation.^[10] In the agreement, it stated that Arab Bank neither admitted nor denied any wrongdoing.^[11]

In the New York Times, John Byrne of the American Bankers Association, stated, It seems like the rules keep changing on us, and there's a lot of confusion and anxiety in the industry about what constitutes a proper compliance program.^[12]

Israel Defense Forces investigation

On February 26, 2004 the Israel Defense Forces confiscated funds from Arab Bank's Ramallah branch in connection with an investigation into whether certain account holders were supporting terrorism. On the same day, the IDF raided other banks including two branches of the Cairo-Amman Bank.^[13]

In September 2009, the IDF issued a letter to Arab Bank stating that it had no evidence that the Bank or any of its directors or employees were involved in or funded terrorist activities.^[14]

Pending U.S. litigation

Several civil lawsuits have been filed against the Bank in the U.S. District Court for the Eastern District of New York in Brooklyn under the Anti-Terrorism Act and Alien Tort Statute. In these cases, U.S. and non-U.S. plaintiffs allege they or their family members were harmed by acts of terrorism that occurred in Israel or the West Bank/Gaza from 1995 to 2005. They allege that the Bank held accounts for individuals and organizations that, in turn, supported terrorist activities. Similar cases were brought against UBS, Credit Lyonnais, Bank of China, American Express Bank LTD, National Westminster Bank, PLC and Commerzbank AG.^[15]

The Bank maintains that it provided routine financial services in compliance with governing laws and regulations. It denies ever knowingly supporting terrorism in any way.^[16] Plaintiffs specifically argue that the Bank is liable for processing payments sent by the "Saudi Committee in Support of the Intifada Al Quds" to Palestinians from 2000 through 2004. These payments, according to the plaintiffs, were intended to encourage acts of terrorism.^[17]

In a May 5, 2002 interview on Meet the Press, then-Secretary of State Colin Powell confirmed that the Bush Administration had spoken directly to Saudi officials about monies raised by the Saudi Committee through a telethon.^[18] In that same interview, Secretary Powell stated that he believed the Saudi's report that those monies were going through the International Committee for the Red Cross, the United Nations Relief Agency, and "going for humanitarian purposes to families" and "not [as] a reward for suicide bombing, but [for] taking care of people in need."^[19] According to the Bank, the Committee was not an account-holder, it believed that the Committee was a legitimate humanitarian organization, and its role in handling the Committee payments was limited to processing transfer instructions sent from a correspondent bank in Saudi Arabia.^[20] To date the Saudi Committee has not been designated as a financier of terrorism by the U.S.^[21]

In 2007, the Bank filed third-party complaints against Bank Hapoalim, B.M., Israel Discount Bank Ltd. and Mercantile Discount Bank Ltd., alleging that each of these banks initiated or processed funds transfers for some of the same organizations that plaintiffs allege served as well known "fronts" for terrorist organizations.^[22] The Bank argued that to the extent that it might be found found liable to plaintiffs for providing financial services to these same organizations, Bank Hapoalim, B.M., Israel Discount Bank Ltd. and Mercantile Discount Bank Ltd. should contribute to any damages.^[23] On April 3, 2009, the District Court dismissed the claims against Bank Hapoalim, B.M., Israel Discount Bank Ltd. and Mercantile Discount Bank Ltd. after finding that neither the Anti-Terrorism Act nor the Alien Tort Statute provided the Bank with a right to seek contribution from parties that were not named in plaintiffs' complaints.^[24]

A central dispute in this litigation has focused on the Bank's discovery obligations. Plaintiffs demanded that the Bank turn over the customer account records for more than 40,000 foreign clients. The Bank, however, was expressly cautioned by foreign governments that disclosing those records would violate criminal privacy laws and subject the Bank and its employees to penalties, including possible incarceration. The Bank was able to lawfully provide more than 200,000 foreign bank records, but then informed the Court that it was barred by foreign laws from providing additional records.^[25] Plaintiffs then asked the Court to impose trial sanctions against the Bank in response to its non-production. On June 1, 2009, Magistrate Judge Viktor V. Pohorelsky issued a Report and Recommendation that recommended imposing sanctions against the Bank intended to "restore the 'evidentiary balance' that [w]as been disturbed by the non-production of important evidence," but denied plaintiffs' request for imposing more severe sanctions that would have barred the Bank from presenting a wide range of evidence at trial.^[26] On June 18, 2009, Magistrate Judge Pohorelsky amended his Report and Recommendation to narrow the scope of one of his sanctions.^[27]

After plaintiffs objected, in July 2010, the District Court deviated from the Magistrate's Report and Recommendations, and imposed the sanctions that plaintiffs had originally requested.^[28] According to the District Court's decision, jurors will be instructed that they may, but are not required to, infer that the Bank knowingly and purposefully provided financial services to terrorists.^[29]

In November 2010, the Bank filed a petition for a Writ of Mandamus and a collateral order appeal with the U.S. Court of Appeals for the Second Circuit in New York asking it to vacate the District Court's sanctions order.^[30] The Government of Jordan filed an amicus curiae brief with the Second Circuit calling the District Court's sanctions order an "affront to the Kingdom's sovereignty."^[31] The Jordanian Government argued any damage to the Bank could undermine global counter-terrorism efforts because it would push customers in the region to an underground financial system where transactions cannot be tracked, triggering political instability.^[32] The Union of Arab Banks and Institute of International Bankers also filed amicus curiae briefs on behalf of the Bank.^[33] In its filing, the Union of Arab Banks stated the sanctions placed harsh measures against the Bank for complying with foreign banking laws. The UAB also warned the sanctions order will have a devastating impact on the region, the international banking community and international relationships.^[34]

The Institute of International Bankers amicus brief states that restrictions on disclosure of personal financial information are standard throughout the international banking community, including in the U.S., and that the Bank should not be punished for abiding by these laws. ^[35]

On March 6, 2012, a three judge panel of the Second Circuit heard arguments from both sides on the Bank s petition for a Writ of Mandamus. A ruling is expected within the year.^[36]

The Bank previously sought discovery from Bank Hapoalim, B.M. and Israel Discount Bank Ltd. arguing that those Israeli banks initiated or participated in financial transfers for some of the same parties that plaintiffs allege were well-known "fronts" for terrorist organizations that directed their violent activities against the State of Israel.^[37] The Bank argued that these records, if produced, would offer "circumstantial evidence of [its] lack of knowledge" that the charities at issue were allegedly well-known "fronts" for terrorist organizations opposed by Israel.^[38] However, the Bank's discovery requests as to Israeli bank records were denied after the Court found that those records were protected from disclosure by foreign financial privacy laws.^[39]

Arab Bank Today

Abdul Majeed Shoman died on July 5, 2005. His son was elected Chairman upon his father s death.

In 2005, the Arab Bank reopened operations in Syria, and performed necessary preliminary arrangements to commence its activities in Iraq, circumstances permitting.

In 2006, Arab Bank was granted the green-light to establish Europe Arab Bank (EAB),^[40] a London-based, fully owned subsidiary. It also acquired 50% of MNG Bank in Turkey (now known as Turkland Bank), and 50% of Al Nisr Al Arabi Insurance company in Jordan, thus introducing Bancassurance to its product variety.^[7] Also, the group established Arab Bank-Syria in Syria and Arab Capital investements company in Dubai.^[7]

Today, the Arab Bank Group has the largest Arab banking branch network worldwide, with over 500 branches in 30 countries, spanning 5 continents.^[41]

Profile

The bank works in developing Arab economies through financing strategic infrastructural projects across the Middle East /North Africa region (MENA). With Headquarters based in Amman, Jordan, the Arab Bank constitutes the first private sector financial institution in the Arab World.

The Arab Bank is ranked amongst the largest international financial institutions, with a rating of A- from Fitch, A- from Standard & Poor and A3 from Moody s. The bank has a capital base of over USD 5.5 Billion and Total Assets of over USD 50 billion. Pretax Income reached over USD 1 Billion in 2008, with a Net Income of USD 850 Million for the year 2008.

The Arab Bank has 500 branches spanning 30 countries in 5 continents. It enjoys prominent positions in key financial markets and centers such as London, New York, Dubai, Singapore, Zurich, Paris, Frankfurt, Sydney and Bahrain.

They sell products in personal banking, corporate and investment banking (CIB), AB Private Banking and Treasury, to individuals, corporations, government agencies and other international financial institutions.

Community programs

In 1931, Arab Bank founder Abdul Hameed Shoman donated a 100 Palestinian Pounds to building a University in Jerusalem.

In August 2006, and during the royal visit by His Majesty King Abdullah II, Arab Bank donated 2 Million Jordanian Dinar (USD 2.8 Million), to support governmental poverty alleviation efforts in the Southern parts of the Kingdom.

Arab Bank's reaction towards the human tragedy caused by Hurricane Katrina in the United States was rapid and determined, contributing with a symbolic amount of USD 100,000 to the American Red Cross Disaster Relief Fund.

Investor Relations

Since its establishment in Jerusalem on May 21, 1930 as Arab Bank Limited, the Arab Bank has continued to grow and improve. It began operations on July 14 of the same year. On January 31, 1990, the name changed to Arab Bank plc in accordance with Section 318 of the Jordanian Companies Act # 1 of 1989.

Arab Bank was the first public shareholding company listed in the Amman Stock Exchange in 1978.

The Bank is constantly improving its disclosure levels and introducing higher levels of transparency through its financial statements, enabling both shareholders and customers to appreciate its ever-growing earning power, its low risk level, and its strong financial position.

References

External links

• Official site (Adobe Flash)
• Arab Bank Jordan
• Europe Arab Bank

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