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It remains a legal gray area for banks, and one fraught with moral questions: whether to process a payment potentially linked to terrorists' ransom demands or hold the funds to satisfy regulators. Under U.S. counterterrorism laws, payments to designated Foreign Terrorist Organizations, Specially Designated Nationals or other blacklisted parties remains illegal, even if the funds are intended to free kidnapping victims. But a White House directive issued last month clarifying that U.S. officials would not prosecute those making ransom payments to terrorist groups could offer a modicum of comfort to the families of hostage victims, the consultancies they turn to...