The Arab Bank, the EU, and Terror

Another Update

August 7, 2005

The Funding for Peace Coalition has long cautioned regarding the role of The Arab Bank in the funding of the Palestinian Authority.

The problem was initially laid out in Appendix C of the report Managing European Taxpayers' Money: Supporting The Palestinian Arabs - A Study In Transparency. This analysis detailed how European taxpayers' money was being diverted to fund a corrupt oligarchy, whose primer interest was waging a war of terror against civilians. The Arab Bank, a prime conduit of these funds, stands accused of money laundering, as well as terror.

Much of Europe's money is fed into the system via The Arab Bank's branches in Gaza and in Ramallah.

In February 2005, the FPC noted both Arab and American media reports on the forced closure of the Arab Bank's New York Branch. The authorities had begun to investigate the links with illicit activity, including the aiding and abetting of terrorism.

More recently, NBC, ran an exposé of The Arab Bank. (The item is printed in full below, along with a response from the bank). It "offered its viewers documentary proof that the bank has been involved in terror."

Following events in London and elsewhere, Europe is considering new measures to combat terrorism. At the same time Brussels continues to transfer vast sums through the bank, alleged to be a logistical center of those who carry out such inhuman actions. It is the duty of politicians to tackle this moral contradiction.

Below is a copy of the NBC report.

Terror ties at a Middle Eastern bank?

FBI investigates Arab Bank for allegedly supporting suicide bombers and doing business with suspected terrorists; bank denies charges

By Lisa Myers & the NBC Investigative Unit

AMMAN, Jordan - August 2001: A suicide bomber hits the Sbarro pizza parlor in Jerusalem, killing 15 people, including an American - Shoshana Greenbaum, a pregnant schoolteacher. The Palestinian bomber's name was Izz Ad-Din Al-Masri. His parents told NBC News that soon after the bombing a group that helps families of suicide bombers told them they'd be compensated for their son's "sacrifice."

"They told me to go to the Arab Bank and open an account, and you will receive a salary," says the bomber's father, Shuhail Ahmed Al-Masri. He says almost immediately, he began receiving $140 a month. And after the Israelis leveled his house, he says he was told to go to the bank and pick up more money - $6,000.

Al-Masri's father says he was told to open an account at the Arab Bank branch in the West Bank settlement of Jenin. There, he says he's received money almost every month for the last three years. The branch, plastered with posters eulogizing suicide bombers, isn't the only one allegedly paying bombers' families. An ad in a Palestinian newspaper told dozens of martyrs' families to pick up money at the nearest branch of the Arab Bank.

"Those types of payments are aiding and abetting terrorism," says Jimmy Gurule, a former official at the U.S. Treasury Department who was in charge of cutting off money to terrorists.

The FBI tells NBC News that it's now conducting a criminal investigation into the Arab Bank's alleged movement of funds for suspected terrorists. The investigation was triggered after U.S. regulators examined Arab Bank operations in New York City on Madison Avenue. U.S. officials tell NBC News that regulators found that the bank had 40 to 60 suspected terrorists and groups as customers. They were allegedly associated with al-Qaida, Hamas and Hezbollah. Officials say all had accounts with the bank or had moved money through the New York office.

"I'm not aware of another situation involving a bank operating in the U.S. that has conducted itself in such a manner," says Gurule.

The Arab Bank, headquartered in Jordan, turned down repeated requests for an interview, so NBC visited bank headquarters in Amman. And only got as far as the lobby.

Lisa Myers: Does the bank support terrorism?

Omar Al-Sheik, Arab Bank official: Of course not.

Myers: Does the bank believe it's proper to move money to help terrorists?

Omar Al-Sheik: Of course not.

In a statement, the Arab Bank denies ever knowingly doing business with terrorists. And officials insist the bank has never moved money for anyone officially designated a terrorist by the U.S. government.

However, NBC News provided the bank with documents showing it dealt with three Hamas terror groups even after they were blacklisted by the United States. It's against the law for banks in the United States to handle transactions for terrorists on the blacklist.

The bank says the three transactions still were legal because they occurred outside the United States but that in the future it will honor the U.S. blacklist worldwide.

As for suicide bombers, the Arab Bank strongly denies ever knowingly handling payments for bombers' families. Their statement reads, in part: "Arab Bank considers suicide bombings an abominable human act."

Then what about that ad telling bombers' families to collect money at the Arab Bank? The bank says it didn't place the ad.

After NBC News provided account numbers for the Al-Masri family, the bank froze the account, which the bank claims was opened before the bombing.

Shoshana Greenbaum's father, who moved to Israel after her death, is now suing the bank.

"This organization, if allowed to continue with a mere slap on the wrist, would be sending a message that it's perfectly all right to support terrorism," says Alan Hayman.

The bank, which Israeli officials call "the Grand Central Station of terrorist financing," has been forced to shut down much of its U.S. operation but remains a dominant player in the Middle East.

The FPC also encourages its members to read the response of the Arab Bank to the NBC.

Arab Bank operates in one of the most dangerous regions of the world. It has historically received the highest ratings from bank regulators worldwide, an indication of its commitment to integrity and safe and sound banking. The bank recently experienced a tragic loss due to terrorism when one of its largest shareholders, former Prime Minister Rafik Hariri of Lebanon, was killed by a car bomb.

Arab Bank abhors terrorism and takes its responsibilities to combat terrorism very seriously. The bank would never do business with any entities that it knew were terrorists. The U.S. Office of the Comptroller of the Currency ("OCC") recently conducted a thorough review covering years of Arab Bank transactions in the U.S. In its Consent Order with Arab Bank, the agency took note of the bank's cooperation and did not find that the Bank had processed any transactions that were prohibited by law.

Arab Bank considers suicide bombings an abominable human act. The bank would never process transactions that it knows are intended to encourage or reward suicide bombings, including payments to the families of such terrorists. Moreover, Arab Bank never created, managed, or was aware of any program to provide financing through the bank to the families of suicide bombers.

Arab Bank continues to strengthen its internal procedures to prevent the financing of terrorism. In 2004 the bank completed a lengthy process of implementing procedures globally to filter all wire transfers outside the U.S. against the U.S. government designated list of terrorists, in addition to the lists maintained by the applicable countries - even though no such requirement exists. In addition, the bank has changed its policies on the filing of Suspicious Activity Reports (SARs). This action is consistent with the rest of the banking industry, and will increase the number of reports and information available to law enforcement.

Still, efforts to shut down the financing of terrorism must be a partnership between financial institutions and law enforcement authorities. One serious problem beyond the reach of the banking industry today is the fact that many suspected terrorists and suspected terrorist organizations are not being designated in a timely way on official lists as known terrorists in the U.S. and elsewhere. Law enforcement authorities, not banks, have the responsibility to make these designations and keep these lists up-to-date. Financial institutions must rely on these lists and use special software to block transactions with all parties that appear on them. It is unrealistic to expect banks to identify and block these transactions with suspect parties at a time when law enforcement itself has not designated those executing the transfers as terrorists.

We strongly encourage governments and the private sector to continue to work together to strengthen the system to prevent the financing of terrorism, and we pledge to do our part.

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