Arab Bank accused of funding terrorists
The influential Mideast firm denies having
knowingly financed Palestinian militants, including suicide bombers
By Josh Meyer, Times Staff Writer March
4, 2007
WASHINGTON - A three-year investigation
into the activities of one of the Middle East's largest and most
influential banks is producing extensive evidence of how tens of
millions of dollars have flowed from wealthy Saudi Arabians to
Palestinian groups that allegedly used some of the money to pay off
suicide bombers and their survivors.
The information being turned up by
government inquiries and lawyers suing Arab Bank "will give people a
better understanding of the way money moves in that part of the
world to support Hamas" and other militant groups in the West Bank
and Gaza Strip, said Stephen Kroll, a terrorism finance specialist
and until recently counsel to the U.S. Senate Committee on Banking,
Housing and Urban Affairs.
"It's important in focusing the public's
attention on the issue of what is and what is not acceptable for
banks to be involved in," Kroll said.
The Justice Department is conducting a
criminal investigation into the New York branch of Arab Bank, which
is based in Jordan, and its financial links to organizations and
individuals accused of terrorism, according to three former U.S.
counter-terrorism officials.
In 2005, the bank agreed to pay the
federal government $24 million in fines for violating U.S. laws
aimed at preventing terrorist financing, including failing to report
suspicious transactions.
The bank is also being sued in federal
court in Brooklyn by Americans and Israelis injured in suicide
bombings or other fighting in Israel and the occupied territories,
and by the relatives of others who were killed. No trial date has
been set, but assuming the cases go to trial, they could establish
ground rules for what obligations banks have in handling money bound
for militant groups. They could also provide an unusually detailed
and public look at the flow of money from Saudi donors to
Palestinian groups that the U.S. and Israel list as terrorist.
Lawyers suing Arab Bank accuse the firm
of facilitating acts of terrorism by providing accounts and other
financial services to Hamas, Islamic Jihad and similar groups. Arab
Bank also acted as the administrator of a plan in which suicide
bombers and others designated as "martyrs" by the Palestinian
Authority and other organizations were compensated for their actions
on a sliding scale, based on the extent of their injuries, according
to documents filed in the cases. The lawsuits charge that the
payments - and thus Arab Bank - provided an incentive for suicide
bombings.
Arab Bank officials deny such charges
and say they have never knowingly supported acts of terrorism. Bank
officials say their agreement to pay the fine in 2005 was not an
acknowledgment of any wrongdoing.
Bank officials say they provide an
important financial service in the impoverished Palestinian
territories and that they were merely acting as intermediaries
between banks representing Saudi donors and Palestinian
organizations and individuals who were being compensated for
suffering at Israeli hands.
They also say that a "martyr" can mean
almost any Palestinian killed or injured as part of the struggle
with Israel, including innocent victims.
"Arab Bank had reason to believe these
were humanitarian payments or social welfare payments, and there was
certainly nothing in any of the public information that suggested to
the bank at the time that these were in any way [meant] to induce
terrorism or reward terrorism," said Robert Chlopak, a
Washington-based spokesman for the bank.
Chlopak said the bank had checked out
clients and transactions and that it did not process any payments to
individuals or organizations that were designated as terrorist.
In one instance in which plaintiffs'
lawyers allege that Arab Bank maintained an account for Hamas in
Beirut, bank officials said that once they learned of the suspicious
account, they froze it and reported it to authorities.
Arab Bank also said that it was
primarily transferring funds sent to it from other banks on behalf
of legitimate Saudi donors that have not been linked to terrorist
activities. To win their case, the plaintiffs' lawyers would have to
prove that Arab Bank knew that it was doing business with terrorist
individuals or entities.
In 2005, the Treasury Department and the
Office of the Comptroller of the Currency found that Arab Bank's New
York branch had transferred funds between 2001 and 2004 for
organizations that were later designated by the U.S. as terrorist
groups. The Treasury Department said the bank had "largely complied"
with the requirement to stop the transfers after the groups were
identified.
But the department said that after the
government designated these groups as terrorist, the bank failed to
go back and review its accounts to see what dealings it had had with
them and report any suspicious activities.
Some of the initial allegations in the
lawsuits, most of which were filed in 2004, were based on documents
seized by the Israeli military during raids on charities, businesses
and other locations in the West Bank and Gaza in 2002. Among the
documents were records indicating that Arab Bank provided financial
services for Hamas and at least 41 organizations and individuals
allegedly related to it or to Islamic Jihad.
Plaintiffs' lawyers Gary Osen and
Michael Elsner used those records as a jumping-off point for a wider
investigation in which they have gained access to tens of thousands
of financial records from Arab Bank.
The records detail financial
transactions that began in 2000 with the start of the second
Palestinian intifada, or uprising. Saudi government officials
created two special fundraising committees to help Palestinians
battle Israeli forces and otherwise resist the occupation, according
to court documents.
One of them, the Saudi Committee for Aid
to the Al Quds Intifada, decreed that the life of anyone who died as
a "martyr" in the conflict with Israel was worth 20,000 Saudi
riyals, about $5,300 at the time. The committee began wiring that
sum into accounts that families were instructed to set up at Arab
Bank branches, the lawsuits allege. The average Palestinian salary
is about $3,000 a year.
In all, the Saudi Committee made about
200,000 wire transfers for the Palestinian cause, totaling more than
$90 million, Shukry Bishara, Arab Bank's chief banking officer, said
in a court declaration. Much of that money went to pay for hospitals
and social welfare programs, or to compensate people injured or
imprisoned - or the families of those killed - in the
Israeli-Palestinian conflict.
But the money also included an
undetermined amount paid to the families of suicide bombers, and
those injured or imprisoned by Israel, according to the lawsuits.
The plaintiffs allege that bank
officials knew that those listed as "martyrs" included suicide
bombers because it was publicly advertised. They cited a Feb. 10,
2001, edition of the Saudi newspaper Al Jazirah in which the Saudi
Committee listed the names of Palestinian martyrs, including those
killed in suicide bombings, whose families received payments.
Several lawmakers and Bush
administration officials involved in the investigation of Arab Bank
have expressed concerns about its activities.
At one House Finance Committee hearing
in May 2005, Treasury Undersecretary Stuart Levey said that during
his visit to the West Bank city of Ramallah to discuss the issue,
the Arab Bank manager for the Palestinian territories told him that
he "had not filed a single suspicious activity report in the past
two years across all the Arab Bank branches in the West Bank and in
Gaza."
"It appears that such controls were
indeed sorely lacking at Arab Bank across all of their global
operation," Levey said.
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