In New Problem for Palestinians, Banks Reject Transfers

By GREG MYRE

The New York Times
4 May 2006

RAMALLAH, West Bank, May 3 -- As the Hamas-led government
struggles to raise cash after the suspension of Western
aid to the Palestinian Authority, it faces a new and
unexpected obstacle: banks here are refusing to accept its
money transfers from abroad.

The United States Treasury last month barred almost all
financial dealings with the Palestinian Authority in
response to Hamas's rise to power, under a federal law
that makes it a crime to provide funds to terrorist
groups.

That has rattled local banks, which are tied to the
American banking system. The banks abruptly stopped
handling even basic wire transfers needed for the
authority to receive money donated by foreign countries.

In recent weeks Arab countries, coordinated by the Arab
League in Cairo, have raised more than $70 million. But so
far, Palestinian officials say, no bank has been willing
to move the money to the West Bank or the Gaza Strip, wary
of legal entanglements with the United States.

Ismail Haniya, the Palestinian prime minister and a leader
of Hamas, said Wednesday that the government could begin
paying overdue salaries, which are now two months late, if
the money reached the Palestinian Authority's bank
accounts.

"The problem is not with raising money," Mr. Haniya said
at a news conference in Gaza City. "The problem is how to
transfer this money to the Palestinians."

Mr. Haniya accused the United States of putting pressure
on the banks "so that the money we have collected does not
reach citizens or civil servants." Hamas says it will not
bow to political pressure from Israel or the West. But
without money from abroad, it is not clear how the
Palestinian Authority can function.

The European Union joined the United States in suspending
all financial assistance for the authority after Hamas
took office in late March as a result of its decisive
victory in Palestinian legislative elections. Israel has
also frozen the roughly $50 million it collects in tax and
customs revenues each month on behalf of the Palestinians.

Now, with the United States Treasury's action, even Arab
and Muslim countries that want to assist the authority
have not been able to deliver their aid.

American diplomats say the United States is not directly
putting pressure on the banks. But the Treasury has
publicized the government's position that Hamas is a
terrorist organization and that financial transactions
with the Palestinian Authority are barred. There are a few
exceptions to the ban, including dealings with the
Palestinian Authority president, Mahmoud Abbas, who
opposes violence against Israel and supports peace talks.

"Generally speaking, if an organization or individual is
facilitating direct fund-raising for Hamas, they open
themselves up to action by the United States," said Molly
Millerwise, a spokeswoman for the Treasury in Washington.

On Tuesday, Stuart Levey, the under secretary for
terrorism and financial intelligence at the Treasury, was
in Israel to meet with senior Israeli officials on how to
prevent money from reaching designated terrorist groups,
the United States Embassy said.

The Palestinian Authority needs at least $150 million a
month just to pay salaries and run essential institutions
like schools, hospitals and the police force. On its own
the authority raises barely $30 million a month, and it is
falling deeper into debt each day.

Since coming to power, the Hamas-dominated government has
missed two paydays for the authority's 165,000 employees.
Palestinian nurses and teachers, civil servants and
security force officers like Muhammad Burbar, 23, are
caught in the middle.

Mr. Burbar has not received his monthly $333 paycheck
since February. He is out of cash, and his wife needs
medical treatment. On Tuesday the couple sold a tiny gold
bracelet and a pendant they bought for their daughter when
she was born last year.

They received $28 from a gold shop in Ramallah.

"We didn't have any other choice," Mr. Burbar said. "I
have no idea when I will get paid again, and I'm not
optimistic. This could go on for another six months."

The shop owner, Khader al-Asbah, said 99 percent of his
customers in the last two months sold family jewelry,
traditionally held as a form of savings by Palestinian
families.

Economists and aid groups say the Palestinian economy,
ailing since the start of an uprising against Israel in
2000, risks a major contraction if government workers go
unpaid for months.

The United States government lacks legal jurisdiction over
financial transactions abroad if no American citizens or
institutions are involved. But many Middle Eastern banks
have branches in the United States or have business
relationships with American banks to handle international
transactions.

Banks here fear they could jeopardize their ties to the
United States or put themselves at legal risk if they
handle money for the Palestinian Authority, regardless of
its origin, said George Abed, governor of the Palestinian
Monetary Authority, which effectively serves as the
Palestinian central bank.

The Arab Bank, based in Jordan, has held the main account
for the Palestinian Authority in recent years. Officials
there and at other banks have refused to discuss the issue
of transactions for the authority.

But Mr. Abed acknowledged that the Palestinian government
and the banks were in an extremely awkward position.
"Banks, being careful as they usually are, have been
telling the Palestinian Authority that they can't complete
these transactions," Mr. Abed said Tuesday in an interview
in Ramallah.

The Arab Bank, which has branches in the United States,
has been subject to American legal action, including a
lawsuit filed in Federal District Court in Brooklyn by
about 50 American survivors or relatives of people killed
in suicide bombings or other attacks by Hamas.

"No bank wants to risk being cut off from international
transactions," Mr. Abed said. "This is oxygen for banks.
If you are a bank, and you shut yourself out of the United
States and Europe, what are you going to do -- conduct all
your transactions in rupees?"

Though the banks are wary, Hamas says it will not give in.

One option is to have the Arab League send the donated
money directly into the personal bank accounts of
Palestinian Authority employees, bypassing the authority.
But that may be highly impractical, because money would
have to be wired into 165,000 separate bank accounts.

"It is being studied, but it does not sound very
feasible," Hesham Youssef, a senior Arab League official,
said in a phone interview from Cairo.

The United States, the European Union and Israel have
demanded that Hamas do three things before they will
consider dealing with the group: recognize Israel, disavow
violence and accept existing Israeli-Palestinian
agreements.

Hamas has refused, instead appealing to Arab and Muslim
countries to replace the lost financing.

Arab League countries recently renewed a pledge made years
ago to provide the Palestinian Authority with $55 million
a month, but it has regularly fallen short. Even if the
league finds a way to get the money to the Palestinian
Authority, it is barely one-third of what the authority
needs to pay its monthly bills.

Photo by: Nayef Hashlamoun