Contents

The Palestinian Authority:  Where Does the Money Go?............................................................. 3

The PLO............................................................................................................................. 3

The PA............................................................................................................................... 4

Funding to the PA from International Donors.......................................................................... 5

Funding to the PA from Crime and corruption......................................................................... 6

Major Sources of the PA’s Illegal Revenues............................................................................... 7

International Aid Directed to Terror........................................................................................... 11

Arafat’s Personal Involvement in Funding Terrorism............................................................... 14

Additional Unacceptable Activities Funded by the PA................................................................ 14

Fostering Hate in Schools.................................................................................................. 14

Examples from Palestinian Textbooks................................................................................. 14

Hate Propaganda............................................................................................................... 15

 

The Palestinian Authority:
Where Does the Money Go?

The following is an examination of how the PA, led by Yasser Arafat, has systemically and systematically used corruption and crime, and diverted funds donated for the development of the Palestinian state, to fund terrorism and to enrich its leadership.

The PLO

In the efforts to stop terrorist financing, the US and international law enforcement agencies might do well to examine how it evolved. The model is hardly new. In fact it dates back more than three decades, and is the prototype for many of today's terrorist organizations: the Palestine Liberation Organization (PLO).

The PLO was classified as a terrorist organization from its inception in 1964 until the Oslo Accords in 1993. Yet, throughout this entire time, it continued to receive financial and political support from the Soviet Union and its satellites in Europe, Latin America and Africa, and from members of the Arab League, as well as other Third World countries. This legitimization, and the accompanying financial backing, allowed the PLO not only to continue its terrorism and criminal activities with impunity, but also allowed the organization to fund a world-wide propaganda campaign, win great popularity and increase its influence.

The PLO used drug trafficking, arms smuggling, money laundering and counterfeiting to amass a fortune estimated by the British National Criminal Intelligence Services (in 1993 & 1994) at about $10 billion. [1] Its connections with international criminal organizations, drug cartels, other terrorists groups and every rogue state, from Libya, Iran and Iraq, to North Korea and the Sudan, set the pattern for others to follow. The PLO's transformation into the Palestinian Authority (PA) in 1993, as a result of the Oslo Accords, did not impede the organization's illegal activities. On the contrary, it enhanced them. As the whole world gave the PA legitimacy, it abused this status to expand its illegal activities.

With the current intifada, the PA has undergone another change, incorporating religion into its political rhetoric and adding jihad to its agenda. As a result, the PA gained even more support financially and politically within the Arab/Muslim world, much as al Qaeda did later. According to a soon to be published report, in 2001, the first year of the current intifada, the amount of money officially donated to the PA jumped 80%, from US $555 million to US $1.002 billion. [2]

Often “political priorities”, along with corruption and hypocrisy all over the world, have made illicit funds easy to launder and to hide. Such had been the case with funds for terrorism. Off- shore banking centers from Monaco, Nauru and Cyprus to Hong Kong and the Bahamas, as well as major international financial organizations, were used not only to launder the money, but also to invest it. At the forefront of the money laundering activities was the PLO.

Historically, the PLO has had nine principal sources of income:

The use of drug trafficking as a tool to fund terrorism was developed by the former Soviet Union as part of its unconventional warfare doctrine. The PLO simply adopted this use of drug trafficking as an excellent source of funding. Other terrorist organizations, such as the IRA, the Basque ETA, the Colombian FARC, and radical Muslim organizations like Hamas, Hizballah and al-Qaeda, have understandably followed suit.

The official decision to use the drug trade for funding was made under the chairmanship of Yasser Arafat in 1983, six months after the PLO was expelled from Lebanon, at a secret emergency session of the Finance Committee in Algiers. As stated by Sallah Dabbagh, then PLO treasury chief, “...the entire future of the PLO operation for liberation may hinge on our exporting more drugs throughout the world”.

For decades, the West has turned a blind eye to the PLO’s fundraising endeavors, allowing the PLO to continue operating both legitimate and illegitimate businesses. These ventures, in turn, laundered money for the organization, which used the revenues to further the PLO's terrorist agenda. This established a precedent that surely did not escape bin Laden when he set out to create the financial infrastructure of al Qaeda. Indeed, U.S. and British law enforcement agencies have detailed by now how the al Qaeda organization has also been reaping huge profits from the illicit drug trade and other criminal activities. Just last month, U.S. authorities presented evidence that illegal drugs operations within the U.S. were funding a host of Middle East terror organizations linked to Palestinian groups and al Qaeda.

Clearly, the PLO and its successor, the PA, have played an indispensable role in creating the financial model for today's terrorist organizations. Close examination of the methods and institutions that account for the PLO’s success can help us to better track how al Qaeda and other terrorist organizations operate financially. More importantly, it can ensure that history will not repeat itself - unless we let it.

The PA

The Palestinian Authority’s leadership and its chairman Yasser Arafat sponsor terrorism. It uses funds from its salary budget, EUR 10 million each month, to do it.

-    The PA has deliberately sent money (from its EU-aided salary account, among other sources) to individuals and groups involved in terrorism;

-    The EU’s denials of this do not stand up to scrutiny;

-    According to the EU’s own statements, it should cease aiding the PA.

The corruption of the PA was known for a long time. In October 1999, Azmi Shuaibi, chairman of the Palestinian Legislative Council Budget Committee, had harsh words for the PA at the 9th International Anti-Corruption Conference in Durban, South Africa: “The recent corruption found in the PA is similar to the corruption that exists in the rest of the Arab countries’ governments.” [3] This was finally acknowledged by President Bush when he called to change the Palestinian leadership and to bring reform, accountability, and transparency to the Palestinian Authority. [4] Condoleezza Rice, the national security adviser, accurately summed up the situation in the San Jose Mercury News: “Frankly, the Palestinian Authority, which is corrupt and cavorts with terror... is not the basis for a Palestinian state moving forward.”

The funding of the PA is based on two sources:

-    International donors

-    Crime and corruption

Funding to the PA from International Donors

The Palestinian Ministry of Planning and International Cooperation (MOPIC) 2001 1^st and 2^nd Quarterly Monitoring Report of Donor’s Assistance, which is current as of June 30, 2001, cites receipts to date from donors of $3,392,634,000. That is 66% of the $6.1B promised. [5] The Arab States donated $45 million per month from April 2001- April 2002 and $55 million per month since then. Further documents show that the EU has donated EUR 10 million a month since June 2001, [6] which together add $806 million, for a total of $4,198,634,000. This figure is the absolute minimum that can be documented according to the most recently available public sources. This amount does not take into account the amount of international aid from sources besides the EU and Arab States subsequent to -June 30, 2001. There is no readily available data on the scope of this aid. However, it is estimated to be in the $400 – 500 million range, consistent with the yearly average and range given in the Palestinian Ministry of Planning and International Cooperation report.

Based on all available documents, a very low estimate of $4.5B was donated to the PA since the Oslo Accords. [7] This figure does not include aid to UNRWA (United Nations Relief and Work Agency), examined below.

 

Table 1 Year-by-Year Data, According to the Palestinian Ministry of Planning and International Cooperation (Since 1998) [Thousands of US Dollars]

However, there are independent sources, such as Info-Prod, an economic research center, that provide a different account, maintaining that the PA has received a much larger sum.

Info-Prod’s figures are as follows (in thousands of dollars): [8]

Table 2 Year-by-Year Data, According to Info-Prod [Thousands of US Dollars]

The 2001 figure is an 80% increase over 2000. These sums do not include UNRWA figures.

A partial breakdown for 2001 is:

-    US: $114 million

-    EU: $250 million

-    Arab States: $400 million

Info-Prod’s figures detail $4,466,868,000 through the end of 2001. Based on these figures, and taking into account the known scope of EU and Arab Aid to the PA (EUR 10 million per month from the EU, and 45 million per month until April 2002 then 55 million per month from the Arab states), a minimum of $4,938,868,000 was given to the PA by the end of August 2002.

Following the Oslo Accords, donations from the EU included demands for accountability. Similar demands were attached to the EU’s direct budgetary assistance following the intifada. However, despite ostensible EU claims to the contrary, no real efforts to monitor how the money was spent has ever taken place. “”Everybody has known for quite some time that money ended up in the wrong hands” [9] noted an EU diplomat. The EU claims that the IMF ostensibly monitors the PA budget. This claim, however, is contradicted by the IMF statement that “the Fund has not been monitoring spending under individual budget lines nor can it ascertain whether a particular spending commitment has been actually disbursed for the reported purpose. This is an auditing function that goes beyond the fund’s present mandate.” [10] Nor was there ever any reason to expect that the PA would meet any demands for account­ability, in light of the fact that Yasser Arafat declared as early as July 1994:

“I refused and I will never accept!” Arafat said of the conditions imposed for economic aid. “I completely refuse any controls by anybody on Palestinian Autonomy, except the Palestinians themselves. We didn’t finish military occupation to get economic occupation” [11]

Clearly, the international donor community did not take Arafat at his word. This follows the same school of thought that holds that he does not really mean it when he calls for suicide bombing and Jihad.

-    The US has given $548,766,000 in direct aid to the PA, according to Palestinian Ministry of Planning and International Cooperation figures [12] . But the total sum, including the amount given through relief and development organizations, is $1.1B. [13] In addition, following the 1998 Wye River Memorandum, the CIA has been training the Palestinian Authority Security Services. [14] The budget for this is unknown, though in September 2002, an additional $20 million has been allocated for an ostensible reform of the Palestinian security services. [15] Clearly, previous attempts to create a law-abiding security force for the Palestinian people have utterly failed. One hopes that this time better selection methods are being implemented to exclude the terrorists from the ranks of the PA security forces.

-    The EU has donated EUR 1B in loans and grants to the PA. Its donations to UNRWA since 1994 total at least EUR 407 million. [16] In addition, EU member countries have donated at least $1,260,022,000, according to Palestinian Ministry of Planning and International Cooperation figures. All together, aid from Europe to the PA totals at least $2.52B. In addition to these amounts, the EU sends 2 – 5% of its donated sum for individual projects. [17]

-    The United Nations Relief and Work Agency (UNRWA): UNRWA is slated to have total disbursements of $521.7 million for 2002, [18] of which $110 million was to come from the US. The US has provided 30% of the UNRWA budget in recent years. [19]

-    The major increase by the Arab states followed a decision by the Arab League in October 2000. The money was sent through the Islamic Development Bank (IDB), and was transferred to the Palestinian Ministry of Finance.

Funding to the PA from Crime and Corruption

The total amount of money accumulated by the PLO from its inception has been estimated by several sources. A 1990 CIA report estimated that the PLO had between $8 – 14B in assets. [20]

Two British National Criminal Intelligence Service (NCIS) reports, (1993 and 1994) esti­mated that “despite denials to the contrary, it is estimated that they [the PLO] have worldwide assets approaching $8-10 billion USD and an annual income of about $1.5-2 billion.” The report noted that the PLO was in fact the wealthiest of the world’s terrorist organizations. [21] The U.S. General Accounting Office performed an investigation into this matter in 1995, but its findings were kept secret, due to “national security reasons.” However, a source familiar with the investigation said that the report found that Arafat and the PLO indeed held “well over $10 billion is assets, even at a time when he was publicly claiming bankruptcy.” [22]

The assets the PLO held were an open secret. Yet, the PA was never asked to use the assets on behalf of the Palestinian people, and there was no demand to account for the where­abouts of these assets.

Major Sources of the PA’s Illegal Revenues

Since the PA has been engaging in criminal activities since its inception, the full extent of the organization and its leadership’s illegal income is impossible to determine. However, the following sources of revenue have been documented:

-    Palestinian Martyrs’ Sons Enterprises (Samed)

-    Monopolies and the Palestine Commercial Services Company (PCSC)

-    Personal Corruption

-    Crime.

·  PALESTINIAN MARTYRS’ SONS ENTERPRISES (SAMED)

The PLO formed Samed in 1970, to control and operate its economic activities. Since then, Samed has been led by Ahmed Qurie, AKA Abu Ala, currently the speaker of the Palestinian Legislative Council. [23] He served directly under Yasser Arafat, who signed the checks for all of the transactions and was no doubt aware of virtually every detail. [24] Samed had a flexible accounting system that included bank accounts not identified as belonging to the PLO but registered in the names of private individuals, including Abu Ala. The value of the PLO investments in farms, industry, weapons and clothing factories, real estate, newspapers, duty free shops, and airlines was estimated by the British National Criminal Intelligence Services (NCIS) in 1993 and 1994 at about $10 billion. [25]

According to the US House of Representatives Task Force on Terrorism and Unconventional Warfare (October 1991), Samed had a penchant for airport-related investments. These investments gave the PLO a base for the procurement of forged travel documents and airline tickets. [26] It owned duty-free stores at airports in Nairobi, Kenya and Lagos, Nigeria. [27] Through Samed it also had interests in airlines from the Maldives to Nicaragua. Until 1993, Samed also received approximately $50 million a year from the “Palestine Liberation Fund Tax,” of 5%, of the income of all Palestinian worldwide. [28] Overall, in the 1970’s and 80’s, the PLO through Samed earned an estimated $5 million per day. [29]

In December 1999, hackers that broke into the PA’s computer system discovered at least “five billion pounds in numbered bank accounts in Zurich, Geneva and New York,” as well as smaller sums in Europe, Asia, and North Africa. None of the accounts were registered in the PLO’s name. The PA records revealed that it owned shares “on the Frankfurt, Paris, and Tokyo stock exchanges,” including stocks in Mercedes-Benz. It also owned property in prime locations in such as Paris, London, Geneva and New York. [30]

·    MONOPOLIES AND THE PALESTINE COMMERCIAL SERVICES COMPANY (PCSC)

The scope of revenues from the monopolies in the PA was estimated in 2000 at $300 million annually. [31] None of this amount is accounted for. The damage to the Palestinian economy goes beyond the loss in revenues, because it prevents competition and results in higher prices for fewer products. Coupled with the fact the monopolies are “on basic goods such as wheat, cement, petrol, wood, gravel, cigarettes and cars are in the hands of Arafat's aides and they exploit their positions to extract high profits,” [32] the dead-weight loss must be staggering.

The Palestine Commercial Services Company is the economic arm of the Palestinian Authority. Yet it is not supervised by its legislature or Finance Ministry. [33] It is run by Mohammed Rashid, Arafat’s economic advisor, and it controls most economic activities in the PA territories. The Palestine Commercial Services Company has “large minority stakes… in a Ramallah Coca-Cola bottler... and myriad other businesses, plus full ownership of a cement plant that had long enjoyed a government protected monopoly. The Palestine Commercial Services Company had the single biggest holding in the Jericho casino until it was shut down, with a $60 million stake. It has a 30% stake in the Palestinian Cellular Communications Company and an 8% stake in the Palestinian Telecommunications Company. It also has investments in the Palestine Development and Investment Company (PADICO). [34] The company was also, until recently, the direct recipient of sales taxes – more than $500 million in the past two years alone, collected by Israel but owed to the PA under the 1993 Oslo peace accords.” [35] The tax receipts were placed in a Tel Aviv account controlled by Arafat and Rashid. [36] The latest estimate of the value of the Palestine Commercial Services Company’s holdings is at least $345 million in cash and equity. [37]

Researchers have noted that “since the establishment of the PA, scores of monopolies have been created by Arafat and are being operated by individuals and organizations close to Arafat. These monopolies control and subvert almost every potentially profitable aspect of daily Palestinian life.” [38] The Palestine Commercial Services Company has a 100% stake in the local cement monopoly that was worth $50million in 2000. [39] Other Palestine Commercial Services Company monopolies include flour, oil, cigarettes, iron, commercial sand, and the PA prohibits other companies from operating in these fields. [40]

Media investigations and sources within the Palestinian territories revealed that Palestinian officials close to Arafat that control monopolies include: Arafat’s personal economic advisor Muhammad Rashid, who together with Suha Arafat (Yasser Arafat’s wife) and communications advisor Nabil Abu-Roudayna co-own pharmaceutical and apparel monopolies. [41] Rashid, together with another Arafat advisor, Hassan Asfour, co-own an oil monopoly; Nabil Shaath, the Minister of Planning and International Cooperation has a computer monopoly, [42] and Ahmed Qurie, speaker of the Palestinian Legislative Council and founder of Samed, is co-owner of cigarettes, conserves, and dairy monopolies. [43]

 The U.S. General Accounting Office’s (GAO) 1995 investigation into the PA’s finances received no cooperation from the PA. But by 1997, following local pressure, the Palestine Legislative Council (PLC) conducted an investigation into PA corruption. This report, was suppressed by Arafat, but leaked. Jarar Kidwa, head of the PA’s financial monitoring institution, disclosed that the PA had lost $326 million – 40% of its annual budget for 1996 – to corruption and mismanagement. The PLC report also implicated PA officials, some still serving in the cabinet. [44]

The PA system of monopolies has a long-term effect that is not immediately quanti­fi­able, because of lost economic opportunities.

·    PERSONAL CORRUPTION

Recent reports by Israeli government officials put Arafat’s personal holdings at about $1.3 billion. This includes $500 million of the Palestine Liberation Organization’s money that Arafat also controls. Wearing three hats, Arafat is the president of the Palestinian Authority, chairman of the PLO, and is the head of the Fatah terrorist organization and its al Aqsa Martyrs Brigades and the Tanzim. [45] As such, he controls the funds of all the terror organizations under the PA umbrella.

There has been a great deal written about Yasser Arafat’s secret bank account in Tel Aviv. Under the 1994 Paris Agreement, Israel is supposed to transfer the tax receipts it collects on imported gasoline for the PA territories directly to the PA. The account number they were asked to deposit the funds in is located in the Chashmonaim branch of Bank Leumi in Tel Aviv, and only Arafat and his trusted advisor Mohammed Rashid have the authority to access it, though some speculate that Treasury Minister Ahmed Zohari Nashashibi has access to it as well. The money collected by this procedure totaled around $400 million by November 2000. [46]

The rest of the taxes that Israel collects on imported goods goes into four accounts in the Bank of Palestine and the Arab Bank of Gaza. According to a leaked IMF internal report, “the account is not under the supervision of the PA Treasury Ministry.” [47] At least half the money was indeed put there to bypass the supervision demanded by international donors, to finance inflated security services and civil service payrolls, which were not approved by the donors. [48] A PA source had a different explanation, claiming that the money was there for emergency use. [49]

Throughout the years, the donor countries led by the US, demanded transparency and accountability from the Palestinian Authority. Clearly, they were not insistent enough.

Some of Arafat’s corruption is simply in the form of outright theft of aid funds. For example, the Kuwaiti newspaper Al-Watan reported on June 7, 2002 that Arafat had deposited $5.1 million into his personal account, siphoned from funds that were donated by Arab states as aid to the Palestinians. [50] In a perverse case of profiteering from the war that the PA created, Mohammed Rashid invested some of the stolen funds in the Jordan Cement Company on behalf of the Palestine Commercial Services Company, in order to profit from the rise in cement prices due to the demand for building materials following Operation Defensive Shield. [51]

Jawad Ghussein, until 1996 the Secretary General of the Palestinian National Fund, told the Haaretz newspaper in August 2002 that Arafat “took aid money and contributions that were earmarked for the Palestinian people to his own account.” Ghussein should know, since it was he who for years deposited $7.5-8 million each month into Arafat’s personal bank account. By 1993, these deposits had totaled $540 million. [52]

A member of the Palestinian Legislative Council from Nablus, Muawiya Al-Masri, was interviewed on July 3, 2002 by the Jordanian publication Al-Sabil about Arafat's regime. When Al-Masri went public about PA corruption back in 1999 he was nearly killed in retaliation. Undeterred, he again spoke at length about the endemic corruption of the PA and Arafat. "No minister can appoint a driver or a delivery boy in his ministry without the president's consent," said Al-Masri. "There is no institutional process. There is only one institution — the presidency, which has no law and order and is based on bribing top officials."

Following the Oslo Accords, Arafat even took over PECDAR (the Palestinian Economic Council for Development and Reconstruction), that was founded under strict European conditions, as soon as it began operating. "His [Arafat's] became the authorized signature. Today, no amount, no matter how small, leaves the PECDAR funds without the president's signature." [53]

Siphoning off the Pension Fund: In compliance with the Oslo Accords, Israel transferred the pension funds of Palestinians who worked for the Israeli Civil Administration, to the PA. The Gaza employees’ fund alone was worth $160 million. [54] The PA used part of these funds to pay the salaries of the bloated police force they created in violation of the accords. [55] Parts of the pension fund were used for an investment in telecommunications. These unauthorized expenditures amounted to $36 million. By September 1997 only $20 million remained in the fund; $104 million disappeared. [56]

·    CRIME

-    Counterfeiting Merchandise: [57] Under the PA’s control, massive merchandise counterfeiting enterprises flourish, “making millions of dollars a year,” with royalties going to “senior Palestinian Authority figures.” [58] The merchandise includes CD’s, DVD’s, clothing, cosmetics, and schoolbooks. This is done in cooperation with Hamas and other Palestinian terrorist organizations.

-    Counterfeiting Money: According to media reports, [59] counterfeiting of Israeli, Jordanian, and Kuwaiti currency, is an ongoing activity in the Palestinian territories. [60] In April 2002, the IDF found large quantities of counterfeit Israeli currency in 50, 100, and 200- Shekel denominations in Arafat’s compound in Ramallah. [61]

-    Shakedowns: According to confidential Palestinian sources, [62] arbitrary charges of traffic violations, demands of large bribes, kidnapping for money, and extortion of 70 – 90% from the income of private businesses, are rampant in the PA. These methods are similar to those employed by PLO in Lebanon.

-    Car theft from Israel is rampant in the PA-controlled areas, frequently with the connivance of senior PA officials. Former PA Police commissioner Ghazi Jabali is accused of licensing thousands of cars stolen from Israel, charging $7000 for a permanent license. However, Jabali was fired only when charges of embezzlement of $20 million from the PA were made. Despite that, Arafat appointed him as advisor on police affairs. [63] According to reports by the Israeli police and eyewitnesses, cars stolen from Israel have special identification on their PA-issued license plate.

-    Faisal Husseini: Documents found in Orient House in August 2001 show that $1.8 million was funneled by Faisal Husseini’s into his private bank accounts in Switzerland and Austria. The money was donated by the Gulf Emirates for business development in the Palestinian territories. [64]

-    Mohammed Dahlan: According to Palestinian and Israeli sources, Mohammed Dahlan, head of the PA security services in the Gaza Strip, supplements his salary by collecting “more than 1 million Shekels per month in protection money (from suppliers of oil and cigarettes, etc.), kickbacks for issuing licenses…and (since 1997), border crossing fees. [65]

-    Nabil Shaath and Yasser Abd Rabboh: The 1997 Palestine Legislative Council investigation into PA corruption implicated Minister of Planning and International Cooperation Nabil Shaath, and Minister of Information and Culture Yasser Abd Rabboh. The report claimed that both used government money for personal purposes. The report determined that Shaath had embezzled ministry funds, transferring them to accounts not subject to PA inspection.