|Israel Resource Review
||18th March, 2007
PA FINANCE MIN.-DESIGNATE CAN'T FIND DONOR MONEY
Middle East News Line
The Palestinian Authority can't find hundreds of millions
of dollars of money provided by donor nations.
Officials said the Finance Ministry has lost all track of funds,
receipts and salaries. They said donor nations, who provide nearly $1
billion a year to the PA, have already been informed.
"Where is the control?" PA Finance Minister-designate Salam Fayyad.
"It's gone. Where is all the transparency? It's gone."
Fayyad, a former World Bank official who served as finance minister
until 2006, said PA financial records have fallen into disarray. Designated
to become the next PA finance minister in a Fatah-Hamas government, Fayyad
said officials could no longer be certain that donor aid was being spent in
accordance with its stated purpose. The Palestinian Legislative Council was
scheduled to vote on the proposed Cabinet on March 17.
Donors have provided about $700 million to PA in 2006. But Iran and Arab
donors were said to have given close to $1 billion to the Hamas-led
Officials said despite PA pledges, the government has failed to monitor
its budget, track spending, control absenteeism and complete projects. They
acknowledged a huge budget deficit in 2006.
Israeli officials said nearly 20,000 jobs were generated in the Gaza
Strip since November 2006. They said most of the jobs were in the
agricultural sector in the northern Gaza Strip.
On March 10, the World Bank released a 197-page report that pointed to
significant deficiencies in the PA budget. The report said 66 percent of all
spending has gone to pay salaries, with an annual 11 percent increase in
civil service jobs.
Officials said donor money has either gone directly to PA Chairman
Mahmoud Abbas or to Prime Minister Ismail Haniyeh. They said that in either
case there was no accounting of the money.
In an interview with the London-based Sunday Telegraph, Fayyad, who has
been threatened by both Fatah and Hamas militias, said the PA needed five
years to gain control of its finances. He said this would include an effort
to terminate salaries to absentee employees.
Fayyad has been provided protection by officers from the Presidential
Guard, loyal to Abbas. He pledged to try to clear up the chaos at the
Finance Ministry, but added, "it's virtually impossible."
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Rachel Ehrenfeld and John Wood
We are on the cusp of a new era of terror financing, that of mobile payments
or "m-payments." An m-payment system is being developed by members of the
GSM Association to enable migrant workers and the poor who do not have bank
accounts to transfer money internationally, efficiently and inexpensively.
According to the World Bank, 175 million migrants transferred at least $230
billion international remittances in 2005. Are Hamas, al Qaeda, Hezbollah
and their likes far behind?
Soon, every mobile-phone owner will be able to send money, pay bills and
make purchases anywhere, anytime. According to the GSM Association, 3
billion people have mobile phones, but only 1 billion people worldwide have
bank accounts. BearingPoint, a major management and technology consulting
company, estimated the unbanked marketplace in the United States alone in
2006 at $510 billion. No wonder that banks such as Citigroup, HSBC, JPMorgan
Chase, BancorpSouth, as well as mobile phone companies such as Cingular,
Verizon, Sprint and Vodafone, to name a few, are clamoring for a piece of
Without the implementation of a real-time digital anti-money-laundering
compliance framework, the m-payment system is well suited to become the
"killer application" for money laundering and terror financing. All you need
is a stored value card and m-payments enabled mobile phone and carrier.
There are now a dozen or so m-payment service providers. In the United
States, Citigroup teamed up on February 27 with Obopay, the mobile
person-to-person payment service provider, thus enabling not only South
American or Filipino migrant workers to avail themselves of the m-payments
service, but also drug traffickers, and members of Hamas and Hezbollah in
the United States to send money back to the Middle East, or to each other
all over the world.
Many companies in Europe also provide such services. LUUP, a Norwegian
company with offices in Germany and the United Kingdom, recently entered
into an arrangement with the National Bank of Dubai. The emirate is a
well-known conduit for al Qaeda, Hamas and Hezbollah funding.
In the United Kingdom, with more practicing Muslims than Christians, and in
which Islamist terrorists recruit and plan terror attacks in radicalized
mosques in Birmingham, Leeds and London, HSBC -- with more than 5,000
offices in 79 countries -- and its subsidiary First Direct -- a telephone-
and Internet-based commercial bank, offer an m-payment solution over the
Monilink worldwide Web network.
Stored value cards do not require a bank account or credit card to activate
and use, nor do they require two forms of government-approved
identification, just plain old cash. The majority of cards only allow low
levels of cash to be held on the card, but some allow the transfer of
thousands of dollars.
This is how it works: You buy a stored value card for X amount of dollars
and a prepaid mobile phone. Next, you register with the m-payment service
provider using a free anonymous e-mail account, your prepaid mobile phone
number and the money on the stored value card. Using your mobile phone, you
log on to the m-payment service provider and give them the number of the
mobile phone to which you wish to transfer the funds from your stored value
card. The m-payment service provider sends a message to the receiver's phone
number asking where to transfer the money. The recipient can request the
transfer to his stored value card and withdraw the funds from any ATM.
Since the Near Field Communication security technology (which is the basis
of the m-payment system) features sophisticated encryption, it represents a
formidable impediment to law enforcers and intelligence services trying to
detect suspicious money transactions. The challenge is compounded by the
fact that the m-payment process can leave little to no audit trail; perhaps,
two mobile-phone numbers; the amount; and short and simple instructions on
transmission and reception.
The task of detecting or interdicting terrorists or money launderers is made
all the more daunting because often the phone and stored value cards are
discarded after a relatively small amount of time and use, and others
employed elsewhere in their stead.
Moreover, many stored value cards enable you to reload the card, thus
enabling larger sums of money to flow through it. Ironically, among its
major selling points is the anonymity it provides for the user, as well as
its functional similarity to a credit or debit card.
A large number of major U.S. credit-card companies and banks now offer
stored value cards. According to the National Drug Intelligence Center's
National Drug Threat Assessment 2007, "the number of U.S.-issued Visa- and
MasterCard-branded money remittance cards . . . increase€ from 400,000 in 2005
to more than one million in 2006. In addition, more than 7 million
MasterCard and Visa prepaid debit cards were in circulation."
While the U.S. government, concerned with the potential impact of reporting
requirements on the day-to-day operations of electronic funds transfer
systems, is conducting feasibility studies, the regulatory framework is not
capable of dealing with the latest digital developments. To avoid the abuse
of this new technology by criminals and terrorists, the government needs to
adopt a sophisticated digital tracking system now, as well as put in place a
digital system to report in real time on transfers and block the flow of
Rachel Ehrenfeld is director of American Center for Democracy. John Wood
is president of the Playfair Group.
Published March 15, 2007: The Washington Times
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