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Should Treasury Sanction the Palestinian Investment Fund?

3:27 PM, Nov 8, 2011 • By JONATHAN SCHANZER
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In a move that should startle members of Congress, a Palestinian sovereign wealth fund that has long received American taxpayer support will soon begin building houses for convicted members of terrorist organizations. 

Hamas terrorists burn American and Israeli flags.

Hamas terrorists burn American and Israeli flags.

The Palestine News and Information Agency WAFA reported over the weekend that Palestinian Authority president Mahmoud Abbas has tapped the Palestinian Investment Fund (PIF) to build houses for the prisoners released in the October exchange that freed Israeli soldier Gilad Shalit, whom Hamas had held for five years. Recipients will include convicted members of Hamas, Islamic Jihad, and the al Aqsa Martyrs Brigades.

The money that Abbas has tapped for the homes of terrorists is only the latest PIF transgression. After their release last month, the PA feted the Gaza-based prisoners at the al-Mashtal Hotel, the only five-star accommodations in Gaza—and another PIF property. 

Under Palestinian Authority prime minister Salaam Fayyad, the PIF was celebrated for its transparent business practices, but in recent months, it has become involved in funding more and more questionable projects.

PIF is partly owned and controlled by Hamas. In early March, Hamas seized its offices in the Gaza Strip, where Hamas has presided as the de facto government since the 2007 civil war. Since March, it has become clear that Hamas controls numerous PIF accounts, including the luxury Hanadi Tower office building, a factory, cars, and other assets.

The PIF sent out an email noting that Hamas had “confiscated some of its assets and properties.” The fund declared that it wouldn’t “be responsible for any future measures, deals, or agreements” associated with those holdings, and that whatever Hamas did would not “represent the PIF or its companies and properties.” But according to former Palestinian officials familiar with the matter, the PIF continues to cooperate with Hamas to ensure that its investments are being handled properly.

In other words, Hamas has become a silent partner of the PIF.

The Palestine Investment Fund (PIF), created in 2002, was initially designed to bring transparency and accountability to many of the businesses originally held by Palestinian leader Yasser Arafat, while simultaneously stimulating the Palestinian economy, particularly small businesses. In short, the plan was to bring an end to the questions of corruption that plagued the Palestinian Authority and to help build a middle class, all in preparation for Palestinian statehood.

But in the nine years since the PIF was created, according to Palestinian officials, Abbas has changed the charter, installed his own choices for board members, placed this sovereign wealth fund under his full control, and neglected to have it audited properly. Today, Prime Minister Fayyad has zero oversight of the PIF, despite his celebrated mandate for transparency. 

In other words, even before it became an asset for terrorists groups, the PIF strayed far from its founding principles.

A Treasury designation would have an immediate impact in Washington. Several U.S. organizations contribute to the PIF, including the Overseas Private Investment Corporation (OPIC), which provided $241 million to the PIF’s Affordable Mortgage and Loan Program (AMAL). Additionally, the Washington-based Middle East Investment Initiative (MEII), a non-profit where former secretary of state Madeleine Albright sits on the board, owns 15 percent of AMAL.

OPIC and MEII also support the PIF’s loan guarantee program, along with the U.S. Agency for Internal Development (USAID), which provided $2 million in technical assistance.

In a sense, all of these agencies have indirectly contributed to the Hamas PIF holdings in Gaza, the mini-vacations of convicted terrorists at the al-Mashtal Hotel, and the funds that Abbas plans to use to build homes for the individuals celebrated as heroes in the Palestinian territories, who were responsible for the planning and logistics of gruesome acts of terror, including suicide bombings that killed both Americans and Israelis.

It’s time for Congress and the U.S. Treasury to determine the legality of these contributions, and whether the Palestine Investment Fund should be targeted with terrorist sanctions like the terrorist groups it supports.

Jonathan Schanzer, a former terrorism finance intelligence analyst at the U.S. Treasury, is vice president of the Foundation for Defense of Democracies.

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