U.S. claims deficiencies at N.Y. Arab Bank

R.A. Hettinga rah at shipwright.com
Fri Feb 25 16:10:35 PST 2005



Friday, February 25, 2005 7 Last updated 2:49 p.m. PT

U.S. claims deficiencies at N.Y. Arab Bank


WASHINGTON -- U.S. regulators said Friday that Arab Bank PLC, one of the
largest financial institutions in the Middle East, has inadequate controls
against money laundering at its New York branch and has been ordered to
stop transferring funds or opening new accounts there.

In an unusual move, the Office of the U.S. Comptroller of the Currency, a
Treasury Department agency, said the branch was being converted into an
entity that will not conduct traditional banking activities but will
continue to engage in corporate and trade financing.

Jordan-based Arab Bank, with operations in 30 countries, faces several
lawsuits in the United States by relatives of terrorism victims in Israel
who allege it supported terrorism by funneling donations to Palestinian
suicide bombers and their families.

The bank, which had said recently it would close the New York branch,
agreed to the conditions in a consent order with the comptroller's office.

"The inadequacy of the branch's controls over its funds transfer business
is especially serious in light of the high-risk characteristics of many of
the transfers," the comptroller's office said in the order, which was dated
Thursday and announced Friday.

Rep. Sue Kelly, R-N.Y., who heads a House subcommittee that has
investigated terrorists' use of the U.S. financial system, called the
action by the comptroller's office encouraging but added, "I remain deeply
concerned about reports of Arab Bank's role in supporting terrorism and
look forward to learning additional facts regarding this situation in the
coming weeks and months."

Families of about 40 U.S. citizens killed in terrorist attacks in Israel
sued Arab Bank in federal court in New York City last summer, accusing it
of channeling money to Palestinian terrorist groups and of making insurance
payments to beneficiaries of suicide bombers.

"This isn't the time to declare victory," Gary M. Osen, an attorney
representing the families, said Friday. "The Treasury Department has taken
an important step by setting up a process for closing Arab Bank's U.S.
operations, but we're a long way from a full reckoning with Arab Bank for
what they've done."

The plaintiffs also allege that the Texas-based Holy Land Foundation for
Relief and Development used Arab Bank's New York branch to transfer money
to Hamas, a Palestinian terrorist organization blamed for dozens of attacks
in Israel. The Justice Department in August indicted the Holy Land
Foundation on charges of providing millions of dollars in support to Hamas.

Officials of Arab Bank have called those allegations "completely false and
totally irresponsible."

In a statement Friday, Shukry Bishara, Arab Bank's chief banking officer,
said the agreement with the U.S. regulators "will help strengthen our
internal controls and will give our customers and regulators even more
confidence in the safety and security of Arab Bank."

The decision to close the New York branch was announced earlier this month
by the Central Bank of Jordan, which oversees the operations of Arab Bank -
the kingdom's largest financial institution with some $32 billion in
assets. The bank is partly owned by the prominent Palestinian Shoman
family, and its shareholders include the Saudi Oger Co., which was owned by
former Lebanese Prime Minister Rafik Hariri, who was killed on Feb. 14 in a
bombing in Beirut.


On the Net:

Office of the Comptroller of the Currency: http://www.occ.treas.gov

Arab Bank PLC: http://www.arabbank.com

R. A. Hettinga <mailto: rah at ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'

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