U.S. claims deficiencies at N.Y. Arab Bank
By Marcy Gordon, Associated Press, Feb 25, 2005
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.