Gaza Redevelopment funds may pose a Threat to Financial Institutions

by Kenneth Rijock

The tug of war over exactly how Gaza rebuilding funds will be administered is distracting us from a far more serious issue: will the transmission of such reconstruction funds result in regulatory fines and penaltiesfor financial institutions involved? How does a bank fund reconstruction, where the government is a designated global terrorist organisation? These questions will require an answer from banks in the region who will be asked to participate in the reconstruction process.

The major issue presented is whether US regulators, who have sanctioned Hamas as a SDGT, will choose to sanction Middle Eastern financial institutions that directly(and not indirectly) fund Hamas in the redevelopment operation. Remember that the US sanctioned not only Hizballah's construction company after the 2006 conflict between Hizballah and Israel, but its successor company.* How the US will treat Hamas in the post-war period may give us an idea regarding how it intends to treat banks who fund rehabilitation money to Hamas, directly or in a covert manner.

The secondary issue is whether the intermediary presence of Non-Governmental Organisations (NGO), acting on humanitarian grounds, and routing funds, will deter US regulators from punitive action against regional banks involved in the funding.

Any financial institution in the Middle East that has already been approached by potential donors had best consult with bank counsel immediately, lest it find itself in trouble with US law enforcement or regulators as a facilitator of terrorism.