Sanctioned Chaos
U.S. sanctions are too effective. (Yes, you read that right.) After Hamas took office in March, the U.S. Treasury’s Office of Foreign Assets Control (OFAC) effectively classified the Palestinian Authority as a terrorist organization. So, World Bank, IMF, and U.N. officials boycotted any financial dealings with the Palestinian government to comply with the sanctions, partly ...
U.S. sanctions are too effective. (Yes, you read that right.) After Hamas took office in March, the U.S. Treasury's Office of Foreign Assets Control (OFAC) effectively classified the Palestinian Authority as a terrorist organization. So, World Bank, IMF, and U.N. officials boycotted any financial dealings with the Palestinian government to comply with the sanctions, partly out of fear of becoming targets of personal litigation in U.S. courts. Even the Amman-based Arab Bank unexpectedly closed the authority’s "single treasury account," leaving the government without a bank account and creating a level of uncertainty that scares the West as much as the Palestinians.
U.S. sanctions are too effective. (Yes, you read that right.) After Hamas took office in March, the U.S. Treasury’s Office of Foreign Assets Control (OFAC) effectively classified the Palestinian Authority as a terrorist organization. So, World Bank, IMF, and U.N. officials boycotted any financial dealings with the Palestinian government to comply with the sanctions, partly out of fear of becoming targets of personal litigation in U.S. courts. Even the Amman-based Arab Bank unexpectedly closed the authority’s "single treasury account," leaving the government without a bank account and creating a level of uncertainty that scares the West as much as the Palestinians.
When the boycott proved more effective than the Bush administration envisioned, they had to backpedal — fast. OFAC quickly issued a waiver exempting U.N. officials from the provisions of anti-terror laws, enabling institutions to resume functional contacts with the Palestinian government. Individual staffers — many of whom have assets in the United States because of earlier stints at the World Bank or IMF headquarters in Washington, D.C. — remain vulnerable, though, to being blacklisted by the Department of Homeland Security. U.S. Agency for International Development staff, who work with the Palestinians, are supposedly trying to insure their personal U.S. assets in case of litigation.
People can be forgiven for taking U.S. terror sanctions seriously. In August 2005, the Arab Bank paid a $24 million fine after Treasury investigators determined transactions had been made with groups later designated as "terrorist organizations." The bank currently faces multimillion-dollar lawsuits in U.S. federal court filed by victims of terrorism who claim the bank channelled funds to Hamas. Other regional banks are refusing to do business with the Palestinian government because they depend upon "correspondent" financial institutions in the United States to conduct daily transactions. Any bank that defies U.S. sanctions — or works with a bank that does — could have its U.S.-based assets frozen and its access to U.S. financial markets denied. That is a risk that no one is prepared to take, not even in the name of Arab solidarity.
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