EU Ponders Arafat's Secret Bank Accounts

Speculation over Arafat's secret bank accounts is nothing new. The International Monetary Fund gave a precise account of the magnitude of Arafat's shadowy assets last year, about $300 million (€232.5 million). But now, European Union officials are wondering whether they have inadvertently contributed to his piggy bank.

It is still unclear to what degree international aid was abused. Already there are concerns over $900 million that disappeared from Palestinian public accounts, trickling out through a murky system of bank accounts and bogus firms. And the money trail leads back to the European Union -- the Palestinian territories' largest donor -- which finances schools, hospitals and agricultural projects in the region.

The accusations of abuse coupled with questions as to whether development aid has flowed to the poor has led to criticism of the aid programs in the European Parliament, with parliamentarians accusing Palestinians of misusing the funds.

''Between 2002 and 2003, the EU paid €10 million monthly to the Palestinian Authority without any controls,'' said Armin Laschet, a Christian Democratic Union member of the European Parliament and co-chair of the oversight committee responsible for Palestinian aid. ''This practice has now been stopped.''

Facing a dilemma

But the European Union commission who decides the allocation of funds to the region has a dilemma: All acknowledge that corruption and nepotism is rampant in the Palestinian territories but no one wants to worsen the poverty or political crisis in the region by cutting off aid. The European Union has given about €1.5 billion to the Palestinian Authority over the past 10 years.

Still, Emma Uwin, spokeswoman for the European Commission, confirmed that Brussels has been investigating the misuse of EU funds by Arafat and his followers during the past year.

''The European Union anti-fraud office (OLAF), is investigating allegations of abuse,'' she said. ''We have found no proof.''

To date, OLAF has not issued its final report. In a preliminary report, the organization said they found no proof that European Union aid money has funded Palestinian terrorists as the Israelis allege.

Suha Arafat under investigation

Meanwhile, French investigators have their sights on Arafat's wife, Suha Arafat, for money laundering. French officials said they have proof that more than $1 million has been diverted to her personal Swiss bank accounts. But the source of the money remains unclear. European officials suspect the money is flowing in from EU accounts but have no proof.

In August, Palestinians held in Israeli prisons accused Arafat and other senior Palestinian officials of diverting European aid to terrorists groups. Those allegations followed the emergence of documents in July showing that Arafat wired $5.1 million -- possibly from international aid funds -- to a personal bank account in Cairo in September 2001, first reported by German public broadcaster ARD.

Meanwhile, the issue over the Arafat accounts is a reason to act, Laschet said.

''The EU now should change its position,'' he said. ''It is possible to freeze the aid money and act upon those accounts in Switzerland, so that this money doesn't end up in the private hands of Mrs. Arafat.''