Reports flow into Swiss money laundering authorities regarding possible Hamas financing attempts
What role does Switzerland’s financial sector play in financing Hamas terrorism? Officials have thus far received numerous reports of suspicious activity, without publicly confirming any specific cases. But authorities are on high alert.
A Hamas youth group trains in a refugee camp in Rafah after the withdrawal of Israeli forces from the Gaza Strip in 2005.
Last November, in the wake of Hamas' attack on Israel, the Swiss federal police's Money Laundering Reporting Office Switzerland (MROS) issued a warning to Swiss financial intermediaries including banks, insurance companies, asset managers and payment service providers. The warning caused quite a stir.
In its appeal, the MROS explicitly pointed out the possible misuse of charitable organizations, warning that campaigns to finance terrorism are often carried out under the guise of appeals for humanitarian aid donations. Such requests could be made on behalf of associations, charitable organizations or private initiatives, the authorities noted.
Since this warning was circulated, the MROS, which reports to the Federal Office of Police, has received around two dozen reports regarding suspicious activity, according to Federal Police spokesman Christoph Gnägi in response to an NZZ inquiry. According to Gnägi, the reports have mainly been related to money transfers for the purpose of humanitarian aid.
Fundamental questions
Gnägi provided no further information on the content of these reports or the status of their processing. If deemed necessary, they will be forwarded to the criminal prosecution authorities. However, he cautioned that the number of reports was not unusual. Humanitarian aid destined for certain countries raises fundamental questions regarding beneficiaries and the use of funds, he said, which in turns leads to an elevated number of reports.
As after the terrorist attacks of Sept. 11, 2001, the MROS seems to be giving serious consideration to the risk of harm to Switzerland’s reputation if its financial sector is associated with any instances of terrorist financing. The authorities provided financial intermediaries with a 27-page supplement addressing this issue around one month after distributing the original warning.
This document, which has been made available to the NZZ, delves more deeply into different types of terrorist financing. According to the report, this includes not only the direct financing of terrorist acts, but also the funding of propaganda, recruitment, training, travel, daily living expenses and other operational needs of terrorist organizations such as Hamas.
The paper also addresses the various methods of terrorist financing, ranging from cash transactions and crowdfunding with cryptocurrencies to informal money transfer systems such as Hawala, in which funds are transferred internationally through networks of money-lending brokers. The money laundering office writes that nonprofit organizations may be subject to particular abuse by terrorists because they enjoy the trust of the public.
In 2022, the MROS received 59 alerts, and forwarded five reports to the criminal prosecution authorities. No final convictions for terrorist financing have to date been handed down in Switzerland. This is due in part to the fact that the offense has a subsidiary effect, thus taking a back seat in cases involving the financing of a specific and concrete act of terrorism. In addition, the relevant law explicitly excludes cases in which an actor involved only foresees the possibility that terrorist financing might take place from their actions, without specifically intending this outcome. A proposal put forward by the Swiss Social Democratic Party aimed at changing this was decisively rejected by the Swiss parliament in the fall of 2016.
Hamas still not banned in Switzerland
Switzerland is one of the few Western countries that has not yet banned Hamas. The Federal Council did submit a bill on this issue in February. However, as is often the case, the details have proved thorny, and debates regarding the exact wording have been ongoing.
As soon as a law officially banning Hamas – and related organizations – comes into force, the Office of the Attorney General of Switzerland (OAG) expects a significant increase in cases, as Attorney General Stefan Blättler announced to the media last week. Even prior to the Oct. 7 attacks, the OAG had already initiated legal proceedings against an entity accused of supporting a terrorist organization due to suspected money payments to Hamas. The OAG has not yet disclosed who is being investigated, or what exactly led to these proceedings. It is conceivable that a suspicious activity report to the MROS or information from abroad triggered the case.
Switzerland's financial sector once played a central role in the management of Palestinian funds. This was in the mid-1990s, following the Oslo Accords, which provided for an autonomous Palestinian state in the West Bank and the Gaza Strip. As a result of these agreements, Israel was required to cede various assets to the Palestine Liberation Organization and the Palestinian Authority.
Pension fund assets from Gaza at Credit Suisse
Hundreds of millions of dollars thus flowed into PLO and PA accounts. In 1997, German newspaper Der Spiegel called it the «richest liberation movement in the world.» Because PLO leader Yasser Arafat feared that the U.S. might one day freeze the organization's accounts, he steered these funds to Europe, and to Switzerland in particular. As a result, around $150 million from the Gaza pension fund ended up in a Credit Suisse account in Zurich.
The CS account containing the Palestinian pension fund assets was temporarily managed by Zurich-based asset management company Belesta Asset Management. The account was overseen by the Israeli-Swiss dual citizen Arie G. «We had the advantage of being Israeli,» he told the Financial Times at the time. «That made it easier for the Palestinians to get the money from the Israeli government.»
When asked about the issue, those responsible for the successor company to Belesta Asset Management noted that the change of ownership took place many years ago. In a statement, the company said it has never had direct or indirect contact with Palestinian individuals or companies. The media office of the CS unit in question – which now belongs to UBS – responded to an inquiry with the statement: «We do not comment on this matter.»
The handshake that caused money to flow from Israeli to Palestinian accounts: PLO leader Yasser Arafat (right) with Israeli Prime Minister Yitzhak Rabin (left) and U.S. President Bill Clinton in Washington in 1993.
Another account with Palestinian funds, which at times was worth over $200 million, was held at the Geneva-based private bank Lombard Odier in the years before and after 2000. PLO leader Arafat entrusted the administration of this account to two former members of Shin Bet, Israel's domestic intelligence service. They invested a considerable portion of the funds in Naguib Sawiris' Egyptian telecommunications company Orascom Telecom – a risky investment that proved to be extremely lucrative.
According to research by the Financial Times, the Geneva-based private bank had agreed that the Palestinian funds could not be used for war or other violent operations. As a result of the Second Intifada, Lombard Odier (now called Lombard Odier Darier Hentsch) closed the account at the end of 2001, as some observers had attributed partial responsibility for the violence to PLO leader Arafat. The private bank feared exposure to U.S. sanctions due to Arafat's involvement.
In his book «West Bankers,» Benoit Faucon, a journalist for the Wall Street Journal, identifies a number of other financial institutions and foreign banks in Geneva and Zurich that often managed sums in the tens of millions of dollars for the Palestinian authorities at the turn of the century.
Switzerland joined task force against Hamas financing
What may have been legitimate in the case of the PLO or the PA at the time is no longer tolerable for Hamas, especially since last October's brutal attack on Israel. Last autumn, for instance, Switzerland joined an international U.S.-led task force focused on disrupting the flow of funds to Hamas and other terrorist organizations. This went largely unnoticed by the general public.
However, this step is worthy of note in part because Switzerland has not yet joined another notable international task force that is committed to locating money belonging to Russian oligarchs.
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