Palestinian Non-profits, Banks in Rift over New Anti-terror Regulation
NGOs say Monetary Authority burnishing international reputation at expense of marginalized populations
In recent weeks, Palestinian civic organizations have been engaged in intense discussions with local banks and their regulatory body, the Palestinian Monetary Authority (PMA), about a new regulation that allows the financial institutions to block transactions depending on their “risk factor.”
The “risk” relates to possible terrorism and money laundering, and the organizations say the parameters for determining this are insufficiently defined.
The regulation was issued on June 16. Unlike all others, though, it is nowhere to be found in official gazettes or on the PMA website.
It allows banks, where non-governmental organizations (NGOs) and non-profits are clients, to take measures to reduce the threat of money laundering and terrorism based on an analysis that assumes a 3% chance that a particular risk will materialize.
Since the regulation went into effect, some organizations working in the West Bank have seen transactions halted, accounts frozen and some online services blocked, according to the Palestinian Non-Governmental Organizations Network (PNGO).
PNGO is an umbrella group for 142 NGOs in the West Bank and Gaza Strip, but more than 3,400 organizations in the Palestinian territories could be affected.
Under the new regulation, banks can impose restrictive measures against a nonprofit’s account in four instances: a branch of the organization based in-country is considered at high risk of terrorism or money laundering; it maintains financial ties with countries considered at high risk for this; it has revenues over $100,000 and is listed under service-providing firms; or if it comes under suspicions raised by relevant partners.
Previously, Palestinian Authority control and intervention was limited to a law passed in 2000 concerning NGOs. Now, it has a window into funding, raising a red flag about the possibility of it using the banking system to impose further restrictions on the organizations.
For the NGOs, the underlying question regarding the new regulation is to what extent local banks are allowed to act as a filter between civil society and official bodies.
“The civil society organizations, or non-profits, are divided into two groups: the NGOs that are registered under the Palestinian Interior Ministry, and the non-profit companies that are registered under the Palestinian National Economy Ministry,” Dua’a Qurie, executive director of PNGO, told The Media Line.
“If these organizations are licensed and operating in conformity with the official regulations of both ministries, why do banks have power to suspend what the government has already approved?” she asked.
If these organizations are licensed and operating in conformity with the official regulations of both ministries, why do banks have power to suspend what the government has already approved?
Qurie says that dialogue with the PMA is ongoing but has yet to achieve common ground. She adds that the regulation conflicts with laws governing the work of NGOs, which, in turn, hurts their ability to make independent decisions and to raise funding.
The PMA, however, says the regulation aims to strengthen ties with the organizations.
In a public debate between the two sides, the PMA says the regulation is based on internationally standardized criteria that Palestinian banks must meet in line with international conventions and organizations that Palestine has joined since it acquired non-member observer-state status at the United Nations in 2012.
The Media Line reached out to the PMA, which said it did not have further comment on the matter for the time being.
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The problem, according to Qurie, is that measures taken by banks “restrict the work of NGOs at a time that is already seeing new changes regionally and internationally, especially for those organizations established before the Palestinian Authority [came into being in 1994] and which provide social services to Palestinians in areas that the PA cannot reach under the [terms of the] Oslo Accords.”
She believes the measures are taken “against a political background and do not take into account” the local context.
“Many of our online services, including payment of salaries, were stopped, and now we have to go back to issuing these payments through old bureaucratic paperwork,” Qurie explained.
Many of our online services, including payment of salaries, were stopped, and now we have to go back to issuing these payments through old bureaucratic paperwork
She added that the banks do not give clear justification for their actions.
Ramallah-based analyst Jihad Harb says there are two main problems with the new regulation. First, it contradicts locally valid laws. Second, the risk assessment study the PMA said it carried out was not properly published.
“According to local laws, the NGO and non-profit companies can open and use bank accounts, and they have their own auditors and self-governance. There is no reason why the bank should interfere from outside,” Harb said.
“Also, the fact that this regulation and the study it was based on are being pushed into obscurity brings its legality into question,” he added.
“It raises eyebrows when the government requires non-profit companies to request prior approval for funding or else it will block transfers,” Harb said.
It raises eyebrows when the government requires non-profit companies to request prior approval for funding or else it will block transfers
According to a PNGO legal memorandum, only some of the new powers in the hands of banks have a legal basis under the PA’s Anti-Money Laundering and Terrorism Financing Law of 2015. In addition, the powers granted to banks in cases of simple suspicion put the sustainability and independence of these organizations at risk and even harm their status as “legal persons,” which is essential to their growth and funding opportunities.
“Legal persons” can do the things that natural persons can usually do under the law, such as enter into contracts, sue and be sued, own property and so on.
The Palestinian banking and non-profit sectors are struggling to grow and meet international criteria and become integral parts of the international community without having to go through the gate of Israel, which is seen as the main obstacle to their growth.
The new and controversial regulation is seen by NGOs and nonprofits as an attempt by the PMA to curry favor with the world’s central banks, even if this suppresses the operation of local organizations that believe they are fighting the good fight on behalf of those marginalized by both the PA government and the private sector.