EN Official Journal of the European Union CE 88/145

(2004/C 88 E/0154)

WRITTEN QUESTION E-3443/03

by José Ribeiro e Castro (UEN) to the Commission

(20 November 2003)

Subject: Palestinian authority — diversion of funds

The media report that the ‘Sixty minutes’ programme broadcast by the US television channel CBS has stated that Yasser Arafat has accumulated, in personal accounts, 800 million dollars from the coffers of the Palestinian National Authority, of which he is president.

The same source indicates that CBS is claiming that the Palestinian National Authority annually deposits 100 million dollars in the personal accounts of Arafat's wife who currently lives in Paris, and that the sums diverted by Arafat come from aid funding regularly sent by the international community for programmes to help the Palestinian population.

What information does the Commission have about this alleged diversion of funds? Does it know, or has it succeeded in clarifying whether these alleged facts involve the possible diversion of Community funds?

Has it approached the Palestinian National Authority, or will it do so, with a view to clarifying its version of the facts, and making it aware of the need for financial and budgetary rigour?

What implications could these accusations and their possible confirmation have on the current and future granting of financial aid to the Palestine National Authority? Specifically, what financial transparency criteria does the Commission believe it needs to reinforce and demand as a pre-condition for maintaining the scheduled aid?

Answer given by Mr Patten on behalf of the Commission

(15 January 2004)

The Commission is aware of the claims in the recent CBS Programme referred to by the Honourable Member. These claims concern commercial activities, investments and off-budget revenue which were detailed in an International Monetary Fund (IMF) report of 15 September 2003. These activities took place over the period 1995-2000, and amount, according to the IMF, to approximately USD 898 million. They do not involve Union funds.

The Commission is also aware of claims of payments by Mr Arafat to the personal account of his wife. The Palestinian Authority's (PA) Ministry of Finance has informed the Commission that such payments of the order of tens of thousands (not millions) of dollars have been made from the budget of the President.

With regard to the Palestinian commercial activities, investments and off-budget revenue referred to in the IMF report, the Commission formally obliged the PA to consolidate these funds into the Palestinian Investment Fund under the full control of the Ministry of Finance. This has been achieved by the PA Finance Minister Salam Fayaad. These funds are now being audited by the international firm, Standard and Poor's, and the results to date of this audit have been published on the Internet. It is a direct result of the conditions attached to the Commission financial support that this practice of off-budget accounts has ended.

In compliance with conditions attached to Commission's financial support, the PA is required to provide extensive budget and expenditure reporting. This is now published on a monthly basis, broken down by wages, operating expenses and transfers and is available to the Palestinian Legislative Council for parliamentary scrutiny.

As concerns the current and future support to the Palestinian Authority, the Commission will continue to attach reform conditions which require the PA to continuously improve the system of financial control, sound financial management, and overall accountability.

The Commission is, furthermore, supplementing this conditioned support with customised institution building programmes to strengthen the administrative capacity of the PA. An example of this is an extensive training programme for Ministry of Finance staff on modern methods of internal audit.