EU Finds No Proof of Aid Funding Terror (Yeah right )

Europe - AP ^ | Thu Mar 17, 2:51 PM ET | RAF CASERT

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BRUSSELS, Belgium - The European Union (news - web sites)'s anti-fraud office said Thursday it has found no evidence to back accusations that some of the hundreds of millions of dollars in EU aid to the Palestinian Authority (news - web sites) was diverted to fund terrorist attacks or siphoned off by corrupt officials.

But the independent European Anti-Fraud Office said its investigators found it was necessary to keep including financial safeguards in aid packages to the Palestinians to avoid funds being diverted.

"The possibility of misuse of the Palestinian Authority's budget and other resources cannot be excluded due to the fact that the internal and external audit capacity in the Palestinian Authority is still underdeveloped," the EU agency said in a statement.

From 2000 to 2003, the EU paid $329 million into the Palestinian budget and $194 million in other forms of assistance.

The probe was opened in February 2003 following accusations from European Parliament members that an unspecified amount of EU aid from 2000 to 2002 had been siphoned off by corrupt officials or diverted to support anti-Israel propaganda or terrorism.

"The investigation has found no conclusive evidence of support of armed attacks or unlawful activities financed by the European Commission (news - web sites)'s contributions," the statement said.

Palestinian Cabinet minister Hassan Abu Libdeh welcomed the findings.

"These accusations have caused great harm to the Palestinian image and Palestinian interests. Several countries either reduced (aid) or transferred through a third party, but now it is clear that these accusations were untrue," he said.

The Israeli government said that, beyond the issue of abuse of EU funds, it was convinced that, under former Palestinian leader Yasser Arafat (news - web sites), funds were used for terrorist attacks.

"In the period when Mr. Arafat ran the Palestinian Authority, there was incontrovertible evidence that in a continued and ongoing way, the Palestinian Authority channeled money to groups involved in terrorism," Israeli foreign ministry spokesman Mark Regev said.

The European Anti-Fraud Office said "the Palestinian Authority has made significant progress since 2002" to put its books in order.

But there was "at least one account in Tunis for which the PA was not yet able to clarify either the origin or the owner," it said without elaborating.

The anti-fraud office did advise the Palestine Authority to move away from funding families of people involved or accused of involvement in attacks on Israel.

"Some of the practices of the past, such as the payment of salaries to convicted persons or the financial aid given to families of 'martyrs' as well as the Fatah (news - web sites) contributions by PA staff, are liable to be misunderstood and so to lead to allegations that the PA is supporting terrorism," it said.

The EU head office, which oversees the aid, has always denied EU funds were used for illegal purposes, noting that the International Monetary Fund (news - web sites) monitors the spending.

The EU probe did show that the Palestinian leadership transferred $238 million to Swiss bank accounts between 1997 and 2000, but said those funds had since been fully accounted for.