Turkish Banks are the new conduits for inflow of foreign money to militants
By Girish Linganna
From a fancy restaurant in Istanbul with a view of the Bosporus, a man, sanctioned by America for allegedly funding Hamas, discusses his business roles. The Bosporus is a narrow water channel in Turkey, separating Europe and Asia, linking the Black Sea with the Sea of Marmara.
He dismisses the American charges as absurd. However, he indirectly acknowledges potential issues by stating he doesn't monitor what his employees do with their own money.
Hamas has three strengths: its military power in Gaza, its influential ideas, and its finances. Since Hamas's attacks on October 7th, Israel has responded by killing over 12,000 Palestinians in Gaza, aiming to weaken Hamas's military presence.
To fully defeat Hamas, Israel aims to break its financial foundation. Most of this money isn't in Gaza, but abroad in supportive countries. With income sources like money laundering and mining companies, Hamas's financial network, estimated to earn over $1 billion annually, is carefully built to dodge Western sanctions. This makes it difficult for Israel and its allies to target these finances.
Hamas uses its income for various expenses, including paying teachers and buying missiles. A significant part of their funding, around $360 million annually, comes from taxes on goods imported into Gaza from the West Bank or Egypt. This income from import taxes is the simplest for Israel to cut off. Since leaving Gaza in 2005, Israel has heavily restricted goods and people crossing the border. Now, it even blocks basic items like food and fuel from entering Gaza.
However, Hamas receives most of its money from other countries, estimated at about $750 million a year. This is the primary source for its weapons and fuel. A significant portion of this funding comes from supportive nations, with Iran being one of the largest contributors.
The United States estimates that the ayatollahs contribute around $100 million annually to Palestinian Islamic organizations, primarily in the form of military support.”Ayatollahs” are high-ranking Shiite Muslim clerics in Iran, recognized for their religious authority and expertise in Islamic law and theology.
The challenge for those funding Hamas is to transfer funds without getting caught by U.S. sanctions. Recently, U.S. authorities have implemented three sets of sanctions targeting individuals and entities accused of financially supporting Hamas in just the last month.
Avoiding U.S. sanctions demands creativity. Large sums of money reach Hamas via cryptocurrency markets.”It's surprising how much market activity is actually connected to [Hamas],” remarks Firuze Segzin, a Turkish economist at Bilkent University, in a statement to The Economist. The U.S. Treasury Department reports that Hamas has secretly moved over $20 million through Redin, a money exchange located in the old Fatih area of Istanbul, surrounded by shops for tourists. According to the U.S. Department of the Treasury, Binance, the largest crypto exchange in the world in terms of trade volume, has allowed its customers to conduct transactions with Hamas.
Israeli officials estimate that the majority of Hamas's funding, approximately $500 million annually, is sourced from its investments, including companies registered in various Middle Eastern countries. These businesses are managed by Hamas's investment office and staffed by its members. U.S. officials state that these companies give money to charities, which then send the funds to Hamas. Turkish officials, on the other hand, say that profits are sometimes directly taken by Hamas.
For Western regulators, it's challenging to separate these sources of income. One of these companies constructed the Afra Mall, Sudan's first shopping center, and another operates mines close to Khartoum, the country's capital. Another company constructed high-rise buildings in Sharjah, located in the United Arab Emirates. Although these companies often publicize their business transactions, they deny any connections with Hamas.
Can the money flow to Hamas be stopped? It largely depends on the countries it goes through. Since 1989, when Israel arrested some of Hamas's leaders in Gaza and the West Bank, the group's financial operators have been based overseas. Over time, due to changing political situations, they've had to relocate. Hamas had to leave its initial financial center in Amman, the capital of Jordan, due to pressure from the United States.
Nowadays, while Hamas's political leaders prefer Doha, Qatar's capital, and its business operations extend from Algeria and Sudan to the UAE, its financial managers reside in Istanbul. Zaher Jabarin, whom Israel accuses of overseeing Hamas's finances (a claim he denies), is based there along with several others who are under U.S. sanctions for funding the group. Keen to gain influence in the region by supporting the Palestinian cause, Turkey's President Recep Tayyip Erdogan provides protection. Israel claims that the Turkish government issues passports to Hamas members (which Turkey denies) and allows Hamas to maintain an office in Turkey.
Turkey's banking system assists Hamas in avoiding U.S. sanctions by carrying out complicated financial operations globally. The presence of a rapidly growing and minimally regulated cryptocurrency market further simplifies this process. Several of Turkey's major banks, such as Kuveyt Turk, have been alleged by both Israel and the United States to be deliberately holding funds for Hamas. It is rumoured that Turkey's President, Mr. Erdogan, might be discreetly in favour of this. In 2021, the Financial Action Task Force, a monitoring group of the G7, added Turkey to its “grey list” for not doing enough to block the financial resources of terrorists.
Hamas's businesspeople gain the most advantage from this situation. According to a finance employee of the group, the unofficial support from the Turkish government helps make business dealings easier and opens new opportunities. Trend GYO, a company listed in Istanbul and sanctioned by the U.S. for sending money to Hamas, secured a government contract to construct Istanbul Commerce University.
Construction firms, which are a major part of Hamas's investments, can easily absorb large amounts of money and often get substantial loans. This situation allows Turkish authorities to claim that they are not directly funding Hamas.
Hamas appears to be financially resilient. Israel has struggled to significantly impact its earnings or savings, and Turkish banks haven't been cooperative. The effectiveness of America's numerous sanctions is reduced when their targets can maintain funds outside the U.S. banking system. Furthermore, Hamas is skilled at concealing its company identities. An ex-official from the Treasury expressed frustration, saying that just when they think they've identified an important Hamas-linked company, it changes its name.
There's a possibility that Hamas's financial situation might get better. With Israel increasing its actions in Gaza, nations with populations that support Palestine might make things more favourable for Hamas's financial handlers. There have been ongoing rumours suggesting that some officials in President Erdogan's economic ministry are working in collaboration with Hamas's finance department.
For Israel, the idea of Hamas growing wealthier despite ongoing conflict is a major disappointment. If Hamas maintains its financial strength, it, or a similar group, could rise again even after destruction. While people in Gaza face hardship, Hamas's funds are securely held elsewhere, allowing its financiers to enjoy luxurious lifestyles with views of the Bosporus. (IPA Service)
(The author is a Defence, Aerospace & Political Analyst based in Bengaluru.)
