Hamas pays Gaza security forces in cash

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GAZA, Oct 5 (Reuters) Islamist group Hamas paid thousands of Gaza security officials today by dishing out cash from suitcases rather than using banks, as Israel tightened a financial clampdown on the Palestinian territory.

A senior official at Gaza's Hamas-run Finance Ministry told Reuters the group planned to circumvent banks -- some of which have come under Israeli-led pressure to shun Hamas -- by paying September salaries to some 20,000 security forces and civil servants in cash.

''We do not want to embarrass the banks and we do not want to allow the Americans and others to undermine these banks,'' the Hamas official said.

Hamas seized control of the Gaza Strip in June after it routed secular rival Fatah, prompting Palestinian President Mahmoud Abbas to sack the Hamas-led government and appoint a Fatah-backed administration in the West Bank.

Israel and Western powers have tried to block funds from reaching Hamas through the Palestinian and international banking system as part of a policy to shore up Abbas and isolate the Islamist group.

The Hamas official said the group was paying at least 10,000 Hamas security officials today at police stations and security posts. The remaining 10,000 civil servants would be paid in cash on Sunday and Monday at the Post Office, which is part of the Hamas-run telecommunications ministry.

Israeli and Palestinian officials told Reuters this week Gaza's largest Islamic bank, Palestine Islamic Bank, had received warnings from Israel and the Palestine Monetary Authority, which functions as a central bank.

A top Palestine Islamic Bank official said any accounts opened by militants at branches in the Gaza Strip have already been closed despite threats from the Islamist group. Bank officials could not immediately be reached to comment today.

Israel's largest commercial bank, Bank Hapoalim , said last month a decision by Israel to brand Gaza an ''enemy entity'' prompted it to start severing links to the territory.

Regulators say other banks could follow suit.

''I received my salary from a suitcase, we did not have to stand in lines at banks,'' said one member of Hamas' Executive Force paramilitary police.

The Finance Ministry official said Hamas would pay 33 to 35 million Israeli shekels (8.74 million dollars) in salaries this month, which it said came from local revenues.

Israeli officials believe that despite an international boycott and pressure on local banks, Hamas is able to bring into Gaza tens of millions of dollars each month using pro-Hamas businesses, cross-border tunnels and by sea.

Israel has tightened a blockade on imports and exports from Gaza since Hamas seized control in June, virtually freezing economic activity in the impoverished coastal enclave. Western powers are also boycotting the territory.

The Palestinian bank regulator said this week some Palestinian banks could be forced to shut their Gaza branches by year-end, fearing the supply of shekels -- the Israeli currency that is used in the Palestinian territories -- could start running out next month.

REUTERS JK HS1745

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