According to  the State Department, the U.S. government is one of the largest donors to  the Palestinian Authority. According to State and USAID, the U.S.  government provided about $3 billion in bilateral assistance for fiscal  years 2008 through 2012 to support education and social services,  economic development, and humanitarian assistance, among other  sectors. PIF was established by Palestinian Authority presidential decree in 2002  and became operational in 2003 as an investment company aimed at  strengthening the Palestinian economy through strategic investments. U.S. Agencies Participate in Various Programs with PIF or PIF-owned Entities

Two U.S. agencies—OPIC and USAID—are involved in programs with  PIF and a PIF-owned entity. OPIC participates in home mortgage  financing and small business loan guarantee programs along with PIF. USAID provided technical assistance and training to benefit participating  banks in the Loan Guarantee Facility (LGF) program and has  participated in educational programs at the American International School  in Gaza, which is owned by PIF through a special purpose vehicle. OPIC, PIF, and Commercial Banks Are Co-Lenders to the Affordable Mortgage and Loan Program in the West Bank

OPIC, PIF, and local and regional commercial banks are co-lenders to the  for-profit Affordable Mortgage and Loan Company (AMAL) in the West  Bank, which is aimed at encouraging mortgage lending to low- and  medium-income borrowers. OPIC officials stated that  OPIC and PIF have not yet financed any mortgage purchases under the  AMAL program. Under the AMAL Common Agreement, OPIC has committed to lend $313  million to AMAL (about 65 percent of the total debt commitment), while  PIF has committed to lend $72 million (about 15 percent of AMAL’s total  debt commitment). June 2013. According to USAID officials, USAID provided implementing partners in  support of AISG an estimated total of about $1.3 million in assistance  from 2010 to 2013. OPIC’s and USAID’s Processes for Vetting PIF or Entities and Individuals in Programs Involving PIF Rely on Various Information Sources

OPIC’s and USAID’s processes for vetting PIF, a PIF-owned entity, or  other entities and individuals in the AMAL, LGF, and AISG assistance  programs rely on various information sources, including information  provided by their implementing partners. Specifically, the banks must verify at the time the  mortgage loan is approved that each borrower and guarantor does not  appear on the Palestine Monetary Authority Central Bank Blacklist,  Treasury’s Office of Foreign Asset Control Specially Designated Nationals  and Blocked Persons List (OFAC’s list), and the Compendium of United  Nations Security Council Sanctions Lists. According to OPIC, it vetted the participants in the AMAL program— including PIF’s board of directors and senior executives, non-U.S. board  members of AMAL, non-U.S. AMAL shareholders, and key individuals of  the banks—against the OFAC list, the FBI Terrorist Screening Center  database, and other relevant databases. As the coordinating agent for the LGF program, MEII is to vet all  borrowers and lenders. OPIC said it provides information  about each proposed participating bank to Treasury’s Office of Terrorist  Financing and Financial Crimes and inquires whether there is any  unacceptable derogatory information in Treasury’s databases that might  prevent OPIC from supporting a particular lender. OPIC said that it has  vetted and cleared all nine participating banks in the LGF program. USAID’s Process for Vetting the Technical Assistance and Training and AISG Programs Was Based on Its Mission Order 21 and Relied on Various Information Sources

According to USAID officials, USAID’s process for vetting key participants  of the Technical Assistance and Training program for Palestinian banks  and the AISG program was based on the U.S. Mission to the West Bank  and Gaza’s Mission Order 21. According to USAID and based on Mission Order 21, it vetted key  individuals of PTEC, such as members of the board of directors, as well  as AISG’s management, such as the principal and vice-principal of the  school, against law enforcement and intelligence community systems  accessed by USAID’s Office of Security and through discussions with  U.S. Consulate General in Jerusalem, as applicable. Appendix I: Objectives, Scope, and Methodology

Our objectives were to describe (1) the nature and scope of U.S.  government involvement with the Palestine Investment Fund (PIF), and  (2) OPIC’s and USAID’s processes for vetting PIF and other non-U.S.  entities and individuals participating in programs involving PIF and PIF- owned entities.
Why GAO Did This Study

According to the State Department (State), the U.S. government is one of the largest donors to the Palestinian Authority. According to State, the U.S. government provided about $3 billion in total bilateral assistance for fiscal years 2008 through 2012. PIF was established by Palestinian Authority presidential decree in 2002 and became operational in 2003 as an investment company aimed at strengthening the Palestinian economy through strategic investments.
GAO was asked to provide information on U.S. involvement with the Palestine Investment Fund. This report describes (1) the nature and scope of U.S. government involvement with PIF, and (2) OPIC's and USAID's processes for vetting PIF and other non-U.S entities and individuals participating in programs involving PIF and PIF-owned entities. GAO reviewed documents and interviewed officials from U.S. agencies, PIF, and implementing partners.

What GAO Found

U.S. agencies and implementing partners participate in various programs with the Palestine Investment Fund (PIF) or PIF-owned entities that include home mortgage financing, loan guarantees, and educational initiatives. First, the Overseas Private Investment Corporation (OPIC) along with PIF and other entities have committed to lend $485 million to the Affordable Mortgage and Loan Company (AMAL) to support mortgages for low- and medium-income borrowers in the West Bank. OPIC has committed to lend about $313 million; PIF has committed about $72 million, and two banks account for the balance of the committed lending. However, as of April 2013, OPIC and PIF had not yet disbursed any funds. Second, OPIC and PIF are co-guarantors in a Loan Guarantee Facility (LGF) program in the West Bank, guaranteeing up to $110 million and $50 million in loans, respectively, to nine regional banks to support lending to small- and medium-sized enterprises. Third, USAID officials stated that, in 2009, USAID provided a U.S. implementing partner $2.1 million for technical assistance and training to enhance the lending practices of participating banks in support of the LGF. Finally, according to USAID, it provided about $1.3 million from 2010 to 2013 to three U.S. implementing partners to provide technical, in-kind, and scholarship assistance to the American International School in Gaza (AISG), which is owned by the Palestine Technology and Education Complex, a PIF-owned entity. According to USAID, its involvement with AISG ended in June 2013.
OPIC's and USAID's processes for vetting PIF and other non-U.S. entities and individuals in programs involving PIF and PIF-owned entities rely on various information sources. For the AMAL program, the two banks that issue mortgages are required under the AMAL agreements to vet potential borrowers for terrorist financing against such information sources as Treasury's Office of Foreign Asset Control Specially Designated Nationals and Blocked Persons List (OFAC) and the Compendium of United Nations Security Council Sanctions Lists; AMAL and OPIC are to conduct additional vetting. OPIC officials stated that OPIC has vetted PIF's board of directors and senior executives, the non-U.S. board members and shareholders of AMAL, and key officials of the banks against information sources such as the FBI Terrorist Screening Center database, OFAC list, and OPIC's Information Center databases. For the LGF program, OPIC said that, based on OPIC's procedures and the LGF agreements, it has vetted all the participating banks and has vetted key officials of each borrower and guarantor before loans are approved using information sources such as Treasury's Office of Terrorist Financing and Financial Crimes and FBI's Terrorist Screening Center databases. According to USAID officials, its process for vetting key participants of the Technical Assistance and Training program and the AISG program was based on documented vetting procedures for the West Bank and Gaza Mission. USAID officials said that all banks that participated in the LGF program that received training and technical assistance from USAID were subject to USAID's formal vetting process. USAID said it vetted information about AISG's owners and management against law enforcement and intelligence community systems accessed by USAID's Office of Security and through discussions with the U.S. Consulate General in Jerusalem, as applicable.

What GAO Recommends

This report does not contain any recommendations.