...Much attention has already been devoted to the goods smuggled into Gaza, such as fuel and cement. Less well understood is the fact that, in exchange for these goods, cash has been steadily exported out of Gaza through the tunnels, at a rate of roughly $750 million per year. Cash is also flowing out of Gaza -- through the tunnels and via bank transfers -- to safe havens in Persian Gulf countries and Europe. The new wealthy class -- many associated with Hamas -- as well as established capital owners are concerned about keeping their money inside Gaza, preferring to move it abroad. And even with huge sums flowing out of the territory, there is still more cash than opportunities to invest it. In February 2009, for example, Gaza banks actually turned to Israel's Central Bank with an odd request: to deposit excess cash reserves in Israel...

"According to Palestinian banking officials, an average of $2 billion per year has been transferred into Gaza via the Palestinian banking system since Hamas's June 2007 military takeover. The PA alone wires an estimated $1.2 billion per year into Gaza banks, much of it as pensions and salaries for the 77,000 employees kept on the payroll even though they are not working. In fact, this estimate may be conservative; according to PA prime minister Salam Fayad, 54 percent of the PA's $3.17 billion 2010 budget went to Gaza. Most of that figure appears to be salaries, although it also covers what the PA pays directly for electricity, fuel, and water provided to Gaza by Israeli firms. In addition, the UN Relief and Works Agency annually transfers about $200 million in cash to Gaza, along with $250 million per year worth of goods, grains, and fuel. Cash is also transferred into Gaza by the 160 nongovernmental organizations operating there..."

"Hamas likely raises as much as $250 million annually via taxes. The group has imposed all sorts of new fees and taxes, such as charging three Israeli new shekels (NIS) on every pack of cigarettes (which may generate around $80 million annually) and an NIS 1,400 auto registration fee (which may generate an additional $25 million based on estimates of 60,000 registered cars in Gaza)."

"In 2005, Hamas was a modestly sized organization of 4,000-7,000 military personnel, with a small charity and education network and a skeletal party bureaucracy. From 2006 to 2010, however, the funds at the group's disposal reportedly grew from $40 million to $540 million. At the same time, Hamas has gained full control over all government ministries and municipal councils in Gaza, as well as many civilian agencies. It also holds a monopoly of power over every security and intelligence service in the territory, such as the 10,000-strong "blue" police. In total, Hamas pays salaries to at least 35,000 employees, among them many of the 20,000-plus armed personnel."

"The United States has designated the Hamas Islamic National Bank and the Gaza Postal Bank as "terrorist entities"... (but) Hamas has been able to tap into financial resources transferred by the PA and aid agencies.... In total, thousands of Hamas members, including many military personnel with fake civilian positions, are paid by outside donors"

"The movement has also recently turned to purchasing all sorts of businesses and initiating new ventures, such as the Islamic Bank, the al-Multazim insurance firm, housing projects, hotels, a shopping mall, resorts, agricultural farms, and a fish hatchery. In fact, Hamas's economic mini-empire is fast becoming the main player in Gaza's private sector. The group often forces businesses to close down in order to eliminate competition."

Conclusion

"Soon after its 2006 electoral victory in Gaza, Hamas faced great financial difficulties, leading the group to smuggle millions of dollars in cash through Egypt. Today, however, Hamas has managed to develop local sources of steadily growing income, mainly by exploiting the huge aid sums transferred by the PA and international donors to sustain the general population. No effective mechanism is in place to prevent the group from taking advantage of the constant cash flow into Gaza; as a result, a significant part of the money intended to help alleviate the hardship of the region's inhabitants has gone to waste. More rigorous measures are needed to restrict Hamas's ability to siphon off such funding for its own purposes.