The soldiers burst into the banks in Ram Allah on Wednesday, corralled employees, covered security cameras and walked out with several millions in cash.

Israel said it took between $6.7mn and $8.9mn from the vaults of the three branches, in an attack it said targeted funds funnelled by Iran, Syria and Lebanese guerrillas to Palestinian resistance groups.

An Israeli official later said the money would be spent on unspecified humanitarian aid to Palestinians.

The raid began on Tuesday night, when Israel arrested computer experts from two of the banks.

Raid

On Wednesday morning, troops in jeeps, trucks and armoured personnel carriers sealed off downtown Ram Allah as security forces strode into the Cairo Amman Bank and two branches of the Arab Bank, Palestinian officials said.

Troops covered the banks' cameras with sacks or disabled them and herded the employees together, before eventually releasing them, witnesses said.

Customers were allowed to leave after identification checks.

"It (the raid) is like the mafia... I think it should be dealt with in a very serious way"

Ahmad Quraya,
Palestinian prime minister

The Israelis sifted through several hundred bank accounts.

During the raids, dozens of Palestinians in the streets threw stones at soldiers, who responded with tear gas, metal-core rubber bullets and live rounds, hospital officials said.

Forty-two people were injured and three were in a critical condition, according to doctors.

Outrage

Palestinians reacted with outrage to the raids.

"The Occupation's Armed Robbery," read the huge red headline in al-Hayat al-Jadida, a newspaper close to the Palestinian Authority, in its Thursday edition.

Palestinian officials said the raid violated banking agreements and could trigger a run on the banks.

Finance Minister Salam Fayad said: "Such measures will hurt, to a large extent, the Palestinian economy and its institutions."

And Prime Minister Ahmad Quraya said: "It's like the mafia... I think it should be dealt with in a very serious way."

Even the US, Israel's ally and protector, criticised the operation.

US criticism

State Department spokesman Richard Boucher said Israel should have coordinated with Palestinian authorities before launching the raid.

"Some of these actions risk destabilising the Palestinian banking system, so we would prefer to see Israeli coordination with the Palestinian financial authorities in order to stem the flow of funds to terrorist groups," he said.

Boucher said during the past 18 months the US, Israel and the Palestinians have introduced better accounting procedures and more openness about the flow of funds.

Israel says Hizb Allah is funding 
Palestinian resistance groups 

"That's been a positive thing, both for the Israelis but especially for the Palestinians, who see where their money goes and who see this being handled appropriately for the people who live in these territories."

But he added: "We certainly recognise the need to cut off funding for terror organisations ... we've always called for Palestinian leaders to take immediate, credible steps to end terror and violence."

"Terror funding"

Meanwhile, an Israeli official called the robbery a "legal confiscation", and said the raid was part of the global fight against "terror funding".

"This money is the fuel for Palestinian terror, and I am convinced we have to dry up the paths for this fuel," Defence Minister Shaul Mofaz said.

Israel said the Palestinian banking system has been hijacked to finance resistance groups that have killed more than 900 Israelis in bombings and shootings.

Much of the funding came from Iran, Syria and Lebanese Hizb Allah fighters, Israeli security sources said on Wednesday, without providing specifics.

But Gil Feiler, a senior researcher at Tel Aviv's BESA Centre for Strategic Studies, said little of the foreign money sent to "militants" is funneled through banks.

"People are coming with $100,000 in their luggage," he said.

No proof needed

And former Justice Minister Yossi Beilin told Israel's Channel One television he doubted the government could prove that the money it seized was earmarked for militant groups.

However, Yuval Steinitz, a lawmaker from the ruling Likud party, said that did not matter.

"We are in a war against the Palestinians and the Palestinian Authority. It is not about proof," he said.

The raids marked the largest search yet for money transfers to resistance groups, and the first time forces have stolen money from Palestinian banks.

Last year, troops raided a bank in a West Bank suburb of Jerusalem, and the Palestinian Authority briefly froze the bank accounts of Palestinian charities in the Gaza Strip to check for possible links to Hamas.

"This money is the fuel for Palestinian terror, and I am convinced we have to dry up the paths for this fuel"

Shaul Mofaz,
Defence Minister

Israel-Palestinian meeting

The Palestinian banking system has remained relatively stable, despite more than three years of Israeli-Palestinian violence that has decimated the Palestinian economy.

The raids came a day after Palestinian security officials said Hizb Allah helped fund the last two Jerusalem bus bombings - on 29 January and Sunday - in which 18 Israelis and a foreign worker were killed.

The Lebanese group had transferred payments of $50,000 to a resistance leader in the West Bank city of Nablus every two or three months for distribution to different cells, according to a resistance fighter.

Despite the raids, Palestinian cabinet minister Saib Uraiqat met with Israeli Prime Minister Ariel Sharon's top aide, Dov Weisglass, to discuss a long delayed summit between Sharon and Quraya.

The men agreed to meet again before such a summit, Sharon's office said.