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Terror ties at a Middle Eastern bank?

An NBC News exclusive: The FBI is now investigating a prominent Middle Eastern bank, with a branch in New York City. Did it help terrorists? Lisa Myers reports.

August 2001: A suicide bomber hits the Sbarro pizza parlor in Jerusalem, killing 15 people, including an American — Shoshana Greenbaum, a pregnant schoolteacher.

The Palestinian bomber's name was Izz Ad-Din Al-Masri. His parents told NBC News that soon after the bombing a group that helps families of suicide bombers told them they'd be compensated for their son's "sacrifice."

"They told me to go to the Arab Bank and open an account, and you will receive a salary," says the bomber's father, Shuhail Ahmed Al-Masri.

He says almost immediately, he began receiving $140 a month. And after the Israelis leveled his house, he says he was told to go to the bank and pick up more money — $6,000.

Al-Masri's father says he was told to open an account at the Arab Bank branch in the West Bank settlement of Jenin. There, he says he's received money almost every month for the last three years. The branch, plastered with posters eulogizing suicide bombers, isn't the only one allegedly paying bombers' families. An ad in a Palestinian newspaper told dozens of martyrs' families to pick up money at the nearest branchof the Arab Bank.

"Those types of payments are aiding and abetting terrorism," says Jimmy Gurule, a former official at the U.S. Treasury Department who was in charge of cutting off money to terrorists.

The FBI tells NBC News that it's now conducting a criminal investigation into the Arab Bank's alleged movement of funds for suspected terrorists. The investigation was triggered after U.S. regulators examined Arab Bank operations in New York City on Madison Avenue. U.S. officials tell NBC News that regulators found that the bank had 40 to 60 suspected terrorists and groups as customers. They were allegedly associated with al-Qaida, Hamas and Hezbollah. Officials say all had accounts with the bank or had moved money through the New York office.

"I'm not aware of another situation involving a bank operating in the U.S. that has conducted itself in such a manner," says Gurule.

The Arab Bank, headquartered in Jordan, turned down repeated requests for an interview, so NBC visited bank headquarters in Amman. And only got as far as the lobby.

Lisa Myers: Does the bank support terrorism?

Omar Al-Sheik, Arab Bank official: Of course not.

Myers: Does the bank believe it's proper to move money to help terrorists?

Omar Al-Sheik: Of course not.

In a statement, the Arab Bank denies ever knowingly doing business with terrorists. And officials insist the bank has never moved money for anyone officially designated a terrorist by the U.S. government.

However, NBC News provided the bank with documents showing it dealt with three Hamas terror groups even after they were blacklisted by the United States. It's against the law for banks in the United States to handle transactions for terrorists on the blacklist.

The bank says the three transactions still were legal because they occurred outside the United States but that in the future it will honor the U.S. blacklist worldwide.

As for suicide bombers, the Arab Bank strongly denies ever knowingly handling payments for bombers' families. Their statement reads, in part: "Arab Bank considers suicide bombings an abominable human act."

Then what about that ad telling bombers' families to collect money at the Arab Bank? The bank says it didn't place the ad.

After NBC News provided account numbers for the Al-Masri family, the bank froze the account, which the bank claims was opened before the bombing.

Shoshana Greenbaum's father, who moved to Israel after her death, is now suing the bank.

"This organization, if allowed to continue with a mere slap on the wrist, would be sending a message that it's perfectly all right to support terrorism," says Alan Hayman.

The bank, which Israeli officials call "the Grand Central Station of terrorist financing," has been forced to shut down much of its U.S. operation but remains a dominant player in the Middle East.