The United States hopes that the Palestinian Authority will cooperate with Israel in an effort to halt the flow of money to terrorist organizations, Under Secretary of the Treasury Stuart Levey said yesterday during a visit to the region.

Levey, who heads the Office of Terrorism and Financial Intelligence, told journalists that the United States hopes to make a constructive contribution to a joint Israeli-Palestinian fight against terrorist financing. Among other things, he said, the PA needs to set up procedures to ensure that donations from both donor states and private individuals are not used to finance terrorism.

The United States is one of the donor states, having recently pledged $350 million to the PA for the coming year.

Levey said that there has been a slowdown in fund transfers to Hamas from the United States, Europe and Saudi Arabia, noting that the latter, which used to be one of Hamas' major donors, has recently taken "significant" steps to reduce the flow of money to the Islamic organization.

While Saudi Arabia's main efforts have been aimed at organizations that raise money for Al-Qaida under the guise of being Islamic charities, the crackdown has had a positive influence on terrorist funding in general, including funding for Palestinian groups, he explained.

Nevertheless, Levey added, Saudi Arabia still has more to do in this area.

Levey also expressed hope that Europe would add Hezbollah to its list of terrorist organizations, as the United States has.

Under United States law, Levey noted, anyone who transfers money to a terrorist organization is guilty of a crime.

This includes not only Palestinian groups, but also extremist Jewish groups such as Kach and its various offshoots.

Levey met yesterday with representatives of the Mossad, the Foreign Ministry and the Justice Ministry, as well as with the head of the Counterterrorism Administration, Danny Arditti, to discuss ways of increasing cooperation on combating terrorist financing.

He is slated to meet today with Palestinian Prime Minister Ahmed Qureia and other senior Palestinian officials.