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French prosecutors yesterday said they had opened an inquiry into transfers totaling nine million euros into bank accounts held in their country by Suha Arafat, wife of Palestinian Authority Chairman Yasser Arafat.

The Paris public prosecutor confirmed a report in Le Canard Enchaine weekly that an inquiry into financial matters connected to Suha Arafat, who lives in Paris, was launched last October, based on information provided by the Bank of France and a government anti-money laundering body.

The prosecutor's office said it would check transfers from a Swiss-based institution into two separate accounts held by Suha Arafat in Paris between July 2002 and July 2003.

The office said the investigations is at a preliminary stage. Suha Arafat could not be contacted for comment.

An International Monetary Fund report on Palestinian Authority accounts between 1997 and 2003 found that some $900 million in PA funds, some of them contributed by donor nations, had been diverted by PA officials to accounts overseas.

A hefty chunk of these funds, around $10 million, had reportedly been transferred to accounts owned by Suha Arafat in Paris. She allegedly used hundreds of thousands of dollars for personal matters and the rest of the money remained in the accounts.

The IMF report also found that a large sum of $74 million was earmarked for Yasser Arafat's office and there was no explanation of the uses to which this money was put.

In a parallel development, investigators from the European Union anti-fraud office (OLAF), who are looking into allegations that the PA diverted money from European donors into terror activity, have concluded that documents the IDF seized during Operation Protective Shield are authentic.

The documents suggested Arafat ordered that funds from European sources be used to support such activity - some of the money reportedly went to the Al Aqsa Martyrs Brigades, which has been involved in terror strikes.

Investigators from OLAF, an independent body authorized to review matters connected to all spheres of EU activity, came to Israel two weeks ago to collect data on allegations of PA involvement in terror, and to review the documents confiscated by the IDF.

After studying the materials, the OLAF investigators concluded the documents were genuine. Sources close to the investigation said findings based on the OLAF officials' trip to Israel will be incorporated in their final report, which should be completed in two months.