The government has admitted that it is allowing hundreds of millions of dollars to be transferred to Hamas in Gaza, the watchdog organization Shurat Hadin charged on Thursday. Organization head Nitzana Darshan-Leitner quoted from a letter she received from the legal adviser of the Prime Minister's Office that said, "The transfer of funds to the Palestinian Authority in the Gaza Strip takes place with the knowledge of the government of Israel for diplomatic reasons." However, Mark Regev, a spokesman for the Prime Minister's Office, told The Jerusalem Post that the funds mentioned in the legal adviser's letter referred to the money from customs taxes belonging to the PA in accordance with the Paris Agreement of 1994. According to the agreement, the customs tax for goods imported to the West Bank is collected by Israel at the ports and then delivered to the PA in Ramallah. "Not a single penny of this money goes to the Hamas," said Regev. The money is used to pay PA employees working in the Gaza Strip, he added. However, Shurat Hadin attorney Ro'i Kochavi said that his organization's allegations were not related to these funds but to other transfers by the Bank of Israel and the Postal Authority. "The transfer of hundreds of millions [dollars' worth] of shekels in cash (bills and coins) to the Gaza Strip has continued since the Hamas takeover of Gaza last year," wrote Shurat Hadin. "The money is transferred in armored cars from banks in Judea and Samaria by the Postal Authority and others. Some of the money is used to replace bills that deteriorated [and could not be used] and some to launder money that the Hamas smuggles into the Gaza Strip from Iran via Egypt." Kochavi told the Post that the Iranian money was delivered in large bills. The armored cars sent by banks with branches in Ramallah and Gaza bring Israeli shekels to the Gaza-Israel border, where they switch loads with armored cars from Gaza carrying the Iranian money, he said. Kochavi charged that Hamas was using the shekels to pay their armed forces. Meanwhile, the Iranian money is brought to the banks in the West Bank, where it is sold to the Bank of Israel in return for shekels, he said. The cycle then repeats itself. In a letter to Kochavi, Merav Batzri, assistant to the legal adviser of the Bank of Israel, wrote that the bank did not know anything about the facts presented in Shurat Hadin's letter. However, it added that "the Bank of Israel also serves as a professional economic adviser to the government of Israel. In this context, it is involved with the relations between banks in Israel and those operating in the areas of the Palestinian Authority. Furthermore, the decision to transfer funds to the Gaza Strip is based on a wide basket of considerations aside from economic considerations, including political, security and others. These are the responsibility of the government rather than the bank." Attorney Ronen Baharav wrote that "the Postal Bank Company, which provides services to the Postal Authority, is required from time to time to transfer money or cash checks on behalf of recipients living in the Gaza Strip. The bank's activities are carried out with the knowledge of the relevant authorities." Darshan-Leitner wrote that she was considering petitioning the High Court of Justice, charging that the government was violating the Prohibition of Terrorist Funding Law and the Prohibition against Money Laundering Law.