Feb. 25 (Bloomberg) -- Israeli forces raided three Palestinian banks in the West Bank city of Ramallah, seizing cash and financial records of customers with suspected links to terrorism, Israeli and Palestinian officials said.

Forces from the police, army and Shin-Bet security service stormed the headquarters of Cairo-Amman Bank and two branches of Arab Bank Plc, confiscating computer files, paper records and money, said Amin Haddad, chairman of the Palestinian Monetary Authority.

``This act is a violation of all agreements with Israel and the U.S. concerning the Palestinian banking system,'' he said in a statement issued in Ramallah. ``It will spread chaos and deepen the Palestinian economic crisis.''

The banks are suspected of channeling money to terrorists in the West Bank from foreign sources connected to such groups as Hamas, Islamic Jihad and Hezbollah, which are committed to Israel's destruction, the Israeli government said in an e-mail.

``The goal of today's operation is to impede the terrorist organizations' activities and reduce their financial capabilities on the ground,'' the statement said.

At least 17 Palestinians were wounded by Israeli soldiers, who used rubber-coated bullets and tear gas to disperse crowds of stone-throwing Palestinian youths outside the banks, the Palestinian Red Crescent Society rescue service said.

When Israel raided Palestinian banks two years ago, it uncovered records showing that deposed Iraqi President Saddam Hussein sent money to the West Bank and Gaza Strip to reward the families of Palestinian suicide bombers.