CAIRO (AFP) - The Arab League on Saturday urged US President Barack Obamas administration to prevent American associations from collecting funds to finance Israeli settlement building in annexed east Jerusalem. Mohammed Sobeih, a deputy secretary general in charge of Palestinian affairs, told reporters such funding was being used for a hostile and illegal act which stands in the way of reaching a peace deal. Such associations, exempted from taxation, help to finance the building of Israeli settlements in the Old City and other districts of east Jerusalem, according to a report compiled by the Arab Leagues office in Washington. Sobeih said the report showed some of the funds were being used to seize properties from their Palestinian residents and to expel them, singling out the ultra-nationalist American Friends of Ateret Cohanim. Financed by Jewish American millionaire Irving Moskowitz, the charitable trust has been linked to Jewish settlement projects in the occupied West Bank, including east Jerusalem. But it has denied reports that American donations finance the purchase of disputed lands. The Obama administration has been pressing hard for Israel to halt all construction work on occupied Palestinian land ahead of the resumption of Middle East peace talks. Israel has so far balked at the demand. Meanwhile, Irans supreme leader Ayatollah Ali Khamenei on Saturday told the visiting Senegalese President whose nation heads the worlds largest Islamic body to do more for Palestinians, his website reported. The aim of creating the Orgnisation of the Islamic Conference is to follow up the Palestinian issue and therefore the OIC has an important responsibility, Khamenei told Senegals Abdoulaye Wade. Today Palestine is really oppressed and alone and is in need of a calculated move (of support) by the Islamic world, Khamenei said without elaborating. The demand of Muslim nations is to aid Palestine and it is up to the OIC to bring hope to the hearts of the Palestinian people by supporting them, he added. Senegal has held the presidency of the the 57-member OIC since March 2008. Khameneis comments come nearly a month after he denied that Iran-a staunch supporter of the Palestinians-was seeking a military solution to the Middle East conflict. Khamenei then stressed it was a lie... claimed by Western media that Iran is attempting to destroy the Zionist regime (Israel) by military equipment. The Islamic republic has proposed a reasonable, logical and humane plan, the leader said, referring to a proposed referendum to decide on the future of Israel, the Gaza Strip and West Bank. However, after the 1979 Islamic revolution, Tehran withdrew its recognition of Israel. The Jewish state considers the Islamic republic to be its arch-enemy after repeated statements by President Mahmoud Ahmadinejad that the Holocaust was a myth and Israel is doomed to be wiped off the map.