The Finance Ministry recently initiated legislation that would allow for the continuation of payments to Palestinian banks, including those suspected of laundering money and financing terrorism.
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According to Israeli intelligence and intelligence report, Palestinian banks do not meet international standards on terror financing and money laundering, and Israeli banks have demanded the country's banks end their cooperation with the Palestinian institutions. Bank Hapoalim and Bank Discount have expressed concerns they may face legal action for maintaining ties with Palestinian banks for years.
"There has never been any financial benefit from this activity. In fact, we did the country a favor by continuing this activity to date," one bank official told Israel Hayom. "The exposure was huge, and the risks were massive. You don't want to find yourself in a situation where the money you transferred ends up in a terrorist attack, and then you've gotten yourself in trouble with the Americans."
In order to take on the risk of transferring the funds, the government in 2019 established the governmental firm "Correspondence Services Ltd." Three years after its establishment, however, the company remains inactive, in all likelihood due to those same financial and legal risks faced by Israeli banks.
The government is now initiating a designated law that will apply only to Correspondence Services Ltd. and that would allow Israeli employers to pay their Palestinian workers in a regulated manner instead of in cash.
While the law's explanatory notes assert that "the company will be subject to a ban on money laundering and terror financing," several subsections offer a legal loophole that would exempt the company from accepted norms in the war on terror.
A diplomatic official confirmed to Israel Hayom that the establishment of a designated company and the introduction of the specific legislation were aimed at "providing a solution and protecting against money laundering and terror financing problems inherent in financial ties with the Palestinians."
Lt. Col. (res.) Maurice Hirsch served for 19 years in the IDF Military Advocate General Corps, and now serves as the head of legal strategy at the nongovernmental organization Palestinian Media Watch.
According to Hirsch, "The Palestinian banks are full partners to the terror financing, and among other things, hold accounts and provide services to a designated terrorist organization like Hamas, the Popular Front [for the Liberation of Palestine], and the Palestinian National Fund. Instead of demanding the Palestinian Authority abide by its commitments to fight terror, the Israeli government proposes we fold and legislate a law the significance of which would be the provision of banking services, knowingly, to terrorist organizations. Regrettably, this is just one aspect of the security system and the Israeli government's disregard for the support for terrorism rampant in the PA."
Nitsana Darshan-Leitner, the president of the Shurat Hadin – Israel Law Center that fights to prevent terror financing, also blasted the initiative.
She said: "The State of Israel was a pioneer in the war on Palestinian terror financing, and now that the entire world recognizes that Palestinian banks are dangerous due to their terror ties, the State of Israel is the one paving the bypass lane to legalize the transfer of funds to Hamas and payments to [security] prisoners. How can the State of Israel continue to demand the world fight the transfer of funds to Hamas or funds to prisoners when she herself allows their transfer?"
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