In an unprecedented move, the government has issued blanket guarantees for Israeli banks that work with the Palestinian Authority, promising to pick up the tab if they are sued for facilitating terrorism. According to Haaretz, the Security Cabinet made the decision after Israeli banks threatened to stop supplying the PA with financial services, out of fear that the move would cripple the PA’s economy.
Around the world, a trend has developed in which victims of terrorism are suing financial institutions that facilitate the conduct of terror attacks, by allowing terror groups to funnel money for the funding of attacks and the payment of operatives. Fearing such lawsuits, banks have begun checking into the provenance of suspicious account holders, and have been closing down those accounts.
Israeli banks as well have begun cutting ties with Palestinian Authority customers whom they suspect of ties to terror – or, more importantly, whom they suspect they could be held liable in Israeli or international courts for doing business with. According to the 1994 Paris Accords, which regulate financial relations between Israel and the PA, Israeli banks provide the PA with services like credit-card processing, international payment transfers, and acting as third-party guarantors for loans from international governments and organizations. Halting those services could halt the PA’s economy altogether.
To prevent that, the government has decided to act as the guarantor for Israeli banks against lawsuits that could develop as a result of this activity. The protection will include preventing legal action against the banks in Israeli courts, as well as full legal backing in international courts. The deal will be in effect for two years, during which time another framework will be developed that will relieve the banks of the burden of handling PA financial affairs.
The PA is cooperating with Israel on this matter, according to government officials. The PA’s top official in charge of banking has provided Israel with an official guarantee that the Authority will work to ensure that PA banks operate at international standards, especially in regard to money laundering and terror funding.
A government official was quoted in Haaretz as saying that while the guarantees for the banks, which are private organizations, are indeed unprecedented, they were appropriate, since the banks offering the services – mainly Hapoalim and Israel Discount Bank – did so at the request of the government, and did not earn money on the PA transactions. Much of the PA’s money has been coming in the form of loans and donations from the United States, and American officials involved in those transfers have approved the deal as well, cabinet members were told.