GAZA CITY, Gaza Strip — The Palestinian Monetary Authority (PMA) and Bank of Israel agreed on a new mechanism to facilitate Palestinian bank transactions with Israeli banks. PMA Gov. Azzam al-Shawa announced the news in a statement published by WAFA, the official Palestinian news agency, on Oct. 24.
Under this mechanism, an Israeli state-owned body would be established in order to serve as a substitute for the Israel Discount Bank and Bank Hapoalim in dealing with Palestinian banks.
In the absence of a Palestinian national currency, Palestinian economic processes depend mainly on the Israeli currency, the shekel. The US dollar and the Jordanian dinar are also used.
Since the Paris Protocol on Economic Relations signed between the Palestinian Authority (PA) and Israel in 1994, Israel is responsible for supplying Palestinian banks with banking services through Israel Discount Bank and Bank Hapoalim.
These two banks act as go-between entities processing Palestinian bank transfers between the Palestinian territories and other countries and also between the Gaza Strip and the West Bank. The Israeli banks supply the PA with services such as credit-card processing, clearing checks and transfers of shekel banknotes.
Shawa’s statement explained that the new mechanism aims to facilitate approval of checks and wire transfers from banks operating in the Palestinian territories.
Palestinian traders, importers of goods and those working in Israel will benefit from the recently reached agreement. Israel imposes restrictions on Palestinian bank transfers, and financial transfers are often delayed or rejected. Clear details are needed on the purpose and recipient of the transferred amounts.
A senior source at the PMA spoke to Al-Monitor on condition of anonymity. He said, “The two Israeli banks impose restrictions on some branches of banks in Palestine that unknowingly or intentionally carry out bank transfers between the Palestinian territories and other countries, and to and from Palestinian resistance factions such as Hamas and Islamic Jihad.”
The source clarified that the Israeli banks would delay or refuse the processing of such bank transfers.
However, these restrictions are not limited to suspicious transfers, but also affect sound financial bank transfers. This includes the transfers made by Palestinian traders and Palestinian workers in Israel within the scope of their commercial and business activities.
“The two Israeli banks impose tight restrictions on all Palestinian bank transfers, whether suspicious or not,” the source said. “They fear getting embroiled in lawsuits in Israel and abroad on counts of transferring funds to and from Palestinian resistance movements.”
Bank Hapoalim and Israel Discount Bank had called on Israel’s government in February 2016 to exempt them from dealing with transfers made by Palestinian banks. They cited the risk entailed from these transfers of facing terrorism financing and money laundering suits both in Israel and abroad.
In January 2017, the Israeli government decided to grant the banks a two-year immunity period from such lawsuits.
In August 2014, around 300 US citizens from among the families of victims killed in military operations by Palestinian resistance factions in Israel and the Palestinian territories between 1995 and 2005 filed lawsuits before the Brooklyn federal court against Arab Bank Plc. The Jordanian bank — based in Amman and operating in Palestine — was accused of financing terrorism and providing banking services to Palestinian resistance movements such as Hamas and Islamic Jihad.
The lawsuits were filed under the US Anti-Terrorism Act allowing victims of foreign entities classified as terrorist organizations by the United States to claim compensation.
On Sept. 22, 2014, the US court convicted the Arab Bank of the charges. The bank appealed the verdict before the US Court of Appeals in Manhattan. On Feb. 9, 2018, the verdict was repealed and settlements of undisclosed amounts were reached with the plaintiffs. The case was dropped.
The PMA source noted that the new mechanism, which will be implemented by early next year, will end the commitment of these two banks to deal with Palestinian bank transfers. This responsibility will be assumed by an Israeli government body.
However, economic expert and editor-in-chief of local Al-Iqtisady newspaper Mohammed Abu Jiyab contended that the new mechanism is a positive change for Palestinian traders and Palestinians working in Israel. “It will facilitate the completion of safe bank transfers quickly and without restrictions,” he said. “Because of these restrictions, Palestinian traders face great difficulty in transferring their funds from and to the Gaza Strip, the West Bank and overseas.”
He added, “The two Israeli banks impose tight precautionary security measures. They require a proper justification for any transfer. They also demand to attach to the transfer request the tax invoices and documents on the recipient’s identity. This process causes certain transfers to be delayed or rejected.”
Abu Jiyab pointed out that the new mechanism will set apart bank transfers of Palestinian traders and workers in Israel. “This category will be exempted from security measures. This will make processing these transactions easier and faster, which is in the best interest of the Palestinian economy.”
Palestinians who work in Israel are a major contributor to the Palestinian economy. According to the latest statistics published Aug. 7 by the Palestinian Central Bureau of Statistics, “the number of individuals employed in Israel and Israeli settlements was 125,600.”
Abu Jiyab argued that the new mechanism is part of Israel's policy of preventing the collapse of the Palestinian economy aimed to ease Palestinian hostility toward it. “This is why Israel has been employing Palestinian workers and facilitating their bank and commercial transactions,” he added.
Meanwhile, the new mechanism of managing the banking system in the Palestinian territories has annoyed Hamas. In a statement published Oct. 25 by Felesteen Online, Hamas leader Abdul Hakim Henini denounced the mechanism as a “stab in the back of the Palestinians.”
Henini said that this would worsen the siege imposed on the Palestinian people, arguing that the new mechanism undermines “all attempts by our good people and nation to provide a helping hand to our people in Palestine.”
Atef Adwan, head of the Economy Committee in the Palestinian Legislative Council, told Al-Monitor, “The agreement on the new mechanism is part of the PA's efforts to dry up all the sources of money that could revert to the Gaza Strip outside the PA’s supervision.”
He said, “The transfer of responsibility for dealing with Palestinian bank transfers from Israeli banks to an Israeli government body may exempt traders’ transactions from the Israeli restrictions on the Palestinian banking system. However, this body may tighten these restrictions on transfers made to Gaza from charitable organizations from around the world for the purpose of providing relief to the enclave’s population.”
In a statement Oct. 16, the Palestinian government denied access of any aid to Gaza without prior coordination with the PA. It claimed the continued entry of funds to the Gaza Strip would strengthen the rule of Hamas and deepen the Palestinian division.