The Palestinian Authority's economic deadlock: "Officials fear being implicated in terror financing"
Discount and Hapoalim banks have announced they will cease providing services to the Palestinian Authority, but the state-owned company intended to replace them has not yet been established. As learned, there is significant difficulty in staffing the board of directors due to fears of legal and international exposure regarding the Palestinian banking system's alleged involvement in terror financing and money laundering.
The state is failing to appoint a board of directors for the state-owned company tasked with providing banking services to the Palestinian Authority. Government officials are refusing to serve on the board due to the risks involved in working with entities that allegedly refuse to take adequate measures against terror financing and money laundering.
As previously reported, Discount and Hapoalim banks recently announced they would stop providing services to the Palestinian Authority, demanding that the state fulfill its commitment to establish a state-owned company to step into their place. This move poses a real economic threat to the Palestinian Authority, which has warned of a potential economic collapse. The establishment of the state-owned correspondent banking company has been delayed for a long time.
As revealed, the 2017 cabinet decision to establish this company was conditioned on the Authority taking steps to prevent actions related to terror financing and money laundering—conditions that remain unmet. At this stage, the Authority is conducting a political campaign against Israel, blaming it for the impending collapse.
It has been learned that the establishment of the state-owned company is further blocked because no officials in Israel are willing to serve as board members due to the risk of personal legal entanglement. A source familiar with the matter explained that the high personal risk, combined with legal and international exposure, makes the role untenable. This activity is defined as problematic by international standards due to the involvement of the Palestinian Authority and its banking system in terror financing.
"It was clear to me that in any case, I am a director only until the system goes live. Afterwards, I was not willing to take the risk. Even though it is a state-owned company, the exposure to risk in the private and international market is high," said one board member who recently left the company.
He added that the Authority's choice not to reduce the involvement of its banking system in terror financing puts every official in this company at real risk.
The inability to fill the board ranks compounds the existing difficulties. The change in policy by Discount and Hapoalim banks followed revelations by Finance Minister Bezalel Smotrich regarding the deep involvement of Palestinian banks in terror financing. Smotrich utilized intelligence agencies to gather findings, which were subsequently shared with international bodies, while insisting that the PA take concrete steps to halt such activities. To date, the Authority continues to complain without correcting the situation.
