Two major Israeli banks are preparing to end their relationships with Palestinian financial institutions, citing concerns over money laundering, terror financing, and the legal risks involved in continuing to process transactions, Reuters reported.

Israel Discount Bank is expected to sever ties on September 1, while Bank Hapoalim is preparing to do so on October 1, according to Israeli officials. The banks currently operate under government-issued waivers that protect them from potential legal exposure while handling shekel transactions involving Palestinian banks.

The arrangement allows payments for trade, services, and Palestinian Authority salaries to pass through Israel’s banking system. Without those connections, Palestinian banks could effectively be cut off from the Israeli financial system. Discount and Hapoalim process approximately 51 billion shekels, or $16.6 billion, in annual transactions for the Palestinian economy, while roughly 90% of Palestinian trade passes through Israel.

Palestinian Monetary Authority Governor Yahya Shunnar warned that cutting the ties could have serious economic consequences. He maintained that the PA’s anti-money-laundering and counter-terror-financing framework meets international standards, but Israeli banks remain concerned that the current temporary waiver system does not provide a reliable long-term solution.

The existing government waiver remains in effect through the end of the year. Israel’s Finance Ministry said it is working with both banks to preserve necessary banking activity in a safe and responsible manner while protecting Israel’s security and economic interests.

(YWN World Headquarters – NYC)