Palestine Reacts to Boycott of Gaza Banks

By Michael Shachor and Micah Menes, Michael Shachor, Menes & Co

The recently signed anti-money laundering decree was mainly intended to allow the continuation of the flow of funds to the Palestinian banks in the Gaza Strip via Israeli banks. Israel regulates this matter through both the Anti-Laundering law and the Anti-Terror Financing Law and the corresponding authority.

The use of Israeli banks as a pipe to transfer major funds to the Palestinians has stirred much debate in Israel. It has been reported that the Israeli Anti-Laundering Authority is investigating how money funnelled to the Palestine Bank through an Israeli commercial bank ended up with armed forces related to the Hammas organization.

On 19 September 2007, the Israeli government’s security cabinet declared the Gaza Strip a hostile entity. Consequently, money transfers to Gaza are illegal, pursuant to the Israeli Act of Commerce with Enemy Country 1939 (which was originally drawn from English law). Seemingly, and from certain inquiries we have made, the cabinet may have not been aware at the time of the consequences regarding money transfers. Although this declaration has not been published in an official gazette, it has put the Israeli banks in a delicate situation. We have been informed by our connections that the banks are discussing the matter with the government and the security authorities.

According to Israeli anti-laundering regulations, Israeli banks are obliged to report transfers to Palestinian banks. Pursuant to a contemplated amendment, the sum threshold will be reduced to 5,000 Shekels (a little more than US $1,000).

The use of Israeli banks for the transfer of funds to the Palestinians has also been subject to certain legal actions. In a recent judgment, the Tel Aviv District Court cancelled a seizure placed over 36 million New Israeli Shekels. In this specific case the seizure was placed as part of a claim in torts filed against the Palestinian Authority by the relatives of terror victim. Over the past four years, some 70 claims (aggregating billions of Shekels) for damages have been filed in Israel against the Palestinian Authority; over half of them are terror related. Such claims have created concern among the Israeli commercial banks that fear that they may be sued as well.

Michael Shachor, Adv., is a partner in Michael Shachor, Menes & Co. Michael heads the litigation department of the firm and specializes in private international law, with specific concentration in areas of a contractual nature including, agency, franchising, insolvency and receivership, commercial contracts, real estate and administrative disputes and fraud. Contact Details: Tel: + 972 3 608 1797 Email: michaels@Shachorlaw.com

Micah Menes, Adv., is a partner in Michael Shachor, Menes & Co. Micah serves as general counsel to many clients including companies publicly traded on the Tel Aviv and foreign stock exchanges. He advises on both contentious and non-contentious issues in relation to fraud, agency, joint ventures, securities, anti-trust, employment and real estate. Contact Details: Tel: + 972 3 608 1797 Email: micahm@shachorlaw.com