Israel orders local banks not to comply with EU sanctions on settlers

The finance minister warned that he could propose legislation forcing banks to pay compensation to those affected.

By Batya Jerenberg, World Israel News

Finance Minister Bezalel Smotrich told the Bank of Israel (BOI) Wednesday to order the banking institutions in the country not to comply with proposed  sanctions by European nations against individual Israelis living in Judea and Samaria.

“Following reports of intentions of EU countries to impose personal sanctions on Israeli citizens living in Judea and Samaria, the continuation of the ‘zero risk’ policy by banks, which leads to the abandonment of Israeli customers under the guise of compliance with foreign sanctions, will not be allowed,” Smotrich wrote to Banking Supervisor Danny Khachiashvili.

Some two weeks ago, the UK announced sanctions against three Israeli citizens, including veteran settler activist Daniella Weiss, for allegedly “threatening, perpetrating, promoting and supporting acts of aggression and violence against Palestinian individuals” in Judea and Samaria.

Weiss heads the Nachala organization, which promotes Jewish settlement in the disputed territory. Nachala would also be sanctioned along with another company, Libi Construction and Infrastructure, because they allegedly “provided logistical and financial support for the establishment of illegal outposts resulting in the forced displacement of Palestinians.”

Sanctions include asset freezes and a travel ban.

Other settlers accused of perpetrating violence in Judea and Samaria were similarly sanctioned by the U.S. under the Biden administration, followed by the EU, although none of these individuals had been convicted of such offenses in any court of law.

This was not acceptable to Smotrich, who heads the Religious Zionism party, which is most identified with the settler movement.

If the banks comply with such sanctions “and seriously harm their customers,” he wrote, “I intend to immediately promote legislation that will impose high compensation payments on the banks” to those affected.

The legislation would also include requiring the BOI “to open and manage bank accounts for citizens on whom sanctions will be imposed in a way that will put them in the same place they were before the sanctions were imposed on them,” he wrote.

The banks have the money and power to fight back, the finance minister insisted, and should be willing to “take measured risks for the sake of their customers – certainly when it comes to a national moral injustice.”

Smotrich suggested that the financial institutions use some of their profits to file lawsuits in Europe, adding that “they can use their global economic ties to enlist partners in opposing the criminalization of political disputes and harm to law-abiding citizens.”

In response, the BOI stated, “The banking system’s compliance with accepted international standards is essential for maintaining its international standing and therefore for the entire Israeli economy.”

Its Supervision Department, it said, would soon publish “a draft directive…that balances the need to protect the rights of customers who have been subject to sanctions and the obligation to adhere to accepted international standards,” emphasizing that “the solution to the issue should come from the political level.”

Smotrich’s critics immediately called his letter an unprecedented attempt to interfere with the legal independence of the Bank of Israel.