The Bank of Palestine has refused a request from Israel’s Finance Ministry to close 3,400 accounts reportedly used to distribute payments to released terrorists, two sources familiar with the matter told The Jerusalem Post on Friday.
The revelation emerged during a meeting of the security cabinet on Thursday. The accounts are linked to the PA’s controversial “pay-for-slay” program, which provides monthly stipends to Palestinians who were imprisoned for carrying out terrorist attacks, as well as to the families of those killed during such acts.
According to the sources, Israeli authorities had previously submitted an explicit demand to shut down the accounts. In contrast to a similar case several months ago, when the bank agreed to close 1,700 accounts in the West Bank and Gaza Strip, the bank’s management this time responded that it was “unable to act.” The prevailing assessment is that senior PA officials instructed the bank not to comply.
The Finance Ministry identified the accounts and warned the bank that failure to close them could prompt Finance Minister Bezalel Smotrich to block Israeli banks from continuing to act as correspondent banks for the Bank of Palestine.
Correspondent banks, such as Israel’s Discount Bank and Bank Hapoalim, provide services that allow the Palestinian banking system to conduct international transactions. Because Palestinian banks lack foreign branches, these Israeli institutions act as intermediaries. The State of Israel indemnifies the Israeli banks in the event that their services facilitate money laundering or the financing of terrorism.
Should the indemnification be revoked and intermediary banking ties severed, financial officials warn that the PA could face severe economic consequences, potentially even a collapse.
Finance Ministry aims to shut off pay-for-slay accounts
In June 2025, Smotrich announced the cancellation of the indemnification amid what he described as an international delegitimization campaign led by the PA against Israel.
“Against the backdrop of the delegitimization campaign... I instructed the Accountant-General to cancel the indemnification provided to correspondent banks vis-à-vis banks operating in Palestinian Authority territories,” Smotrich said at the time.
However, the move was ultimately postponed following pressure from international partners, including the United States.
Now, with the Bank of Palestine continuing to serve as a conduit for terrorist payments, the issue has returned to the cabinet’s agenda. According to reports, senior US officials have privately warned PA leaders that the continuation of such payments could trigger the imposition of personal sanctions on top Palestinian officials.
The security cabinet is expected to hold another meeting on the issue on Sunday, during which decisions may be taken regarding the future of Israel’s financial cooperation with Palestinian banks.