Israeli Finance Minister Reminds Banking Not To Comply With European Union Sanctions To Settlements

EU/ILLUSTRATION Flag UNSPLASH/Guillaume Périgois

JAKARTA - Israeli Finance Minister Bezalel Smotrich on Thursday criticized banks in the country for refusing to provide services to Israeli settlers sanctioned by the European Union.

Smotrich warned the bank might have to pay compensation to settlers.

Last year, the European Union imposed sanctions on five Israeli settlers for violence against Palestinians and Smotrich said there were reports of sanctions being considered against other settlers.

But in his letter to banking watchdogs, he said Israeli banks should not follow the "zero risk" policy as the policy led to the neglect of Israeli clients "under the guise of compliance with foreign sanctions."

In a statement citing his letter to regulators, Smotrich asked banks to use their legal, economic and international powers to counter "unfair sanctions".

"The huge profits of banks allow them to take measurable risks on behalf of their clients especially when it comes to national moral injustice," Smotrich said.

If banks continue to comply with sanctions and harm clients, Smotrich says he intends to immediately file a law requiring banks to pay large compensation to affected customers.

Minister of Finance Smotrich also intends to ask Bank Israel itself to offer banking services to citizens who are subjected to sanctions.

In response to the letter, Bank Israel said that although banks must comply with international sanctions to avoid various risks, the draft directives published on Thursday aim to ensure appropriate banking services are available to affected customers.

"Avoiding regimes of foreign sanctions through the Israeli banking system put banking companies at various risks, including risk of compliance, anti-money laundering risks and anti-terror funding, legal risks, and reputational risks," the central bank said.

However, the bank said it had taken steps to comply with sanctions "without the bank having to refuse to serve the customer."

Although the sanctions in question concern Israeli settlers, the EU is reviewing its extensive pact governing its political and economic ties with Israel in the face of growing international pressure on Israel amid complaints about the lack of humanitarian aid to reach Gaza after the war sparked by the Hamas attack on October 7, 2023.