A conservative nonprofit organization, Hashomer Yosh (Hashomer Yehuda VeShomron), criticized Finance Minister Bezalel Smotrich on Tuesday over new Bank of Israel guidance on how banks may handle customers in the West Bank who appear on foreign sanctions lists, according to the group’s statement.
The dispute follows a recent directive from the Bank of Israel intended to clarify when banks may limit services, and when they must continue providing them, to customers whose names appear on sanctions lists issued by other countries. The group argues the policy effectively enables Israeli banks to act on foreign restrictions against Israeli citizens.
What Bank of Israel directive says
Under the directive, banks are not supposed to refuse service automatically solely because a customer appears on a foreign sanctions list. Instead, each case is to be reviewed individually, including legal, financial, and reputational considerations, and potential concerns related to money laundering or terror financing.
The directive also requires banks to provide a written explanation when restricting services, including what is being limited and what documentation may be needed. The Bank of Israel also provides legal backing for banks that can show they followed the prescribed process and based decisions on a substantive assessment.
Why the issue is sparking backlash
Hashomer Yosh, which the report said is itself on sanctions lists, claimed the directive functions as legal protection for banks that choose to refuse to open accounts, restrict activity, or end relationships with Israelis targeted by foreign measures. The group said this undermines what it called a basic right to access banking services in Israel.
Shabtai Koshlovsky, the organization’s CEO, accused the government of allowing foreign policy decisions to be implemented through Israel’s banking system. He argued that Israeli institutions should not impose what he described as economic punishment without Israeli legal process.
Protest and government response
The organization called on the government and the finance minister to present an immediate solution to guarantee basic banking services for sanctioned Israelis, and to create legal protections against foreign actions. It also urged the public to attend a protest scheduled for Monday at 7 p.m. outside the British Embassy in Tel Aviv, according to the report.
In a statement, the Finance Ministry said Smotrich rejects what it called illegitimate political sanctions on Israeli citizens and opposes the banks’ approach on the issue. The ministry added that under current law, authority over bank directives lies with the Supervisor of Banks, not the finance minister, and said legislation is being advanced by MK Zvi Sukkot that would require banks to compensate customers harmed by such restrictions.