Civil Case (Tel Aviv) 34153-02-24 Al-Aqsa Association for the Development of Islamic Endowment Assets v. Bank Leumi Le-Israel Ltd.

Judgment

I have before me an action for an injunction ordering the cancellation of the defendant's decision ("Bank Leumi" or "the Bank") to cease the plaintiff's activity ("Al-Aqsa" or "the association") in his account due to concerns about activity relating to money laundering or terrorist financing.

Background

1. The plaintiff is an association that was incorporated in 1991. Among its goals are: assistance to organizations active in the development of Islamic endowment assets, maintenance and development of Muslim holy sites in Israel, and charity.  A significant part of its activity is expressed in organizing transportation from around the country to the holy sites of Islam in Jerusalem and humanitarian aid in kind (not in money) for the needy in East Jerusalem (food baskets, meals to break the fast during Ramadan, winter supplies, and more).  The Association's account is managed by the bank as of September 20, 2000.  The balance of the credit in it generally does not exceed ILS 100,000.  The association does not have an additional bank account.
2. The days were the days of war after the horrors of October 2023. On November 13, 2023, the bank contacted the association in a letter informing it of its decision to immediately block the deposit of cash in its account in light of a significant and unexplained increase in its activity, which included cash deposits, and demanded satisfactory explanations for the nature of the activity.  The bank noted that its decision was based on information from external sources and media publications from which it learned about a criminal investigation that had been opened and the sums of money confiscated as part of it.
3. On November 27, 2023, the association responded to the bank's request. It approved an increase in the financial activity in the account due to an increase in the volume of donations, including cash (about 30% increase in the past three years, when about 60% of the rate of donations was in cash, and at that time it was about 50% of the rate of donations to the association).  She claimed that the increase was due to improvements in the organization's staff and its conduct, including the recruitment of new employees and marketing activities; all donations originated in Israel, from Israeli citizens, in small amounts, and against receipts legally; the activity in the account is carried out transparently, to known beneficiaries and targets backed by references; no investigation has ever been opened against it; the allegations of confiscation of funds relate to a one-time event from 2015 in which on July 8, 2015, a total of ILS 144,750 donated to the association was confiscated from Aman Palestin In May 2015, even before the donor association was declared an unauthorized association by the Ministry of Defense (the announcement was made on June 3, 2015); The Ministry of Defense did not take any further step other than confiscating the funds; The bank did not specify its sources of information and the information was not presented to the association.  The association requested that the account activity be restored to normal and expressed its willingness to be at the bank's disposal for any inquiry.
4. On December 27, 2023, the bank sent another letter in which it announced that after an in-depth discussion of the association's application, it had been decided not to approve the cash deposit on the grounds that it did not comply with its risk management policy. The bank required the association to respond within seven days to specific questions: whether it employs or employs Mr. Ihab Gilad ("Gilad"); If it is aware of irregularities mentioned in the article in "Globes" dated October 28, 2022 (details of which are below); If it has joint activity with the Islamic Association for Orphans and the Needy ("Association 48"), including transfers of sums of money or accounting between the associations; and if any of its members and employees are connected or were connected to the association 48.  They were also asked about the donations: who are the donors to the association; how they were contacted; What checks were made about them and the sources of their money; If the donations are received from residents of Israel or abroad, including Gaza and the Palestinian Authority; what are the donation amounts; how the donation is actually made; If the donors donate cash; and if the donations are reflected in the association's financial statements.
5. The Ottoman Settlement [Old Version] 1916On January 2, 2024, the association replied that the information against it had been disseminated by right-wing organizations. This is false information that was carried out as part of a smear campaign against the Administrative Appeals Authority party following its joining the coalition in 2021.  The publications tried to weave a story according to which the Administrative Appeals Authority supports and finances terrorism through various associations, including the NGO Dana; the allegations were examined by the police, which did not open an investigation; the allegations were even rejected by the Attorney General and the Shin Bet as part of a request to disqualify the list of the Administrative Appeals Authority from running in the elections; there are no irregularities in the conduct of the NGO and it receives a certificate of proper management from the NGO Registrar every year; there are no transfers of funds between NGO and NGO 48, only cooperation in humanitarian projects; The only connection that exists is that the member of the committee, Mr. Samer Badawi, is employed by the association 48 as a human resources consultant, and the member of the audit committee, Muhammad Freig, is employed there as a graphic artist; Gilad is not employed by the association but volunteered to give a lecture as a tour guide and expert on Jerusalem, and he is not a terrorist activist.  His sentence was handed down in 2012 and since then, to the best of her knowledge, he has been a normative citizen.  The association emphasized that the donations are received by bank transfers, standing orders and cash.  Cash donations are accepted only from Israeli citizens, and the organization does not have donations from residents of the Palestinian Authority, Gaza or abroad.  The donor is issued a receipt in his name.  Some of the donations are collected in mosques and charitable funds in small sums ranging from ILS 1 to ILS 200, against which receipts are given for the total amount in the fund in the name of the mosque; The association does not examine or investigate the source of the donors' funds since these are small sums; All donations are documented in receipts and reported in the association's financial report; No investigation was opened and no criminal proceedings were taken against the association.  The bank was again asked to restore the activity in the account to a normal track, including cash deposits for the purpose of paying checks to suppliers and providing salaries to employees.

12-34-56-78 Chekhov v.  State of Israel, P.D.  51 (2)

6. On January 16, 2024, the bank announced that it had decided to block the association's account for all activity thirty days after its decision. The bank explained this in its risk policy against the background of regulatory guidelines that bind it, especially in times of war, and in light of the association's conduct, which is expressed in depositing large amounts of cash without knowing the identity of the donors; maintaining ties with the 48 association, which is allegedly suspected of financing terrorism through the employment of joint employees; the employment (voluntary) of an employee who has been convicted of security offenses in the past; There was no adequate response to the irregularities attributed to her, among other things, in newspaper articles; The association did not provide details, information, references or answers to the questions asked.
7. On January 31, 2024, the association sent another letter to the bank in which it stated that it was surprised by its decision to block the account. She argued that the decision was extreme, unreasonable, disproportionate, and based on general arguments without giving her a proper opportunity to respond.  The association once again emphasized that its activities are completely normal, open and lawfully reported to the law authorities; has rejected any business or financial relationship with Association 48; the claim that the employment of two of its members in junior positions does not make them partners in the activity; An investigation revealed that 48 was never suspected or interrogated of terror financing; stressed that she had never employed a person convicted of terrorist activity, and that there was nothing wrong with Gilad's voluntary participation in one or two events; The judgment in the case of Al-Rahimon (Civil Case (Tel Aviv District) 63381-11-23 Al-Rahhimon v.  Bank Leumi Le-Israel in Tax Appeal (December 18, 2023)) deals with a different situation, since there we were talking about an association whose main activity was outside of Israel and with foreign suppliers.  As for the cash deposit: the association noted that each deposit was collected by lawful receipt for the donation, the donor's identity is known and reported to the authorities; The association is willing to present the receipts to the bank and reach any arrangement, including reducing the cash amounts or providing references regarding the identity of the donor.  The association cannot comment on publications that were not presented to it.  The association reiterated its request to meet personally with the bank's representatives and with the party that decided to block the account in order to present all the accounting reports and the required references, thus removing any concerns.  She requested that the decision to temporarily block the account be delayed until the investigation is completed and an opportunity to turn to the courts if necessary.
8. Copied from NevoOn February 4, 2024, an email was sent by the bank in which he asked to speak with the association's representative the next day. On February 5, 2024, a conversation took place between the bank's representatives and the association's attorney, another legal advisor and its accountant.  According to the association, in the conversation, the association's representatives proposed reaching various arrangements, which are less harmful, as well as freezing the 30-day count for blocking the account allotted in the letter on January 16, 2024.  The bank refused.  On February 6, 2024, the bank sent an email requesting additional information only for the two articles mentioned in the letter sent to the association.
9. On February 7, 2024, a final letter was sent to the bank by the association's representative. The association referred to two specific articles: one about Gilad's employment and the other dealing with financial irregularities.  The association clarified once again that Gilad is not employed by it in any way, but rather participated voluntarily as a guest lecturer in some of the course sessions for instructors in 2021.  The association claimed that it was not aware of his criminal record, and noted that he was a normative citizen and had a tour guide license from the Ministry of Tourism.  Regarding the financial irregularities detailed in the "Globes" article, the association confirmed that there is a gap between its marketing publications and the official financial statements for the years 2017-2019, but explained that this gap stems from the fact that the publications also include indirect activity - referring donors to finance direct transportation to transportation companies, which are not included in its financial statements.  The association emphasized that this is not an attempt to launder money or conceal funds.  The organization reiterated that it has no financial ties or accountability between it and NGO 48, but only cooperation in humanitarian projects.  She stressed that she has been acting lawfully for more than 33 years, and that the blocking of her account will lead to her elimination.  She again asked to discuss an agreed outline of activity that would neutralize the bank's concerns, including limiting cash amounts.  The letter was not answered.
10. On February 15, 2024, after receiving no response to its last letter, and before the end of the bank's thirty days' notice, the association filed the lawsuit together with a request for a temporary injunction to instruct the bank to refrain from blocking the account until the claim is decided, or alternatively, to prevent a sweeping blocking of the account and allow the blocking of specific actions only.
11. On February 18, 2024, the bank blocked the plaintiff's account for all activity.

The course of the litigation

12. On February 29, 2024, a hearing was held on the request for temporary relief. I proposed to the parties to agree that the association should be allowed to provide the bank with supplementary affidavits together with references in an attempt to appease its opinion regarding those "red flags" that flew, according to the bank, over the conduct of the association that aroused its concern about carrying out activities related to money laundering or terrorist financing, and therefore ordered the blocking of activity in the account.  After the affidavits are submitted, the bank will make a new decision, and if the closure of the account remains in place, an amended request for temporary relief will be submitted.  The parties agreed and a decision was given effect.
13. The parties acted as agreed. The association provided the bank with supplementary affidavits and references; The bank examined the material; and on March 27, 2024, he decided to leave the account unblocked in a reasoned letter.  Against this background, an amended request for temporary relief was filed.  A response was requested, a response to the response was held, and a discussion was held (on May 6, 2024) in which one of the two declarants of the association, Yazid Jaber, its administrative director, was interrogated.  Afterwards, oral arguments were summed up.
14. On May 9, 2025, a decision was made on a request for temporary relief. The decision included a detailed analysis of all the evidence presented at that stage: the bank's claims in relation to them, and the association's response.  This was done, as may be recalled, after the association was given the opportunity to complete an argument while the litigation was underway, and the bank made a new decision.  Therefore, at that stage, the factual basis that stood before the bank's eyes was relatively broad, since the association had a clear interest in appeasing its opinion, and therefore the disclosure it gave it in response to his concerns was very broad.  Since the determinations made in that decision, even though they were prima facie as of that stage, remained essentially in place, I will detail those determinations in detail below, and then discuss the changes that occurred in the factual basis at the stage of the final judgment, after hearing evidence.  Before I do so, however, I will preface a review of the normative basis necessary for a decision.

The Normative Infrastructure

15. Section 2(a) ofthe Banking (Customer Service) Law, 5741-1981 imposes a duty on a banking corporation not to refuse an "unreasonable refusal" to provide essential banking services, including opening and managing a current account. This obligation is derived from the necessity of the services provided by banking corporations to the general public and the business sector - essential services for the modern economy such as the payment of wages, payments by bank transfer, and the provision of credit.  It also stems from the monopoly granted by the legislature to the banks in the provision of these services, and the power inherent in denying them (Civil Appeal Authority 6582/15 Emaar Association for Economic Development and Growth v.  Israel Postal Company Ltd., para.  13 (November 1, 2015); Civil Appeal Authority 2407/19 Ziv v.  Bank Leumi Le-Israel, para.  15 (May 14, 2019); Civil Appeal 3794/18 Toledano v.  First International Bank of Israel Ltd., para.  18 (October 2, 2019); Civil Appeal Authority 9065/23   A.  Top Investments in Tax Appeal v.  Mercantile Discount Bank Ltd., para.  33 (January 3, 2024)).
16. As stated, the obligation of a banking corporation to provide a service is not an absolute obligation, and the law permits it to refuse to provide a service, provided that the refusal is reasonable. The list of cases in which the refusal will be considered reasonable is not a closed list, and its content is drawn from a number of normative sources.
17. The first normative source is the provisions of the law that permit or obligate a bank not to provide banking services if there is a substantial and real concern of money laundering, including the Prohibition of Money Laundering Law, 5760-2000 and their details in the Prohibition of Money Laundering Order (Obligations to Identify, Report, and Maintain Records of Banking Corporations for the Prevention of Money Laundering and Terrorist Financing), 5761-2001. Sections 2 and 2A of the Order require banks to conduct procedures for identification, registration, and acquaintance with customers in order to detect unusual activity in the account; Sections 8 and 9 of the Order require that they report to the competent authorities any unusual activity that may raise suspicions of improper activity, including large cash transactions and significant money transfers between Israel and Israel.  The second addendum to the order specifies actions that may be considered "unusual", including activity that appears to have no business or economic logic according to the type of account (section 6); The transaction in the account is not typical of the account holder or the type of account for no apparent reason (section 10); and an unusual scope of actions for no apparent reason (section 11).  This law imposes on the bank a public, administrative, and even enforcement role in the fight against money laundering and terrorist financing (the Emar case, para.  15; the Toledano case, para.  26; the Top Investments case, para.  38; Civil Appeals Authority 1052/24 Mizrahi-Tefahot Bank inTax Appeal v.  ZAKA - Finding and Rescue, para.  16 (April 2, 2024); Opening Motion (Hai District) 9761-03-20 Kobi v.  Bank Leumi Le-Israel Ltd., para.  28 (April 22, 2021); Ricardo Ben Uliel and Liran Haim Banking Law: General Part 1 Volume 169 (2nd Edition 2021)).
18. A second normative source that obligates the bank not to provide service are the instructions of the Supervisor of Banks published by virtue of his authority under section 5(c1) of the Banking Ordinance, 1941. Proper Conduct of Banking Conduct Directive No. 411, entitled "Risk Management of the Prohibition of Money Laundering and Prohibition of Terrorist Financing" ("Procedure 411"), instructs banking corporations to conduct a "know-your-customer" process while assessing various risk variables, according to a "risk-based approach".  When customers are classified as high-risk, the banking corporation is required to take increased steps to manage and mitigate the risk.  These steps include gathering additional information about the client, clarifying the source of funds and wealth, receiving explanations of unusual actions, and conducting ongoing and in-depth monitoring of the account.  Among the risk variables that the bank must examine include: whether the customer's business is rich in cash or if he engages in "high-risk activity" according to the definition of the procedure.  A banking corporation is required to monitor the activity of its customers once a year, and to examine whether it is consistent with the customer's character according to his acquaintance with him, and to check whether there is business or economic logic in complex or unusual actions (sections 23(b), 28(e), 29, 30, 31, 32, of the Procedure).  Section 50 of the Procedure states that the bank's refusal to provide service to a customer will be considered a reasonable refusal if one or more of the following conditions are met: "a) The customer's failure to provide details required to fulfill the provisions of the order, this provision, as well as the policies and procedures of the banking corporation determined pursuant to them; (b) a reasonable basis for concern that an action is related to money laundering or terrorist financing; (c) The execution of the 'Know the Customer Procedure' will lead to a violation of the prohibition set forth in section 12 of the Order" (Top Investments, paragraphs 39-41; Opening Stimulus (Tel Aviv District) 262-04-17 Toiga Online in Tax Appeal v.  Mizrahi Tefahot Bank Ltd., paragraphs 19-21 (December 6, 2018)).
19. Provision 308 of the Supervisor of Banks' Directives, entitled "Compliance and the Compliance Function in the Banking Corporation", imposes a duty on banks to ensure compliance with legislative and regulatory provisions during the conduct of their business in order to prevent compliance risks. Failure to comply with these provisions may expose the Bank to significant compliance risks, including legal or regulatory sanctions, financial losses, reputational damage, and reputational damage (Sections 1-2, 4 of the Procedure; Appendix 23 to the statement of defense).
20. In its statement of defense (Appendix 24) and affidavits (Appendix 27), the Bank referred to a publication by the Money Laundering and Terrorist Financing Prohibition Authority entitled "Red Flags in the Provision of Business Service" dated September 2, 2015, which is intended to assist business service providers in identifying the activity of customers at high risk of money laundering or terrorist financing. The document specifies various "red flags" in relation to the customer, the source, the destination of the funds, and the types of business service provided.  These include, but are not limited to, the client's clandestine or evasive behavior; attempts to conceal identity or source of funds; ties to criminal activity; Offering exceptional fees; or a discrepancy between the declared activity and the actual conduct.  The document emphasizes that the existence of a single red flag does not necessarily indicate a risk if there is a satisfactory explanation, but the multiplicity of such flags raises concern.
21. Following the atrocities of October 2023 and the war that ensued, the Money Laundering Prohibition Authority published a global warning document for financial institutions abroad on the prevention of terrorism by Hamas and other terrorist organizations (Appendix 24 to the Bank's affidavits). The document calls on regulated financial institutions around the world to increase their vigilance and enforcement and monitoring activities to prevent Hamas and Palestinian Islamic Jihad's terror financing campaigns under the guise of fundraising for humanitarian aid.  The document listed red flags, including contact with entities connected to a non-profit organization that had known past or present ties to terrorist organizations or terrorist financing activity (Civil Case (Tel Aviv District) 62654-11-23 The Islamic Association for Orphans and the Needy v.  Bank Leumi Le-Israel Ltd., para.  34 (April 9, 2024)).
22. Another document published by the Countering Terrorist Financing Task Force calls for increased financial intelligence detection capabilities in all matters related to terrorist financing, and for strengthening working relations between various authorities in this regard.
23. The courts have ruled that a refusal to provide a service will be considered reasonable in cases of inappropriate or negligent behavior on the part of the customer in the management of his account that may cause harm to the bank or the public; specific behavior of the account holder and his attitude toward the bank's clerks, including unfair, aggressive and violent behavior; or a substantial crisis of trust between the bank and the customer (the Eammar case, para. 14; High Court of Justice 8886/15 Republicans from Abroad in Israel v.  Government of Israel, para.  59 (January 2, 2018); Toledano case, para.  19; Top Investments, para.  34; Toiga case, para.  15; ZAKA case, para.  16; Civil Case (District M) 45627-09-22 Chodin v.  Bank Leumi Le-Israel Ltd., para.  35 (October 3, 2022)).
24. The Administrative Directives and case law therefore defined indicative "red flags" indicating an apparent concern of support for terrorist activity: inclusion in the "blacklist" in foreign countries (the Ziv case); ties with enemy states or terrorist organizations (Civil Case (Tel Aviv District) 29979-08-14 Renaissance School B Tax Appeal v. Massad Bank in Tax Appeal (August 2, 2017); the Islamic Association for Orphans and the Needy); ties with terrorist operatives (the I'ammar affair); Imposing International Sanctions on the Bank's Customer (Civil Case (Tel Aviv District) 8487-05-22 Davidovich v.  Bank Hapoalim in Tax Appeal (September 3, 2025)).  With regard to the concerns of terrorist activity, the bank must prove that there are concrete actions that substantially establish the existence of the suspicion.
25. Interim Summary: A refusal to provide a service will be considered reasonable if the customer does not cooperate with the bank's requirements derived from the provisions of the law that apply to him; or if there is a reasonable basis for concern that activity in the account is related to money laundering or terrorist financing.
26. As to the burden of proof: Since banking services are essential services for the public, the burden of proving the reasonableness of the refusal is on the bank. The bank can lift the burden by the usual means of proof when the level of proof required of the bank in this context is lower than that required in civil law (balance of probabilities), and is closer to the evidentiary threshold required in an administrative proceeding.  The bank is not required to conduct a full investigation, but rather to point to concrete acts and actions that establish a substantial and real concern of improper conduct.  A vague, casual apprehension, not even a reasonable apprehension is sufficient (Civil Appeals Authority 6685/17 Mountain of Success and Blessing in Tax Appeal v.  Bank Hapoalim Ltd., para.  18 (September 10, 2017); the Imar case, para.  14; the Toledano case, para.  25; the Ziv case, paragraphs 16 and 20; the Top Investments case, para.  42; Civil Appeal Authority 38430-08-24 Elrahima v.  Bank Leumi Le-Israel Ltd., para.  7 (October 6, 2024); Civil Appeal Authority 43819-12-24 Humanitarian Action Association v.  Bank Leumi Le-Israel Ltd., para.  16 (May 28, 2025)).
27. When the bank is able to show that "red flags" are flying over the customer's activity, the burden shifts to the customer to appease the bank's opinion and to provide satisfactory explanations for that suspicious activity and the source of the funds. If the account holder does not provide the explanations required of him, the basis for assuming that there is a real concern that the nature of the activity is related to money laundering or terrorist financing will not be concealed, and as a result, the bank will be obligated - by virtue of the regulatory legislation applicable to it - to restrict the activity in the account and, in severe circumstances, even to stop it altogether.
28. Alongside the bank's duty to act in the public interest, as aforesaid, it is obligated, as an entity that provides a service of an essential nature, to examine whether there is a means that is less harmful and that will achieve the goal to a sufficient extent. In other words, the measure that the bank chooses to take to deal with such concerns must be proportionate to the degree of concern found (large or little), the strength of the administrative evidence to substantiate the suspicion, the nature of the concrete concern that arises from the red flags that were discovered in terms of its severity, and the other circumstances (Judge G.  Gontovnik inCivil Case (Tel Aviv District) 8487-05-22 Davidovich v.  Bank Hapoalim Ltd., paragraph 50 (September 3, 2025) (appeal against the judgment is pending): Civil Appeal 36516-11-25 Davidovich v.  Bank Hapoalim Ltd.) [emphasis in original]:

There must be an appropriate relationship between the intensity of the concern that underlies the bank's actions and the intensity of the steps it takes.  This requirement expresses the basic insight that the bank is not free to act as it pleases in light of the risks.  He must also examine the needs of the client.  This balance requires an individual examination of the circumstances in each case.  It is not possible, due to a marginal concern, to justify taking the step of a complete suspension of the account, or a sweeping refusal to provide services.  Even where the bank's concern about providing a service is legitimate, it is still necessary to examine whether the restrictions imposed are proportionate.  Thus, for example, when it is possible to deal with the risk by imposing less harmful restrictions on the account, without reaching a complete closure or complete cancellation of the service, this course of action should be preferred.