Palestinian Media Watch is warning Mastercard and Visa that the companies could be exposed "to both criminal and civil liability" if they provide credit card services to terrorists.
Israeli law bars banking institutions from providing services to terrorists, PMW said.
The Palestinian Authority has paid monthly salaries to terrorists who are imprisoned and stipends to the families of dead terrorists since 1994.
Those funds to members of organizations such as Hamas, Palestinian Islamic Jihad and the Popular Front for the Liberation of Palestine are paid through banks operating in the region.
"When the PA banks – who can identify the accounts of the terrorist prisoners (or their proxies) and the released prisoners and the families of the dead terrorists – allow these groups of people to request and receive Mastercard and Visa credit cards, they are clearly breaching their contracts with the credit card companies," PMW said this week.
The credit card companies likely were "unaware that the banks would facilitate both terror funding and the payment of terror rewards," but now PMW said it has "notified and warned both companies of the terror supporting operations of these banks."
The only solution for the companies is to cut ties to the banks, PMW said. The alternative "could potentially expose the credit card companies to both criminal and civil liability."
PMW explained that Israel recently adopted legislation applying to the PA-controlled areas in the West Bank that "prohibits, inter alia, any bank transaction that funds, promotes, assists, or rewards the performance of an act of terror."
"Warning letters sent … to the banks informed them of the new Israeli legislation and urged them to immediately close the accounts of the terrorist prisoners and released prisoners."
Banks previously rejected the payments for terrorists, and the PA decided to create its own institution. But existing banks appear to have been persuaded to continue processing the funds until the new bank is operating.
The world has been paying attention to the issue in recent years. The Financial Action Task Force has been set up to address it, and the United Nations Security Council resolution 2462 from last year focused on efforts to combat terror financing.
The FATF has recommended: "Countries should criminalize terrorist financing on the basis of the Terrorist Financing Convention, and should criminalize not only the financing of terrorist acts but also the financing of terrorist organizations and individual terrorists even in the absence of a link to a specific terrorist act or acts. Countries should ensure that such offenses are designated as money laundering predicate offenses."
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