A hamas scheme to launder money in Chinese bank accounts has been revealed in an ongoing court case in the US.

The allegations emerged in a suit being brought against the Bank of China by the family of Daniel Weltz, a 16-year-old American killed in a suicide bombing in Tel Aviv in April 2006.

According to documents presented in the case, both Hamas and Islamic Jihad used a West Bank money-changer to transfer cash to accounts held by the family members of suicide bombers.

An investigation carried out by the Israeli security agency, Shin Bet, alleged that the money-changer received the cash from Eritrean migrants in Tel Aviv. The migrants, it was claimed, had been directed by operatives in Gaza to pass him money via Israeli-Arab couriers.

The funds were then allegedly deposited in a West Bank branch of the Palestine Bank and from there wired to accounts in China, as well as India, Turkey and the US.

The money-changer was arrested at a West Bank checkpoint in February 2012 carrying large sums of cash. The investigation claimed that, in a three-month period, more than $1 million had been transferred in this way. Some of the money was destined for family members of Hamas prisoners. The money-changer and two couriers were convicted earlier this year of providing services to an illegal organisation.

The case has already caused diplomatic strife between Israel and China.

A former Israeli security official who took part in previous probes into Hamas money-laundering was dissuaded from giving evidence after Chinese pressure and Beijing’s threats to cancel a visit by Prime Minister Benjamin Netanyahu that took place in May.