The Co-operative Bank has revealed it closed the Palestine Solidarity Campaign’s account because of fears money could inadvertently be funnelled to illegal groups in Gaza.

Following advanced due diligence checks on the anti-Israel group’s account, the bank said it was not satisfied that it would not be used to aid proscribed activities in the Palestinian territories.

The Palestine Solidarity Campaign launched a legal case against the bank this week and claimed the closure amounted to “discrimination”.

A statement released by the PSC on Tuesday revealed that at least 20 groups pursuing anti-Israel campaigns had been affected. Accounts were closed last month by the bank, or access to funding was denied.

In a statement the following day the bank said it was committed to supporting charities, but needed to perform “due diligence” checks on customers, their accounts and payments. It must “ensure the bank complies with anti-money laundering obligations and to manage the bank’s risk”.

Customers who send money to “very high-risk high-risk locations throughout the world” required advanced checks, the bank said, “to ensure that funds do not inadvertently fund illegal or other proscribed activities”.

The bank said it would continue to assist with a range of donations to Gaza through groups including Médecins Sans Frontières‎, Amnesty, and Oxfam.

Lawyers for the PSC had claimed the Co-op had breached equality legislation by targeting the group because of its “cogent belief in Palestinian rights”.

“A decision based on active support of Palestinian causes – or on the nationality or religion of the Palestinian people – would be discriminatory,” a statement from the ITN law firm in London said.

PSC director Sarah Colborne, who travelled on the Mavi Marmara boat as part of a flotilla aimed at reaching Gaza in 2010, urged PSC members to move their personal accounts.

She said supporters were “angry and disappointed at the Co-operative Bank which has turned its back on the ethical principles which drew so many of us to open accounts there in the first place”.

The Co-op angered Israel supporters in 2012 when its supermarket arm extended a boycott policy against Israel to include a bar on any engagement with Israeli suppliers which worked with West Bank settlements.

PSC branches across the country had lobbied the Co-op for that ban and supported the measures taken against Israel.

When the scandal around former Co-op bank chairman Paul Flowers erupted in 2013, the scale of the Co-op’s financial problems emerged. Since then huge cutbacks have been made in an attempt to fill the £1.5 billion hole in the bank’s finances. It announced plans earlier in the year to shut almost 60 branches.

Attempts have also been made to rid the bank of customer accounts which could be seen as having overtly political interests or possible criminal or terrorist connections. There is no suggestion that the PSC falls into that category.

A number of British-based Muslim groups claimed the HSBC bank had closed their accounts last year because of their attempts to raise funds for Palestinians in the West Bank and Gaza.

Alex Brummer, the former Board of Deputies vice-president and City Editor of the Daily Mail, said: “Now that the Co-op governance has been cleaned-up, it is my understanding, post the crisis at its bank, that the new chief executive has all the political stuff under review, including reversing the [Israel] boycott.

“At the Board I did extensive lobbying with him on this and was making real progress.”