Police seized tens of thousands of shekels from the family of an East Jerusalem terrorist on Wednesday, which cops said was paid as a stipend by the Hamas terror group.

The NIS 43,000 ($11,800) in Israeli and foreign currency had been given to the family of Alaa Abu Dheim, who in 2008 shot dead eight Israeli students, aged 15-26, in Jerusalem’s Mercaz Harav yeshiva and wounded 11 more.

Abu Dheim, from the East Jerusalem neighborhood of Jabel Mukaber, was killed during the attack by an off-duty IDF captain and a student in the yeshiva.

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“The activities carried out this morning were another step in the general actions of the Israel Police and security forces to prevent, thwart and stop those directly involved in riots or terror activities in Jerusalem, and also against those who encourage and support terrorists,” police said in a statement.

“The operation was the result of covert activity and targeted intelligence gathering by the Israeli Police and security forces which found that the family of the terrorist who live in East Jerusalem received cash and funding from Hamas in support for the murderous terror attack,” police said.

“We will not permit financial support from a terror organization for the families of terrorists who carry out murderous attacks,” they added.

Security forces and lawmakers have worked to end payments from the Palestinian Authority and from Palestinian terror groups to families of terrorists which they say encourage further attacks.

On Wednesday lawmakers gave the final go-ahead for a decisive vote on a bill that would slash funds to the PA by the amount Ramallah pays out to convicted terrorists.

The bill, proposed by Yesh Atid MK Elazar Stern and Likud MK Avi Dichter, says that welfare payments paid out by the PA to Palestinian prisoners and their relatives must be deducted from tax revenues Israel transfers annually to the administrative body. The money withheld in this way would instead go into a fund designated to help victims of terror attacks.

Under the current law, based on the 1994 Oslo Accords that established the PA and the mechanism for Israeli funding, the finance minister already has the ability to freeze funds.

The measure, which would cut hundreds of millions of shekels from tax revenues transferred to the PA, is similar to a measure recently passed in the US, known as the Taylor Force Act, withholding funding to the PA over stipends to terrorists and their families.

According to the Defense Ministry, the PA in 2017 paid NIS 687 million ($198 million) to the so-called “martyrs’ families fund” and NIS 550 million ($160 million) to the Palestinian Prisoners’ Club — some 7 percent of its overall budget.

Palestinian prisoners serving 20- to 30-year sentences for carrying out terror attacks are eligible for a lifetime NIS 10,000 ($2,772) monthly stipend, the Defense Ministry said, citing PA figures. Those prisoners who receive a three- to five-year sentence get a monthly wage of NIS 2,000 ($554). Palestinian prisoners who are married, have children, live in Jerusalem, or hold Israeli citizenship receive additional payments.

The Defense Ministry last month released figures alleging that some terrorists who killed Israelis will be paid more than NIS 10 million ($2.78 million) each throughout their lifetimes by the PA.