- Ori Ansbacher's body was found late Thursday in southeast Jerusalem, and she was buried the next day in her Israeli settlement of Tekoa.
- Israeli security forces arrested the suspect in a raid in the West Bank city of Ramallah. He has not yet been charged.
- Israel has withheld payments in the past, notably in response to the Palestinians' 2011 admission to the UN cultural agency UNESCO as a full member.
Nudged by rightwing political rivals after a deadly Palestinian attack on a young Israeli woman, Prime Minister Benjamin Netanyahu who seeks re-election pledged Sunday to freeze money transfers to the Palestinian Authority.
Israel collects around $127 million a month in customs duties levied on goods destined for Palestinian markets that transit through Israeli ports and then transfers it to the PA.
The Israeli parliament last year passed legislation to partially withhold funds, in response to PA payments to families of Palestinians jailed by Israel for attacks against Israelis.
"By the end of the week, the staff-work necessary for implementing the law on deducting terrorists' salaries will be completed," Mr Netanyahu -- who faces a general election in April -- told journalists at the start of the weekly cabinet meeting.
"Next Sunday I will convene the security cabinet and we will approve the necessary decision to deduct the funds. Let nobody doubt, the funds will be deducted, at the start of next week," he said in Hebrew.
Earlier Sunday, Education Minister Naftali Bennett was among rightwingers pressing Mr Netanyahu to implement the law after a Palestinian was arrested at the weekend on suspicion of killing 19-year-old Ori Ansbacher.
"The law to offset terrorist funds passed...last July," he Tweeted. "I call on the prime minister - apply the law immediately."
The Israeli army said Sunday it had started preparations to demolish the West Bank home of the Palestinian suspected of Mr Ansbacher's killing, named by security officials as 29-year-old Arafat Irfaiya from the flashpoint city of Hebron on the occupied West Bank.
"Overnight, troops operated in Hebron, where the suspect in the murder of Ori Ansbacher is from," the army said in an English-language statement.
"During the operation, the troops surveyed the suspect's house in order to examine the possibility of its demolition."
Ms Ansbacher's body was found late Thursday in southeast Jerusalem, and she was buried the next day in her Israeli settlement of Tekoa.