Israeli Banks Must Reimburse Victims of Remote Fraud Up to NIS 450

Israeli law dictates that banks must reimburse customers up to NIS 450 for losses incurred due to remote fraud, where a scammer obtains verification codes to make unauthorized transactions. Under the Payment Services Law of 2019, banks have eight business days to return funds after being notified of such misuse. This protection applies when the customer's details are used without their direct input of the transaction.

However, the situation changes significantly if the customer willingly transfers money to a scammer, believing it to be a legitimate investment or a plea for help from a relative. In these cases, the law offers no automatic protection, and victims must pursue legal action, often through small claims court, to recover their funds. The bank's liability is limited in these scenarios, and the burden of proof can shift to the customer to demonstrate negligence on the bank's part.

The law specifies that until a customer notifies the bank of unauthorized use, their liability is capped at NIS 450, or the actual amount of the fraudulent transactions, whichever is lower. This cap includes a base amount of NIS 75 plus NIS 30 for each day the misuse occurred before notification, provided the notification is made within 30 days. Once notified, the customer's liability is zeroed out, even if the scammer attempts further transactions.

Recent legal interpretations, including a 2021 Ministry of Justice opinion, have clarified that even if a customer provides an authentication code to someone posing as a bank representative, it is still considered misuse, with the NIS 450 cap applying. The Banking Supervision Department has adopted this stance, reporting in 2025 that NIS 33 million was returned to approximately 300,000 customers, noting that some banks had wrongly refused compensation in such cases.

In contrast, when a customer directly initiates a transfer, such as to a fake investment platform or a fraudulent emergency appeal, the bank is not automatically liable under the Payment Services Law. Recovery in these instances typically involves proving bank negligence, as seen in a 2026 Bat Yam Magistrate's Court ruling where a bank was found negligent for failing to monitor unusual activity, though the customer was found contributorily negligent. The Israeli regulatory framework for these direct transfers is noted as a significant gap compared to the UK, where banks are mandated to reimburse such transfers up to £85,000 starting October 2024.

Following a fraudulent transaction, customers are advised to immediately contact the bank's fraud hotline, block payment methods, obtain written confirmation of their notification date, and file a police report. If the bank fails to return funds within eight business days, customers can escalate their complaint to the bank's public inquiries unit and subsequently to the Banking Supervision Department.