Dear Clients and Friends,
We are pleased to present you with our quarterly update on banking, finance, and insurance law for the second quarter of 2025, including a summary of recent regulatory, and judicial developments.
Regulatory Updates
Bank of Israel completes ISO 20022 transition
The Bank of Israel announced the completion of its transition to the international ISO 20022 payment messaging standard within the ZAHAV real-time gross settlement system. This milestone aligns Israel’s financial infrastructure with global standards and is expected to have a wide-reaching impact on the financial ecosystem.
- ISO 20022, also adopted by SWIFT as a global platform, enables richer and more structured payment messages, enhances the speed and reliability of fund transfers, reduces operational costs, and supports the development of advanced financial products. The move is anticipated to benefit private and corporate clients, banks, fintech, and other financial institutions, while strengthening the stability, competitiveness, and openness of Israel’s financial sector.
Temporary Extension of the Reporting Period to the Credit Data System for Loan Payment Delinquencies
In a notice from the Bank of Israel, it was announced that the Supervisor of Credit Data Sharing at the Bank of Israel informed data sources—namely credit providers reporting to the database—that a temporary extension has been granted for reporting loan delinquencies. Instead of reporting a delinquency after 30 days, reporting will now be required after 60 days.
- The relevant legal framework for the Bank of Israel’s announcement is the Credit Data Regulations, 2017, which govern the transmission of credit data to the database by banking corporations, credit card issuers, or other credit providers (“data transmitters”).
- The regulations specify the type of information that must be reported to the database, such as identifying details of the credit transaction, the type and purpose of the credit, payment performance, payment delinquency, and more.
- Regarding credit transactions, the regulations distinguish between different types—for example, credit lines, revolving credit, loans, mortgages, guarantees, and so forth.
- The regulations state that the data transmitter must report a delinquency if at least 30 days have passed since the debt arose and the overdue amount exceeds 200 NIS. If the credit was provided in connection with the sale of an asset or service, reporting is required only after 60 days and if the delinquent amount exceeds 500 NIS.
- Accordingly, the extension granted by the Bank of Israel applies specifically to loans issued by credit providers that were subject to the 30-day reporting requirement. That is, in plain terms, the extension does not apply to credit given in connection with the sale of assets or services, nor to credit transactions such as credit lines, revolving credit, mortgages, or guarantees.
- The directive will apply to monthly reports for the months of June 2025 through August 2025. Thereafter, the Supervisor will assess whether additional reporting months should be covered.
Judicial Updates
Partial Payment of Legal Fees Permitted—Alongside International Sanctions
The court ruled that despite international sanctions imposed on Roman Abramovich by the UK and the European Union, a partial transfer of funds to cover his legal fees may be allowed in order to safeguard his right to legal representation and prevent infringement on his fundamental right of access to the courts. However, the approved amount was significantly lower than the requested sum, and a final decision on the full amount will be made later in the proceedings.
59756-12-23 ZAKA – Search, Rescue and Recovery (RA) et al. v. Mizrahi-Tefahot Bank Ltd.
(Tel Aviv District Court, Judge Erez Yekuel, Vice President, June 8, 2025)
Case Summary:
- Roman Abramovich, who is subject to international sanctions, sought to transfer NIS 8 million from his account at Mizrahi-Tefahot Bank as a donation to the NGO ZAKA. The bank refused, following guidance from the Supervisor of Banks. A petition for interim relief was denied by the Supreme Court.
- Later, Abramovich requested to transfer approximately NIS 1.25 million to his attorneys as legal fees. The bank also refused this request, arguing that such payments fall under the scope of the sanctions and that no specific regulatory approval had been obtained.
- ZAKA and Abramovich contended that the sanctions do not apply to transfers between Israeli accounts and that legal expenses are a recognized exception under the sanction’s regimes. They emphasized that denying the ability to pay legal fees undermines the right to legal representation. The bank countered that facilitating the payment could expose it to sanctions violations and risks within the global banking system.
- The court held that the balance of convenience should favor preserving access to the courts as a constitutional right. While exceptions in sanction frameworks may allow for reasonable legal expenses, no specific authorization has been provided for this case. Therefore, the court approved a partial payment of NIS 140,000 to enable the continued legal process.
- The ruling underscores the balance between banks’ duty to comply with international sanctions and their customers’ fundamental rights, particularly the right to legal counsel.
A Bank May Refuse to Transfer Funds in the Absence of Beneficiary Identification or Suspicion of Illegal Activity, but Must Allow Transfer to the Account Holder if There Is No Sufficient Evidence of Terror Involvement
The court ruled that while a bank is permitted to refuse the transfer of funds to a nonprofit organization’s account if there is suspicion of illegal activity or if the beneficiary is not identified, it must still allow the transfer of funds intended for the organization itself—provided there is no sufficient evidentiary basis linking the organization to terrorism and subject to the submission of proper documentation.
52464-11-24 Al-Hakawati Theatre v. Mercantile Discount Bank Ltd.
(Jerusalem District Court, Judge Miriam Ilani, June 4, 2025)
Case Summary:
- In a request for interim relief, the Al-Hakawati Theatre NGO petitioned the court to compel the bank to process a first payment of Euro 252,904.81 from a Euro 700,000 EU grant. The bank had refused the transfer, citing concerns of money laundering and terror financing—based partly on warnings from the Corporations Authority that the NGO might be a front for terrorism, and because a portion of the funds was designated for another organization (Hypatia), which was not listed as a beneficiary on the account. The petitioner claimed that the bank had no legal basis for refusal and that the denial of funds would result in the NGO’s collapse.
- The bank argued that the transfer deviated from the NGO’s usual activity pattern, that full beneficiary details were not provided, and that red flags were present—such as cross-border transactions, letters from regulatory authorities, and designated funds to an unidentified party (Hypatia), which lacked proper registration and did not hold a bank account or nonprofit certification.
- The court held that the bank’s initial refusal was justified based on the suspicions and information received. However, once it became clear that no further investigation had been conducted and that there was no sufficient evidentiary foundation linking the NGO to terrorism, the bank had no justification to continue withholding the portion of the funds intended for the NGO itself.
- The court maintained that no transfer should be made to the unidentified beneficiary (Hypatia) unless proper EU documentation is submitted regarding that specific allocation.
Liability of an Israeli Company for Operating a Binary Options Trading Platform Toward a Foreign Investor – Even Without Formal Registration
An Israeli company and one of its representatives were held personally liable for damages caused to a foreign investor who was misled into investing through an international binary options trading website, even though the platform operated under the name of a foreign entity. The court found that despite the operational structure intended to obscure the Israeli company’s involvement, the circumstantial evidence was sufficient to establish tort liability for fraud and breach of legal duties.
The ruling serves as a warning sign for Israeli operators of foreign trading platforms – substantive involvement may result in significant legal liability, even without formal ownership.
18882-09-20 Massimo Giorgetti v. Pi Trade Services Ltd. et al.
(Tel Aviv Magistrate’s Court, Judge Adi Nir Benyamini, June 22, 2025)
Case Summary:
- Background and facts: The plaintiff, an Italian citizen, was misled into investing €200,000 on a binary options platform called Tradingbanks. He claimed to have been lured by false promises of guaranteed returns made by the platform’s representatives, until eventually his account was frozen and access to funds denied.
- Parties’ claims: The plaintiff asserted that the platform was effectively operated by the Israeli company Pi Trade, using Israeli employees posing as foreign brokers. The defendants denied any direct connection, claiming they only provided technical services to a foreign company.
- Court ruling: The court found the Israeli company liable in tort, as it actively managed the platform’s marketing and sales, used aliases, and misled investors.
- The court noted that proving fraud may rely on circumstantial evidence where there are significant informational gaps between the parties.
- A consistent and ongoing connection between the defendants and the platform was established—including use of identifiable emails, addresses, and phones, and staff presenting themselves under the brand.
- Even though the platform appeared to operate abroad, the court determined that its operation and control originated in Israel, through deliberate efforts to conceal responsibility.
- The court ordered the company and its director to pay damages of approximately NIS 815,000.
Bank Leumi Escapes Liability in Class Action Over Erroneous Account Seizure Alerts
The court ruled that a class action filed against Bank Leumi over the sending of erroneous garnishment notices was closed by agreement, without compensation to the plaintiff and without acceptance of the class’s claims, after it was determined that the incident was an isolated technical error that did not justify continuing the proceedings.
56765-09-23 Dines v. Bank Leumi Le-Israel Ltd.
(Rishon LeZion Magistrate’s Court, Judge Lior Mashali-Shlomi, June 12, 2025)
Case Summary:
- Nir Dines filed a class action against Bank Leumi, claiming the bank had sent him and other customers false notices of account garnishments, causing stress, emotional distress, and loss of work hours.
- He argued that the bank failed to promptly notify customers that the messages were sent in error, thereby breaching the Banking Law and its agreement with clients. The bank responded that this was a one-time error, where notices were mistakenly sent for previously canceled garnishments, and that the error was corrected the same day. It further claimed that most customers could verify the details via the bank’s website or app and that no collective harm had been caused.
- Following court discussions, the parties agreed to end the proceedings. It was decided that the claim would be dismissed, the bank would refund Dines’ court fee and reimburse him NIS 2,000 in costs, but no additional compensation would be paid. The court held that no common harm to the group had been proven, thus a representative action or compensation was not warranted. It was clarified that Dines may file an individual claim but may not submit another class action on the same grounds.
We are at your service for any questions or clarifications via email or phone: 03-3075000
Best regards,
Banking, Finance & Credit Insurance Department
Shibolet & Co.
The contents of this memo are for general informational purposes only and should not be relied upon in any specific case without additional legal advice.
