Banking Law and Ombudsman Schemes for Payment Complaints in Kuwait

1. Introduction

Kuwait does not operate a separate, independently constituted banking ombudsman scheme in the same form found in some other jurisdictions. Instead, payment and banking complaints are handled through a two-level customer-protection mechanism:

1. First level — the bank/payment institution's internal complaints unit; and
2. Second level — the Central Bank of Kuwait (CBK) Customer Protection Unit, which receives complaints/appeals when the internal process does not resolve the matter or the institution fails to follow the required procedure. 

For payment complaints, this framework operates alongside Kuwait's electronic-payment regulatory regime. The CBK states that the 2023 Instructions for Regulating the Electronic Payment of Funds, issued under Law No. 20 of 2014 on Electronic Transactions, provide the regulatory framework for electronic-payment services, including risk management, cybersecurity, business continuity and customer-rights protection.

2. Meaning of an Ombudsman Scheme

An ombudsman scheme is an alternative dispute-resolution mechanism through which a customer can complain about a financial institution without immediately commencing court proceedings.

Its principal purposes are:

• inexpensive dispute resolution;
• accessibility for consumers;
• investigation of complaints;
• correction of administrative or procedural failures;
• protection against unfair banking practices;
• reduction of unnecessary litigation;
• enhancement of confidence in payment systems.

In Kuwait, the CBK Customer Protection Unit performs several functions that are comparable to an ombudsman mechanism, although it should technically be described as a central-bank customer-protection and complaint/appeal mechanism, rather than an independent statutory banking ombudsman.

3. Legal Framework in Kuwait

The principal legal and regulatory framework consists of:

A. Law No. 32 of 1968

The Law Concerning Currency, the Central Bank of Kuwait and the Organisation of Banking Business establishes the CBK's supervisory authority over the banking system.

It provides the institutional foundation for:

• banking supervision;
• regulation of banks;
• protection of the banking system;
• regulatory instructions;
• supervisory intervention.

B. Law No. 20 of 2014 on Electronic Transactions

This legislation provides the legal foundation for electronic transactions and entrusts the CBK with important supervisory responsibilities concerning electronic payment transactions.

C. CBK Customer Protection Instructions

Banks are required to maintain mechanisms for receiving and handling customer complaints.

The CBK states that banks must provide customers with designated complaint procedures and that a bank complaint should ordinarily receive a written response within 5 working days under the current CBK framework.

D. 2023 Electronic-Payment Instructions

The CBK updated its electronic-payment regulatory framework in May 2023. It covers electronic-payment service providers and incorporates requirements concerning:

• governance;
• risk management;
• AML/CFT;
• cybersecurity;
• business continuity;
• customer protection;
• safety and stability of payment systems. 

4. Who Can Make a Payment Complaint?

A complaint may concern, for example:

• unauthorised bank transfers;
• ATM transactions;
• debit-card transactions;
• credit-card transactions;
• electronic-payment transactions;
• mobile banking;
• internet banking;
• payment-service providers;
• incorrect account debits;
• duplicate payments;
• failed transactions;
• delayed transfers;
• incorrect charges;
• disputed fees;
• unauthorised withdrawals;
• payment authentication;
• electronic-payment fraud;
• failure to refund an improperly processed payment.

The CBK's customer-protection framework specifically extends to electronic payment companies and other CBK-regulated entities.

5. First Stage: Complaint to the Bank

The customer normally has to begin by complaining directly to the concerned bank.

The complaint should identify:

• customer name;
• account/card details;
• transaction date;
• transaction amount;
• transaction reference;
• nature of the dispute;
• reason the transaction is challenged;
• requested remedy;
• supporting documents.

For example:

A customer notices a KD 750 electronic transfer that the customer says was never authorised.

The customer should first notify the bank and request investigation.

The bank's complaints unit should investigate the transaction and issue a written response.

Under the current CBK information, banks are required to respond within 5 working days.

6. Second Stage: Complaint/Appeal to the CBK

If the customer is dissatisfied with the bank's response, the matter can be escalated to the Central Bank of Kuwait Customer Protection Unit.

The CBK states that an appeal against a local bank requires:

1. prior submission of the complaint to the bank;
2. receipt of the bank's written response;
3. explanation of the grounds for the appeal;
4. supporting documents.

The CBK then considers whether the bank followed the applicable procedures and regulations.

This is therefore different from an ordinary civil lawsuit.

The CBK's role is principally regulatory and supervisory, rather than acting as a court awarding damages.

7. Special Position of Electronic Payment Companies

Kuwait's system is particularly significant because complaints involving electronic-payment providers can be taken directly to the CBK in circumstances specified by its customer-protection procedures.

The CBK expressly provides for complaints against:

• electronic-payment companies;
• exchange companies;
• investment companies;
• finance companies;
• other CBK-regulated entities. 

This is important because modern payment transactions frequently involve several parties:

Customer → Bank → Payment Provider → Payment Network → Merchant

A payment complaint may therefore require determining which regulated institution was responsible for the disputed event.

8. Types of Payment Disputes

A. Unauthorised transaction

The customer states:

"I did not make this payment."

The bank may examine:

• authentication;
• OTP;
• device information;
• IP/device records;
• transaction history;
• card usage;
• account-access records;
• customer notification;
• fraud indicators.

B. Failed electronic payment

For example:

A customer makes an online payment, the amount is debited, but the merchant does not receive the money.

The complaint may concern:

• payment processing;
• settlement;
• reconciliation;
• technical failure;
• reversal;
• refund.

C. Duplicate payment

A customer's account is debited twice for the same transaction.

The complaint mechanism provides a means of requiring the institution to investigate the transaction records and determine whether a correction or reversal is required.

D. Incorrect fee

A customer disputes a payment-processing fee or banking charge.

The relevant question can include whether:

• the fee was contractually disclosed;
• applicable CBK requirements were followed;
• the customer received appropriate information;
• the fee was correctly calculated.

9. Exclusion of Matters Already Before Courts

An important limitation is that the CBK complaint mechanism does not replace judicial proceedings.

The CBK states that complaints or appeals may be disregarded when the matter is already before a court or has been referred to the Public Prosecution.

Thus:

Bank complaint → CBK complaint/appeal → possible judicial proceedings

is not necessarily a mandatory sequence in every dispute, but a matter already under judicial consideration will generally not be dealt with simultaneously through the CBK mechanism.

10. Evidence in Payment Complaints

Evidence is extremely important.

A customer should preserve:

• bank statements;
• SMS alerts;
• transaction confirmations;
• screenshots;
• emails;
• payment receipts;
• card statements;
• account statements;
• complaint reference numbers;
• bank correspondence;
• merchant correspondence;
• fraud reports.

For electronic payments, electronic records can become especially important because the central question may be:

Was the payment actually authorised by the customer?

11. Bank's Responsibilities

A bank operating a payment system should maintain appropriate controls concerning:

Authentication

The institution should have reliable mechanisms for identifying the person initiating the transaction.

Authorisation

Authentication and authorisation are not necessarily identical.

A person may successfully access an account while still lacking authority to make a particular transaction.

Transaction monitoring

Banks should have systems capable of detecting suspicious or unusual payment activity.

Cybersecurity

The 2023 electronic-payment framework expressly includes cybersecurity requirements.

Record keeping

A bank should be able to reconstruct relevant payment events.

Complaint handling

The bank must maintain an appropriate customer complaint mechanism.

12. Relationship Between Customer Protection and Payment Regulation

The Kuwaiti model can therefore be represented as:

Law No. 32 of 1968
↓
Central Bank of Kuwait
↓
Banking/payment regulations
↓
Electronic-payment instructions
↓
Banks and payment-service providers
↓
Internal complaint mechanism
↓
CBK Customer Protection Unit
↓
Judicial remedies where appropriate

This creates both preventive regulation and post-transaction dispute resolution.

13. Six Relevant Kuwaiti Case Laws

A qualification is important here: publicly accessible English-language reporting of Kuwaiti Court of Cassation judgments is comparatively limited. The cases below should therefore be understood as Kuwaiti banking/payment authorities whose principles are relevant to payment complaints, rather than six judgments specifically establishing the modern CBK complaint portal. The original Arabic judgments should be checked before formal litigation or citation in a legal submission.

Case 1 — Kuwait Court of Cassation, Commercial Appeal No. 37/2005, 31 January 2006

This case concerned a cheque bearing a forged customer signature.

Principle

The existence of an apparently valid payment instrument does not necessarily establish genuine customer authorisation.

Relevance to payment complaints

The principle is highly relevant to modern electronic payments.

In a digital dispute, the equivalent question could be:

Was the transaction genuinely authorised, or did the transaction merely appear to have been authenticated?

The same underlying issue arises with:

• stolen credentials;
• compromised OTPs;
• account takeover;
• unauthorised cards;
• fraudulent payment instructions.

Case 2 — Kuwait Court of Cassation, Commercial Appeal No. 424/2001

This authority concerned banking transactions involving allegedly forged customer authority.

Principle

There is a distinction between:

genuine authority

and

apparent authority contained in a disputed banking instruction.

Relevance

For electronic payment complaints, this principle can be applied to questions concerning:

• digital mandates;
• corporate payment authorisations;
• online banking;
• electronic instructions;
• payment approvals.

A payment system should therefore be capable of establishing who actually authorised the transaction.

Case 3 — Kuwait Court of Cassation, Commercial Appeal No. 430/2001

This case also concerned disputed payment instructions and banking authority.

Principle

Banks dealing with customer funds must address whether the payment instruction genuinely originated from an authorised customer or representative.

Relevance

The principle has modern significance for:

• mobile banking;
• internet banking;
• electronic signatures;
• authentication;
• payment APIs;
• corporate banking mandates.

A successful technical authentication process does not automatically answer every legal question concerning authority.

Case 4 — Kuwait Court of Cassation, Commercial Appeal No. 1838/2023

This reported banking dispute concerned bank transfers and questions concerning authorised signatures and banking procedures.

Principle

Transaction authority and compliance with banking procedures are important when determining whether a financial transaction was properly executed.

Relevance to payment complaints

The principle supports the importance of maintaining an audit trail showing:

Initiator → Authentication → Authorisation → Processing → Settlement

This is particularly relevant where a customer challenges a transfer through the CBK complaint mechanism.

Case 5 — Kuwait Court of Cassation, Commercial Appeal No. 1809/2023

This related banking authority concerned disputed transactions and questions concerning authority and banking procedures.

Principle

Proper authorisation and reliable banking records are important when determining the validity of disputed banking transactions.

Relevance

For modern electronic payments, banks should be able to demonstrate:

• who initiated the transaction;
• what account was used;
• what authentication occurred;
• whether the person possessed the required authority;
• when the transaction was processed.

This evidence can become central to an internal complaint and subsequent CBK review.

Case 6 — Kuwait Court of Cassation, Appeal No. 508/2016

This case involved a bank loan, an increase in the applicable interest rate and the relationship between contractual banking rights and CBK requirements.

Principle

Banking contracts operate within the mandatory regulatory framework governing banking activities.

Relevance to payment complaints

The principle is broader than electronic payments. It means that a bank cannot analyse its relationship with a customer solely through the private contract while ignoring applicable regulatory requirements.

For payment services, this supports the importance of examining:

• contractual terms;
• CBK instructions;
• customer-protection requirements;
• electronic-payment rules;
• procedural obligations.

14. Case-Law Table

These cases are supporting banking authorities, not six decisions specifically interpreting Kuwait's present CBK electronic complaint portal.

15. Application to an Unauthorised Electronic Payment

Suppose a customer discovers:

KD 2,000 transferred electronically without permission.

The legal/complaint analysis can proceed as follows:

Step 1 — Notify the bank

The customer immediately reports the transaction.

Step 2 — Preserve evidence

The customer preserves:

• SMS;
• account statement;
• transaction reference;
• screenshots;
• device information;
• correspondence.

Step 3 — Bank investigation

The bank examines:

• authentication;
• OTP;
• device;
• transaction records;
• account access;
• authorisation;
• fraud indicators.

Step 4 — Written response

The bank provides its written response under the applicable complaint procedure.

Step 5 — CBK escalation

If the customer is dissatisfied, the customer can use the CBK Customer Protection appeal mechanism, subject to its requirements.

Step 6 — Judicial remedy

If the dispute ultimately involves a civil claim for recovery or damages, judicial proceedings may become relevant. Once the matter is before the courts, the CBK complaint mechanism may not continue to consider the same matter.

16. Role of the CBK as a Quasi-Ombudsman Mechanism

The CBK system has several characteristics associated with an ombudsman:

Accessibility

Customers can escalate unresolved banking complaints.

Independence from the bank

The CBK is the banking regulator rather than the complained-of bank.

Procedural review

The CBK can examine whether the regulated institution followed appropriate procedures.

Consumer protection

The mechanism is designed to protect banking customers.

Regulatory oversight

The complaint process also gives the regulator information about weaknesses in regulated institutions.

However, the mechanism should not be confused with a completely independent private ombudsman because the CBK is itself the banking regulator.

17. Importance for Fintech and Digital Payments

The importance of the system has increased with:

• mobile wallets;
• instant payments;
• online shopping;
• digital banking;
• payment gateways;
• electronic transfers;
• QR payments;
• card-not-present transactions.

The 2023 CBK electronic-payment framework expressly incorporates customer protection, cybersecurity, risk management and business continuity.

Consequently, payment complaints increasingly involve both:

consumer-protection law

and

technology/risk-management regulation.

18. Advantages of the Kuwaiti System

The system provides several practical advantages:

1. Initial resolution at bank level — the institution gets an opportunity to correct the transaction.
2. Regulatory escalation — unresolved issues can reach the CBK.
3. Specialised supervision — complaints are considered within the banking regulatory environment.
4. Electronic-payment coverage — payment-service providers fall within CBK supervision.
5. Evidence-based process — supporting documents are required.
6. Reduced need for immediate litigation — appropriate disputes can first be handled administratively. 

19. Limitations

The system also has important limitations.

First

The CBK mechanism is not a substitute for a court.

Second

A complaint already before a court or Public Prosecution may be excluded.

Third

The customer normally has to approach the bank first in a complaint against a local bank.

Fourth

The CBK does not function simply as a private arbitrator deciding every compensation claim.

Fifth

The exact remedy available depends upon the nature of the dispute and applicable law.

20. Conclusion

Kuwait's approach to payment complaints is best understood as a central-bank-led customer-protection and escalation system rather than a conventional independent banking ombudsman scheme.

The framework begins with the bank's internal complaints unit and can proceed to the Central Bank of Kuwait Customer Protection Unit when the customer's complaint remains unresolved or the bank fails to comply with the prescribed procedure.

For electronic payments, this mechanism operates alongside the Law No. 20 of 2014 on Electronic Transactions and the CBK's updated 2023 Instructions for Regulating the Electronic Payment of Funds, which address electronic-payment supervision, cybersecurity, risk management, business continuity and customer protection.

The Kuwaiti Court of Cassation authorities concerning forged payment instructions, genuine customer authorisation, banking transfers and compliance with CBK requirements provide useful judicial principles for analysing payment complaints. The central legal themes are valid authorisation, authentication, proper banking procedures, reliable transaction records and compliance with mandatory banking regulation.

Exam conclusion:

Kuwait's payment-complaint framework combines internal bank complaint procedures with regulatory escalation to the Central Bank of Kuwait. Although it is not technically a separate independent banking ombudsman, the CBK Customer Protection mechanism performs an analogous dispute-resolution and consumer-protection function. Its importance has increased with electronic payments, where questions of authentication, authorisation, cybersecurity, transaction records and bank liability have become central to customer disputes.