The man legally adopted the child through an agreement with the surrogate Indian mother and under current legislation the Israeli authorities do not have the power to remove the girl away from him, the report said.
According to an independent probe conducted by the Israel National Council for the Child (NCC), an NGO for children's rights, the man served a year and a half in jail for sexually abusing young children while they were under his supervision and is recognised as a paedophile by the authorities.
The NCC, which had been tipped off about the man's past anonymously via email, informed the police, local social workers and the girl's school which was apparently unaware of the father's prior convictions.
The welfare authorities have reportedly placed the man under observation and ordered him to seek psychological treatment.
Foreign surrogacies have recently surged in Israel as potential parents, particularly homosexual couples who, under Israeli law are barred from using surrogates in the country, have been willing to travel abroad and pay more in order to circumvent the protracted procedures in their home country.
"In the past six years, 200 children have come to Israel via foreign surrogacy," NCC Executive Director Yitzhak Kadman said.
"This case is a good wake up call that there are changes that have to be made", Kadman noted. In contrast to the rigorous interviews and background checks required of new parents undergoing surrogacy and adoption in Israel, parents of adopted children from surrogates abroad are subjected to more lenient screenings, the report pointed out.
Israeli social services provide medical and psychological treatment to only 15 per cent of the thousands of children who report sexual abuse every year, Orly Levy-Abekasis, Chairperson of the Knesset (Israeli parliament) Committee on Children's Rights, has revealed.
The Israeli health ministry in response to a letter from Kadman to Health Minister Yael German has said that "it was considering new policies to secure the protection of children born in overseas surrogacies".