Resolution No. JB-2015-3442 of the Banking Board

Banking Board of Ecuador

RESOLUTION No. JB-2015-3442

THE BANKING BOARD

CONSIDERING:

THAT this appeal is resolved in accordance with the First Transitional Provision of the Organic Monetary and Financial Code, published in the Official Register Second Supplement No. 332, on September 12, 2014, whose text states that resolutions contained in the Codification of Resolutions of the Superintendence of Banks and Insurance and the Banking Board, and norms issued by control bodies, will remain in effect insofar as they do not oppose what is provided in the Organic Monetary and Financial Code, until the Monetary and Financial Policy and Regulation Board resolves what corresponds, according to the case; and with the second paragraph of the Third Transitional Provision, which states that the Banking Board will continue to act until it resolves all complaints, appeals, and other administrative procedures it was hearing on the date of entry into force of the same, within a period of one hundred eighty days, extendable at the discretion of the Monetary and Financial Policy and Regulation Board, which grants the control body competence to hear and resolve this review appeal;

THAT through Resolution No. 054-2015-F, of March 5, 2015, published in the Official Register No. 467, on March 27, 2015, the aforementioned Board extended by one hundred eighty additional days the period for the Banking Board to continue acting and resolve all complaints, appeals, and other administrative procedures within its competence;

THAT through the "Free complaint form by users of entities controlled by the Superintendence of Banks and Insurance," submitted to the control body on March 13, 2014, Mrs. Glenda Evangelina Camacho Mendoza filed a complaint against the National Bank of Development requesting the Superintendence of Banks and Insurance to order the bank to refund the sum of USD $200.00 corresponding to unauthorized debits, charged to savings account No. 0080257500, an amount corresponding to the "Eugenio Espejo" bonus, because the financial entity did not resolve the complaint presented, indicating that it was a case of card donation;

THAT through letter No. DAYEU-ISFP-REQ-2014-552, of March 25, 2014, the Regional Intendancy of Guayaquil admitted the complaint presented by Mrs. Glenda Evangelina Camacho Mendoza to processing and requested information and defenses from the aforementioned financial institution. Through letter No. 04361, of April 15, 2014, submitted to the control body on the 17th of the same month and year, Mr. Marco Rúales Valverde, Director of the Customer Service Unit of the National Bank of Development, attached the "CONFIDENTIAL REVIEW REPORT," in which he indicated the following:

"In response to the request made (...), and taking as input the detail of transactions carried out at ATMs by the customer CAMACHO MENDOZA GLENDA EVANGELINA on the dates from

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22/05/2013 to 01/11/2013 it can be seen that the debit card was used at ATMs of the Financial Institutions: Banco de Machala, Banco Bolivariano, Banco Nacional de Fomento, Banco Internacional, Banco de Guayaquil.

(...)

According to the review of notifications by the BANRED Security Committee, there are coincidences of possible compromise points in ATMs used by our client, which are detailed below:

On October 21, 2013, the BANRED Security Committee notified as a possible compromise point the ATM 55 of the Banco de Macheta on the dates September 1 to September 30, 2013.

(...)"

THAT through letter No. IRG-DAyEU-V-R-2014-480, of May 21, 2014, the Regional Intendancy of Guayaquil, after the corresponding analysis regarding the complaint, resolved and concluded the following:

"(...)

From the explanations and defenses sent by the National Bank of Development, it has been evidenced that the claimant was not attended to promptly by the banking entity, observing the non-compliance with the aforementioned regulation, as the user informed the facts and complained to the entity on November 25, 2013; and the National Bank of Development through the Customer Complaint Report for Transactions Not Made at ATMs, prepared on January 6, 2014, signed by Roberto Silva, Submanager of Operational Risk, and received by the Customer Supervision area on January 15, 2014. Likewise, it is visible that the emails sent to the financial entity Banco de Guayaquil S.A. requesting videos, audit tapes, and ATM security information where the transactions were made, are dated Tuesday, April 15, 2014; that is, the National Bank of Development proceeded with the request to the financial entity owning the ATM after having been notified with the complaint before this Control Body, and one hundred forty-one (sic) days after the complaint was presented to the entity, therefore, when the period during which banks have the obligation to keep videos in custody had already expired.

(...)

In merit of the above, and in exercise of the powers delegated by the Superintendent of Banks and Insurance (...), this Office resolves:

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1. ACCEPT the complaint presented by Mrs. GLENDA EVANGELINA CAMACHO MENDOZA, with citizen ID No. 090840321-5, against the controlled financial institution BANCO NACIONAL DE FOMENTO, for the reasons stated in the sixth section of this letter.

2. ORDER the controlled financial institution BANCO NACIONAL DE FOMENTO to proceed to restore to Mrs. Glenda Evangelina Camacho Mendoza the sum of US$ 200.00 (...), debited from savings account No. 80257500 on November 1, 2013; and submit to this Office, within a term of eight days, counted from the receipt of this letter, the documentation that accredits the compliance with this resolution.

(...)"

THAT through a document submitted to the control body on June 5, 2014, Ms. Erika Palma Portilla, Commercial Manager of the National Bank of Development, Guayaquil Branch, filed an appeal for reconsideration against the administrative act contained in letter No. IRG-DAyEU-V-R-2014-480, of May 21, 2014;

THAT through letter No. IRG-DAyEU-V-R-2014-774, of July 14, 2014, the Regional Intendancy of Guayaquil analyzed the appeal for reconsideration and considered that the written submission and documentation presented did not provide new evidence on the merits of the subject matter of the administrative complaint, that justify changes to the circumstances under which the administrative act contained in letter No. IRG-DAyEU-V-R-2014-480, of May 21, 2014, was issued;

THAT through a document submitted to the Superintendence of Banks and Insurance on August 1, 2014, Mrs. Ángela Mercedes Avilés Gómez, Acting Commercial Manager of the National Bank of Development, Guayaquil Branch, filed a review appeal against the administrative act contained in letter No. IRG-DAyEU-V-R-2014-774, of July 14, 2014;

THAT Mrs. Ángela Mercedes Avilés Gómez, Acting Commercial Manager of the National Bank of Development, Guayaquil Branch, argued the following:

• That Mrs. Glenda Evangelina Camacho Mendoza did not apply basic security recommendations for the handling of the debit card, which were formally communicated to her via security flyers, ATM messaging, and transactional receipts;
• That the National Bank of Development is carrying out procedures so that the requested information is delivered to the Control Body by private financial institutions and thus attend to the request made by the Superintendence of Banks and

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Insurance, since not having access to the required videos, caused the information to be delivered partially;

• That the Control Body did not consider the abundant evidence provided by the National Bank of Development when issuing letters Nos. IRG-DAyEU-V-R-2014-774, of July 14, 2014 and IRG-DAyEU-V-R-2014-480, of May 21, 2014, without considering that the National Bank of Development has been the only one to collaborate with the control authority, presenting all the required documentation;

THAT through letter No. JB-2014-2120, of August 11, 2014, the Secretary of the Banking Board accepted the review appeal filed by the controlled institution for processing, and through letter No. JB-2014-2121, of August 11 of the same month and year, Mrs. Glenda Evangelina Camacho Mendoza was notified with its content;

THAT articles 52 and 66 of the Constitution of the Republic establish that people have the right to dispose of and access public and private services of optimal quality, as well as to receive non-misleading information about their content and characteristics; in virtue of this, the financial entity, upon receiving money from its clients, assumes the obligation and responsibility to keep and safeguard the deposited values with diligence and professional care;

THAT article 1 and letters b) and o) of article 180 of the General Law of Institutions of the Financial System determine that the Superintendence of Banks and Insurance, as the competent authority, has the function and attribution to ensure the stability, solidity, and correct functioning of institutions subject to its control; to supervise that they comply with the norms that govern them; and to require that said institutions present and adopt the corresponding corrective measures when necessary. Likewise, if the Superintendence of Banks and Insurance determines incorrect procedures by the controlled financial institutions that have caused harm to a claimant, it must act as ordered for those effects;

THAT article 5, chapter IV "Procedure for the attention of complaints against financial system institutions," title XX "Of the Superintendence of Banks and Insurance," Book I "General norms for the application of the General Law of Institutions of the Financial System" of the Codification of Resolutions of Banks and Insurance and the Banking Board, states:

"ARTICLE 5.- If the result of the analysis carried out by the Superintendence determines the need for the controlled institution to introduce corrections that guarantee the situation that motivated the complaint, the Superintendent of Banks and Insurance or the official who has the delegation of said authority will issue the corresponding disposition;

If the situation that motivated the complaint referred to in the previous paragraph originated in an incorrect procedure of the controlled institution, which has caused harm to the claimant, the Superintendence of

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Banks and Insurance may order the return of the claimed values, in exercise of the functions and attributions contemplated in letters b) and o) of article 180 of the General Law of Institutions of the Financial System, granting the legal representative of the entity a period that cannot exceed fifteen (15) days from the notification to submit, under the legal warnings, the proof of compliance with the order issued;

For complaints of unauthorized withdrawals due to evidence of attempts or frauds produced in ATMs, the Superintendence of Banks and Insurance will order the return of the claimed values to the credit card issuing institution or where the client maintains their account, if said withdrawals originated in an incorrect procedure of the controlled institution, which may repeat against the institution owning or operating the ATM due to whose defects or lack of security measures the fraud occurred";

THAT numeral 4 of article 4 of the Organic Law for the Defense of the Consumer determines that consumers have the right to have adequate, truthful, clear, and timely information about the goods and services offered in the market, as well as their prices, characteristics, quality, contracting conditions, and other relevant aspects of them, including the risks they may present. Therefore, financial institutions, when offering their financial products to their clients, are obligated to put at their service policies for disseminating the conditions surrounding them, including the security measures implemented and their possible risks when accessing said services through channels other than their own;

THAT from the documentation that forms part of the file, it is appreciated that the withdrawals subject to the complaint were carried out on November 1, 2013, and sum a total value of USD$ 200.00, which were carried out at ATMs of the interbank network BANRED. Regarding this, transferring exclusive responsibility to the client for the disputed transactions solely by the fact of having issued a debit card and PIN is not acceptable; since although there is a written agreement between the parties regarding deposits, fund withdrawals, credits, debits, and any other transaction permitted, carried out through electronic or electromagnetic means, it is no less true that the National Bank of Development has the obligation to safeguard the money delivered to its custody, in order to return it to the depositor when requested. Hence, the bank's responsibility consists of having physical and computer security in the ATM channel. Therefore, the bank, by stating that "(...) According to the review of notifications by the BANRED Security Committee, there are coincidences of possible compromise points in ATMs used (...)", leads to the conclusion that said vulnerability occurred due to a lack of security that the bank was required to implement;

THAT the National Bank of Development agreed with the client, under its responsibility, to use BANRED ATMs; therefore, the financial institution had to evaluate and require that the ATMs enabled for cash delivery have the necessary security measures in order to fulfill its obligation as custodian of its clients' money, thereby preventing the commission of electronic frauds that violate the patrimony of its clients. The claimed transactions are the ones indicated below:

ATM	DATE-TIME	AMOUNT	AUTHORIZATION	ACQUIRER	ACCOUNT
5055	01/11/2013 18:44	100	Banco Fomento	Banco Guayaquil	80257500
5055	01/11/2013 18:43	100	Banco Fomento	Banco Guayaquil	80257500

THAT it is not appreciated that the National Bank of Development carried out a complete, timely, and effective investigation into the complaint; on the contrary, it is appreciated that the request for information to the entity owning the ATM was made only after having been notified by the control body with the complaint presented by Mrs. Glenda Evangelina Camacho Mendoza; the aforementioned evidences that the financial institution failed to comply with what is established in article 12, of chapter V "Of the protection of the financial user, of information services and complaint attention"; title XIV "Code of transparency and of User Rights," Book 1 "General norms for the application of the General Law of Institutions of the Financial System" of the Codification of Resolutions of the Superintendence of Banks and Insurance and the Banking Board, that is, with the obligation that banks have to attend and resolve complaints and claims presented by their users within a period of 15 days;

THAT it has been evidenced that the National Bank of Development is subject to article 5 of chapter IV, title XX, book I of the Codification of Resolutions of the Superintendence of Banks and Insurance and the Banking Board, in virtue of having incurred in an incorrect procedure by not monitoring or implementing alerts on the movements occurring in the account, allowing the security controls of the debit card delivered by the bank to be violated. In virtue of what was stated, the National Legal Intendancy agrees with what was stated by the Regional Intendancy of Guayaquil in establishing the National Bank of Development as responsible for the unauthorized debits and those carried out from account No. 0080257500 for a total amount of USD$ 200.00, which caused economic harm to Mrs. Glenda Evangelina Camacho Mendoza;

THAT the National Legal Intendancy, through memorandum INJ-DNJ-SAL-2014-1063 of December 24, 2014, recommended to the Banking Board to reject the claim contained in the review appeal filed;

AND,

In exercise of its legal powers,

RESOLVES:

SINGLE ARTICLE.- REJECT the claim contained in the review appeal filed by Mrs. Ángela Mercedes Avilés Gómez, Acting Commercial Manager of the National Bank of Development, Guayaquil Branch; and, consequently,

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CONFIRM the administrative act contained in letter No. IRG-DAyEU-2014-774, of July 14, 2014, through which the Regional Intendancy of Guayaquil rejected the appeal for reconsideration filed and confirmed the administrative act contained in letter No. IRGDAyEU-V-R-2014-480, of May 21, 2014, in which it was ordered to the National Bank of Development to proceed to restore to Mrs. Glenda Evangelina Camacho Mendoza the sum of USD$ 200.00. The financial entity may repeat the collection of the aforementioned value against the bank owning the ATMs where the challenged transactions were carried out.

NOTIFY.- Given at the Superintendence of Banks, in Quito, Metropolitan District, on the twenty-seventh of May of two thousand fifteen.

(Signature) Econ. Rodrigo Landeta Parra GENERAL INTENDANT, S PRESIDENT OF THE BANKING BOARD, E

I CERTIFY.- Quito, Metropolitan District, on the twenty-seventh of May of two thousand fifteen.

(Signature) Lcdo. Pablo Cobo Luna SECRETARY OF THE BANKING BOARD