Banking Board of Ecuador

RESOLUTION No. JB-2015-3467

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 of 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 the norms issued by control bodies, will remain in force 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 claims, appeals, and other administrative procedures it was hearing as of the date of entry into force of the same, within a period of one hundred and 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 a communication, entered into the control body on January 31, 2014, Mr. Holger Oswaldo Campuzano Amat, filed a claim against Banco Nacional de Fomento, Guayaquil Branch, indicating the following: "(...), on December 22 (sic) of 2013 I went to the teller (sic) of Banco de Fomento, Babahoyo Branch to withdraw $260.00 from my savings account # 016025125-6, where the cashier (sic) told me that I could not perform said transaction because I did not have a balance (sic) in my account, so I went to the customer service of said Banking Institution and verified (sic) that indeed I did not have the money I had saved and subsequently they gave me a detailed report of card transactions where I found withdrawals that I had not made, withdrawals that have been made systematically from December 26, 2013 to January 03, 2014 at Automated Teller Machines (sic) (...) I request before this Institution, relying on my right as a citizen because my patrimony has been (sic) violated and for the security that Banking Institutions in the Country must provide, that my money stolen from my savings account, which is $ 2,331.85 US dollars (...), be returned to me;"

THAT by letter No. DAYEU-ISFP-REQ-2014-289 of February 12, 2014, the Regional Intendancy of Guayaquil admitted for processing the claim filed by Mr. Holger Oswaldo Campuzano Amat and requested information and defenses from the referred financial institution. Through letter No. 037-2014 of March 10, 2014, entered into the control body on the 11th of the same month and year, the economist Rodrigo Astudillo Tamayo, Acting Commercial Manager of Banco Nacional de Fomento, Guayaquil Branch, stated that the documentation corresponding to the case of Mr. Holger Oswaldo Campuzano Amat was attached to the letter, for the pertinent purposes;

THAT by letter No. IRG-DAYEU-V-R-2014-579 of June 11, 2014, the Regional Intendancy of Guayaquil, after the corresponding analysis regarding the claim, concluded and resolved as follows:

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c.1 From the video recordings of transactions made at the Automated Teller Machines of Banco del Austro S.A., it is not possible to visualize if the person performing the transactions (sic) is the claimant and if they are using a card with the financial entity's logo, because the videos are not clear.

c.2 From the video recordings of transactions made at the Automated Teller Machines of Banco Nacional de Fomento and Banco Pichincha C.A., it can be determined that there is a poor camera placement which does not allow verifying if the person performing the transactions is the claimant and if they are using a card with the financial entity's logo.

c.3 From the video recordings of transactions made at the Automated Teller Machines of the Cooperativa Policía Nacional and Banco de Guayaquil S.A., it can be determined that the videos submitted do not correspond to the disputed transactions, which does not allow verifying if the person performing the transactions is the claimant and if they are using a card with the financial entity's logo.

d) What is stated in the previous letter violates:

d.1) What is established in numerals 37.2 and 37.3 of article 37, of Section VIII, Chapter 1, Title II, Book I of the Codification of Resolutions of the Superintendence of Banks and Insurance and the Banking Board, (...)

e) From the documentation sent by Banco Nacional de Fomento, it is evident that the disputed withdrawals, through automated teller machines, charged to savings account No. 0160251256, were within the limits authorized by the financial entity, that is, US$ 300.00.

(...)

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

1. ACCEPT the claim filed by Mr. HOLGER OSWALDO CAMPUZANO AMAT, with citizenship ID No 1203413305, 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 Mr. HOLGER OSWALDO CAMPUZANO AMAT the sum of US$ 2,231.85 (...), debited from his savings account No. 0160251256 that he maintains in the aforementioned bank, on December 26, 27, 29, 30, 31, 2013 and January 1, 2, and 3, 2014, being able to exercise his right of recourse against the institutions owning the automated teller machines where the disputed withdrawals were made and send to this Office, within eight days, counted from the receipt of this letter, the documentation that accredits the compliance with this resolution.

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(...)

THAT by writing entered into the control body on June 27, 2014, the engineer Erika Palma Portilla, Commercial Manager of Banco Nacional de Fomento, Guayaquil Branch, filed an appeal for reconsideration against the administrative act contained in letter No. IRG-DAYEU-V-R-2014-579 of June 11, 2014;

THAT through letter No. IRG-DAYEU-V-R-2014-931 of August 28, 2014, the Regional Intendancy of Guayaquil analyzed the appeal for reconsideration and resolved that the writing and documentation presented did not provide new evidence regarding the merits of the administrative claim matter, nor did they motivate changes to the circumstances under which the administrative act contained in letter No. IRG-DAYEU-V-R-2014-579 of July 11, 2014 was issued, therefore, the Regional Intendancy of Guayaquil ratified the appealed letter;

THAT by writing entered into the Superintendence of Banks on September 9, 2014, the engineer Julio César Romero Villagómez, Acting Commercial Manager of Banco Nacional de Fomento, Guayaquil Branch, with the legal sponsorship of lawyers Nicolás Rodríguez Campos, María Angélica Pazmiño Muñoz, and Licenia Rizzo Zambrano, filed a review appeal against the administrative act contained in letter No. IRG-DAYEU-V-R-2014-931 of August 28, 2014;

THAT the engineer Julio César Romero Villagómez, Acting Commercial Manager of Banco Nacional de Fomento, Guayaquil Branch, argued the following:

• That Mr. Holger Oswaldo Campuzano Amat did not apply basic security recommendations for the handling of the debit card, which were formally communicated to him via security flexes, ATM messaging, transactional receipts, etc.;

• That Banco Nacional de Fomento is undertaking efforts so that the requested information is delivered to the control body by private financial institutions, thereby attending to the requirement made by the Superintendence of Banks and Insurance, since not having access to the required videos resulted in the information being delivered partially;

• That the control body, when issuing letter No IRG-DAYEU-V-R-2014-579, of June 11, 2014, did not consider the abundant evidence provided by the bank, considering additionally that it was the only financial institution that collaborated with the control authority, by presenting the documentation that was requested;

THAT through letter No. JB-2014-2456 of September 11, 2014, the Secretary of the Banking Board accepted the review appeal for processing and through letter No. JB-2014- 2457 of September 11 of the same month and year, notified Mr. Holger Oswaldo Campuzano Amat, with the content thereof;

THAT articles 52 and 66 of the Constitution of the Republic establish that persons 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

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characteristics; in such virtue, 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 Financial System Institutions, in force at the time, determine that the Superintendence of Banks and Insurance has the function and attribution to ensure the stability, solidity, and correct functioning of institutions subject to its control, monitoring 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 that there are incorrect procedures on the part of the controlled financial institutions that have caused harm to a claimant, it must act as ordered for those effects;

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

"ARTICLE 5.- If the result of the analysis performed by the Superintendence determines the need for the controlled institution to introduce corrective measures to regularize the situation that motivated the claim, the Superintendent of Banks and Insurance or the official who holds the delegation of said authority will issue the corresponding order.

If the situation that motivated the claim 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 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 Financial System Institutions, granting the legal representative of the entity a period that may not exceed fifteen (15) days from the notification to send, under the legal warnings, the proof of compliance with the order issued.

For claims of unauthorized withdrawals due to evidence of attempts or frauds produced in automated teller machines, the Superintendence of Banks and Insurance will order the return of the claimed values to the card-issuing institution or where the client maintains their account, if said withdrawals originated in an incorrect procedure of the controlled institution, which may then recourse against the institution owning or operating the automated teller machine due to whose defects or lack of security measures the fraud occurred."

THAT numeral 4 of article 4 of the Organic Law of Consumer Defense determines that consumers have the right to receive and 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 thereof, including the risks they may present, therefore, financial institutions when offering their financial products to their clients are obliged to put at

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their service policies for disseminating the conditions surrounding them, including the security measures implemented and their possible risks when accessing said services through electronic channels other than their own;

THAT from the documentation that forms part of the file, it is appreciated that the withdrawals subject to the claim were made on December 26, 27, 29, 30, 31, 2013 and January 1, 2, and 3, 2014, and sum a total value of USD$ 2,231.85, made at automated teller machines belonging to the BANRED interbank network. Regarding this, the bank shifting exclusive responsibility to the client for the transactions in dispute solely by virtue 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, made through electronic or electromagnetic means, it is no less true that Banco Nacional de Fomento 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 automated teller machine channel. Therefore, the bank when stating that: "(...) It should be noted that the client used automated teller machines of other financial institutions, which potentially could have been exposed to third-party manipulation. Taking into consideration the habitual nature of the withdrawal, the amounts, places, and times of their execution. It can be concluded that although the transactions claimed by the client presented an atypical pattern, it was not possible to determine a point of compromise of the client's card. (...)"; leads to the conclusion that such violation occurred due to lack of security in the automated teller machines belonging to the network; therefore, Banco Nacional de Fomento could not disclaim its responsibility for the service provided;

THAT Banco Nacional de Fomento agreed with the client, under its responsibility, the use of automated teller machines of the BANRED NETWORK, so the financial institution had to evaluate and require that the machines 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;

THAT from the Claim Review Report, signed by engineer Roberto Silva, Submanager of Operational Risk, of Banco Nacional de Fomento, it is evident that the withdrawals subject of the present claim present an atypical pattern, which implies that the bank failed to comply with "Know Your Customer" policies, whose purpose is for each financial institution to have sufficient and necessary information about the transactional profile and behavior of each of its clients from the start of the commercial relationship, thereby preventing not only money laundering, but other types of crimes; therefore, Banco Nacional de Fomento failed the obligation to implement procedures to monitor and control financial operations, as well as to issue alarms that inform timely about the status of electronic channels, in order to identify unusual and fraudulent events in a timely manner, as established in article 21 and following of chapter IV "Norms for financial system institutions on anti-money laundering, counter-terrorism financing, and other crimes"; of title XIII "Of Internal Control", book I "General norms for financial system institutions" of the Codification of Resolutions of the Superintendence of Banks and Insurance and the Banking Board;

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THAT from the preceding analysis, it has been evidenced that Banco Nacional de Fomento is subject to article 5 of chapter, title XX, book I of the Codification of Resolutions of the Superintendence of Banks and Insurance and the Banking Board, by virtue of having incurred an incorrect procedure by not monitoring nor implementing timely alerts on the movements occurring in the account, allowing the security controls of the debit card issued by the bank to be violated. By virtue of what was stated, the National Legal Intendancy agrees with what was stated by the Regional Intendancy of Guayaquil in establishing Banco Nacional de Fomento as responsible for the unauthorized debits made from savings account No. 0160251256 for an amount of USD$ 2,231.85, which caused economic harm to Mr. Holger Oswaldo Campuzano Amat;

THAT the National Legal Intendancy, through memorandum INJ-DNJ-SAL-2015-0131 of February 5, 2015, recommended to the Banking Board to reject the claim contained in the appeal filed by the Acting Commercial Manager of Banco Nacional de Fomento, Guayaquil Branch; and,

IN exercise of its legal powers,

RESOLVES:

SINGLE ARTICLE.- REJECT the claim contained in the review appeal filed by engineer Julio César Romero Villagómez, Acting Commercial Manager of Banco Nacional de Fomento, Guayaquil Branch; CONFIRM the administrative act contained in letter No. IRG-DAYEU-2014-931 of August 28, 2014, through which the Regional Intendancy of Guayaquil rejected the appeal for reconsideration filed and confirmed the administrative act contained in letter No. IRG-DAYEU-V-R-2014-579 of June 11, 2014; and, consequently ORDER Banco Nacional de Fomento to proceed to restore to Mr. Holger Oswaldo Campuzano Amat the sum of USD$ 2,231.85.

NOTIFY.- Given at the Superintendence of Banks and Insurance, in Quito, Metropolitan District, on June 4, 2015.

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

I CERTIFY.- Quito, Metropolitan District, on June 4, 2015.

Lcdo. Pablo Cobo Luna
SECRETARY OF THE BANKING BOARD