Resolution No. JB-2015-3463 of the Banking Board of Ecuador

Banking Board of Ecuador RESOLUTION No. JB-2015-3463 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 Compilation of Resolutions of the Superintendence of Banks and Insurance and the Banking Board, and the norms issued by control bodies, will remain in force in all that does 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 handling on 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;

THAT from the aforementioned provisions, it is established that the Banking Board is competent to resolve the present review appeal;

THAT Mr. Miguel Ángel Maldonado Pañora, through a complaint form, filed on December 3, 2013, at the Regional Intendancy of Guayaquil, a complaint against the Banco Nacional de Fomento, regarding various withdrawals made through ATMs of various financial institutions, which he stated he had not made; therefore, he requested the respective investigation and the refund of his money. In the complaint filed against the aforementioned bank, on the 2nd of the same month and year, he objected to the withdrawals made through this electronic channel, from November 16 to December 2, 2013, for an amount of USD 3,989.35;

THAT by letter No. DAYEU-ISFP-REQ-2013-1760 of December 19, 2013, the Director of User Attention and Education of the Regional Intendancy of Guayaquil, requested the Zonal Manager of Banco Nacional de Fomento Guayaquil, to send the explanations and defenses regarding the present complaint; a matter that was communicated to the complainant by the same means;

THAT by letter number 014-2014 of January 21, 2014, the Acting Zonal Commercial Manager of Guayaquil, of Banco Nacional del Fomento, presented part of the information required by the control body, offering to send, as an addendum, the remaining part;

THAT by letter No. IRG-DAyEU-V-R-2014-343 of April 30, 2014, the Regional Intendant of Guayaquil, resolved:

"1.- ACCEPT the complaint filed by Mr. MIGUEL ANGEL MALDONADO PAÑORA, with citizenship ID No. 030118500-5, against the controlled financial institution BANCO NACIONAL DE FOMENTO, for the reasons stated in the sixth section of the present letter.

2.- ORDER the controlled financial institution BANCO NACIONAL DE FOMENTO to proceed to restore to Mr. MIGUEL ANGEL MALDONADO PAÑORA, the sum of US $ 4,480.85 (FOUR THOUSAND FOUR HUNDRED EIGHTY WITH 85/100 DOLLARS OF THE UNITED STATES OF AMERICA) debited from savings account No. 0840100838, which he maintains in the aforementioned bank, for the months of October, November, December 2013, being able to exercise his right of recourse against the [sic]

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financial institutions owning the ATMs where the disputed withdrawals occurred, and send to this Office, within eight days, counted from the receipt of this letter, the documentation that accredits the compliance with this resolution. (...)";

THAT by writing received at the control body on May 15, 2014, the Commercial Manager of Banco Nacional de Fomento, El Triunfo Branch, filed a request for reconsideration against letter No. IRG-DAyEU-V-R-2014-343 of April 30, 2014;

THAT the Regional Intendant of Guayaquil, in letter No. IRG-DAYEU-2014-846 of August 5, 2014, issued his resolution within the request for reconsideration filed, ordering: "REJECT the claim contained in the request for reconsideration filed by BANCO NACIONAL DE FOMENTO; and, consequently, CONFIRM the administrative act contained in Letter No. IRG-DAyEU-V-R-2014-343, of May 30, 2014.";

THAT by communication entered in the Superintendence of Banks and Insurance on August 18, 2014, engineer Enrique Arce Icaza, Commercial Manager of Banco Nacional de Fomento - El Triunfo Branch, with the professional sponsorship of lawyer Nicolás Rodríguez Campo, filed before the Banking Board a review appeal against the administrative act contained in letter No. IRG-DAyEU-V-R-2014-846 of August 5, 2014, pointing out as arguments the responsibilities stipulated in clauses fourth and eighth of the agreement celebrated between the savings account holder and the bank; that it was made known to the Regional Intendant of Guayaquil that Banco Nacional de Fomento is permanently carrying out procedures in order for the requested information to be delivered to the control body, since without access to those files they are subject to entities having less predisposition than others, which has caused the information to be delivered partially by said entity; that the evidence provided by Banco Nacional de Fomento through the documentation sent to the body regarding the client's complaint was not considered for resolution;

THAT by letter No. JB-2014-2287 of August 25, 2014, the Secretary of the Banking Board, communicated to the appellant that the referred review appeal has been accepted for processing; and by letter No. JB-2014-2288 of the same date, communicated the matter to Mr. Miguel Ángel Maldonado Pañora;

THAT by letter No. IRG-DAYEU-2014-302 of September 29, 2014, in attention to letter No. SAL-2014-00242 of September 9, 2014, the Regional Intendant of Guayaquil, sent the respective technical report, in which he ratified the resolution issued in the appealed letter;

THAT article 1, in concordance with article 180, letters b) and o) of the General Law of Institutions of the Financial System, in force at the date of the event, contemplated among the functions and attributions of the Superintendence of Banks and Insurance, within the orbit of its competence, the supervision and control of the financial system, keeping in mind the protection of the interests of the public, as well as requiring that controlled institutions present and adopt the corresponding corrective measures;

THAT in that line, the Banking Board, with the purpose of achieving effective compliance with the provisions emanating from both the control body and the collegiate body, integrated into chapter IV, of title XX, of book I, of the Compilation of Resolutions of the Superintendence of Banks and Insurance and the Banking Board, the procedure for the attention of complaints against institutions of the financial system, always attentive to the protection of the interests

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of the public as mandated by law, whose article 5 establishes that if the result of the analysis carried out by the Superintendence determines the need for the controlled institution to introduce corrective measures that regularize the situation that motivated the complaint, the Superintendent of Banks and Insurance or his delegate will issue the corresponding disposition. Likewise, if the situation that motivated the complaint referred to in the previous paragraph originated in an incorrect procedure of the controlled institution, which caused harm to the complainant, the Superintendence of Banks and Insurance may order the return of the claimed values, granting the legal representative of the entity a period that cannot exceed fifteen (15) days from the notification to send, under the precautions of law, the proof of compliance with the order issued;

THAT for complaints of unauthorized withdrawals due to evidence of attempts or frauds produced in ATMs, the control body will order the return of the claimed values to the institution where the client maintains the account, if said withdrawals originated in an incorrect procedure of the controlled institution, which may then recourse against the institution owning and operating the ATM due to whose defects or lack of security measures the fraud occurred;

THAT from letter number 014-2014, of January 21, 2014, it is appreciated that Banco Nacional de Fomento, although it sends information, does so partially, therefore its assertion that it attended the requirements of the control body becomes inappropriate, given that it tried to disclaim its responsibility regarding the complaint with the argument that the ATMs where the withdrawals were made belong to other banks. In any case, the sending of a detailed historical log of movements of transactions carried out on Mr. Miguel Ángel Maldonado Pañora's account is not appreciated, where the alerts of the operations being executed, whether by email messages or cellular telephone, and more informative data of said transactions can be appreciated;

THAT the "CONFIDENTIAL REVIEW REPORT", of January 6, 2014, issued by the Operational Risk Manager, states: "in the complaint review process it was determined that the transactions were carried out normally and it was not possible to determine irregularities because the client used ATMs of other Financial Institutions, which potentially could have been exposed to third-party manipulation. (...) Taking into consideration the habitual nature of withdrawals, the amounts, place, and times of their execution, it [sic] cannot be concluded that although the transactions claimed by the client show a change of locality, it was not possible to determine a point of compromise of the client's card. (...) It is recommended that the Customer Attention Unit review if it meets the requirements to apply the "Secure Transaction" insurance to this case, as established by BANRED.";

THAT from the report of withdrawals made in the client's account, from January 14, 2013, to October 24, 2013, transactions made from ATMs located only in the city of El Triunfo are observed. From November 16, 2013, to December 1, 2013, transactions for the concept of forty-seven withdrawals made through different ATMs of various financial institutions located in the city of Quito were processed; according to the report of Banco Nacional de Fomento, these correspond to banks of Austro, Pacífico, Guayaquil, Internacional, Unibanco, Pichincha, and Cooperativa Policia Nacional, transactions that are registered as authorized by Banco Nacional de Fomento, the depository institution of Mr. Miguel Ángel Maldonado Pañora's account. The cited report evidences that the withdrawals demonstrate a uniform behavior during the period questioned by the client, that is, three withdrawals are executed daily, two for one hundred dollars; and, one

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for ninety dollars, which reached the daily limit indicated by the bank to carry out these transactions;

THAT the appellant argued that the client did not apply basic security recommendations for the handling of the debit card; however, from the review and analysis of the defenses presented by the bank and the documentation that supported the appeal in question, even though it referred to the content of the agreement signed by the client with the bank, brochures, and others, there is no evidence of record that the user failed to observe the custody of his card and the key of his debit card, more so, when the bank did not present, within the complaint investigation, information of the video recordings of the transactions in dispute, added to which, the Bank's Operational Risk Report of January 6, 2014, in which it derives the exposure to risk of the questioned transactions to the fact that these were made in ATMs of other financial institutions that potentially "could have been exposed to third-party manipulation." In any case, the bank argued that not having access to the files of the entities in whose ATMs the transactions were processed has caused that information to be delivered to the control body partially, an argument that does not disprove the obligation of Banco Nacional de Fomento to the custody of the funds deposited in said financial institution by the client, under the contract signed between the parties, which was based on article 51 of the General Law of Institutions of the Financial System, in force at the date of the claimed event;

THAT the user and/or client of the financial system, under the protection of the Constitution and the Law, has the right to access public and private goods and services of quality, with efficiency, effectiveness, and good treatment, as well as to receive adequate and truthful information about their content and characteristics; Banco Nacional de Fomento, by offering as a financial service the withdrawal of funds through ATMs, is obliged that these, whether own or contracted, provide optimal security, among others, physical, mechanical, or electronic, referred not only to the use of the assigned key but to the inviolability of the debit card delivered to the client, in order to fulfill its obligation to return the deposited funds to its legitimate owner;

THAT from the file formed around the complaint and resources presented, it is evident that the appealed letter complied with due process, for this reason, it is not appropriate for the client to argue nullity of the appealed letter, having considered for resolution the documentation and defenses provided by Banco Nacional de Fomento;

THAT from the preceding considerations, an incorrect procedure of Banco Nacional de Fomento is observed in not providing the respective security to the transactions in dispute, through the ATM network, placed as a financial service for the client's use, by not monitoring nor implementing alerts on the movements that were occurring in the account entrusted to its custody, allowing the security controls of the debit card delivered by the bank to the client to be violated, which caused him economic harm, consequently, the budget established in article 5, section I, chapter IV, title XX, book I of the Compilation of Resolutions of the Superintendence of Banks and Insurance and the Banking Board is met, for the control body to order the return of the values in dispute;

THAT Mr. Miguel Ángel Maldonado Pañora asked in his complaint to the Superintendence that Banco Nacional de Fomento refund to his savings account the amount of US$ 3,989.35, for several withdrawals made, without his consent, through ATMs; from the review of what was requested, and taking into consideration the transaction record, it is appreciated that said sum agrees with the values questioned by the complainant;

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THAT the National Legal Intendancy, through memorandum INJ-DNJ-SAL-2015-0050 of January 22, 2015, recommended to the Banking Board to reject the claim contained in the appeal filed by the Commercial Manager of Banco Nacional de Fomento, El Triunfo Branch; and,

IN exercise of its legal attributions,

RESOLVES:

SOLE ARTICLE.- REJECT the claim contained in the review appeal filed by engineer Roberto Enrique Arce Icaza, Commercial Manager of Banco Nacional de Fomento, El Triunfo Branch; and, PARTIALLY CONFIRM the administrative act contained in letter No. IRG-DAyEU-V-R-2014-846 of August 5, 2014, issued by the Regional Intendant of Guayaquil, since the amount to be refunded to the client is US$ 3,989.35; consequently, it must be ORDERED to BANCO NACIONAL DE FOMENTO to proceed to restore to Mr. MIGUEL ÁNGEL MALDONADO PAÑORA, the sum of US$ 3,989.35, for the withdrawals made from November 16 to December 1, 2013, through ATMs of various financial institutions and debited from savings account No. 0840100838.

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

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

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

[Signature] Lcdo. Pablo Cobó Luna SECRETARY OF THE BANKING BOARD