Banking Board of Ecuador

RESOLUTION No. JB-2015-3455

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 recorded 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 conflict with the provisions of the Organic Monetary and Financial Code, until the Monetary and Financial Policy and Regulation Board resolves as appropriate in each 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 as of the effective date of said code, within a period of one hundred 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 through a complaint form submitted to the Regional Intendancy of Guayaquil on December 16, 2013, and a follow-up communication on March 31, 2014, Mr. Francisco Urbano Chimbo de Lucca filed a complaint against Banco Nacional de Fomento, Guayaquil Main Branch, in the following terms: "Suspecting that my balance in my savings account No. 0230214082 at Banco Nacional de Fomento does not match the bank's records, [sic] on 12/9/2013 I requested a transaction report and found withdrawals I did not make from November 23, 2013 to December 8, 2013, totaling $4,440.00 dollars";

THAT through letters No. DAYEU-ISFP-REQ-2014-015 of January 3, 2014, and DAYEU-ISFP-REQ-2014-496 of March 21, 2014, the Director of User Attention and Education of the Regional Intendancy of Guayaquil requested the Zonal Manager of Banco Nacional de Fomento Guayaquil to submit explanations and defenses regarding the present complaint; a matter communicated to the complainant through the same channel;

THAT through letter No. 044-2014 of April 3, 2014, the Acting Zonal Commercial Manager of Guayaquil of Banco Nacional de Fomento submitted part of the information requested by the control body, offering to submit the remainder as a follow-up;

THAT through a communication submitted to the Superintendence of Banks and Insurance on April 10, 2014, Mr. Francisco Urbano Chimbo de Lucca informed the control body that he had received from Banco Nacional de Fomento the letter of February 24, 2014, responding to his complaint, in which he stated he did not agree with the bank's report, as "the report does not demonstrate that the withdrawals were made via ATMs and another method";

THAT through letter No. IRG-DAYEU-V-R-2014-345 of April 29, 2014, the Regional Intendant of Guayaquil resolved:

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"1.- ACCEPT the complaint filed by Mr. FRANCISCO URBANO CHIMBO DE LUCCA, with citizenship card No. 0906160676, against the controlled financial institution BANCO NACIONAL DE FOMENTO, based on the analysis set forth in section six of the present letter.

2.- ORDER BANCO NACIONAL DE FOMENTO to proceed to reimburse Mr. FRANCISCO URBANO CHIMBO DE LUCCA the sum of FOUR THOUSAND EIGHT HUNDRED SIXTY-TWO WITH 35/100 UNITED STATES DOLLARS (US$4,862.35) debited from savings account No. 0230214582, which he holds at the aforementioned bank, and he may exercise his right of recourse against the institutions owning the ATMs where the disputed withdrawals occurred, and submit to this Office, within eight days counted from receipt of this letter, the documentation that proves compliance with this resolution. (...)";

THAT through a document received by the control body on May 15, 2014, the General Manager of Banco Nacional de Fomento filed a motion for reconsideration against letter No. IRG-DayEU-V-R-2014-345 of April 29, 2014;

THAT through letter No. IRG-DAYEU-V-R-2014-797 of July 16, 2014, the Regional Intendant of Guayaquil resolved: "REJECT the claim contained in the motion for reconsideration filed by BANCO NACIONAL DE FOMENTO; and, consequently, CONFIRM the administrative act contained in Letter No. IRG-DAYEU-V-R-2014-345, of April 29, 2014.";

THAT through a communication submitted to the Superintendence of Banks and Insurance on July 30, 2014, Mgr. Ángela M.A. Avilés Gómez, Commercial Manager of Banco Nacional de Fomento – Guayaquil (Acting), with the professional sponsorship of lawyer Nicolás Rodríguez Campos, filed before the Banking Board a review appeal against the administrative act contained in letter No. IRG-DAYEU-V-R-2014-797 of July 16, 2014; based on the following arguments: that Banco Nacional de Fomento has submitted the information requested by the Regional Intendant of Guayaquil, evidence that was not considered to resolve the motion for reconsideration; that "the client, Mr. Francisco Urbano Chimbo de Lucca, did not apply basic security recommendations for handling the debit card, which were formally communicated to him, all of which is duly justified [sic]"; that the bank reviewed the case, identifying the different withdrawals allegedly made from his savings book at financial institutions, and could have identified at that time that withdrawals not made by the affected person had been recorded in said book, which would have allowed him to prevent further transactions; that the Regional Intendant of Guayaquil was informed that Banco Nacional de Fomento is permanently carrying out procedures to ensure the requested information is delivered to the control body, as without access to those files they are subject to varying levels of predisposition among entities, which has resulted in partial delivery of information by said entity; that since being notified of the administrative complaint, the bank has been the only entity to cooperate with the control authority by presenting the required documentation and executing pertinent actions, categorically demonstrating that the new elements provided in this administrative complaint do change the circumstances upon which the resolution contained in letter IRG-DAYEU-V-R-2014-797 of July 16, 2014 was based;

THAT through letter No. JB-2014-2108 of August 7, 2014, the Secretary of the Banking Board informed the appellant that the aforementioned review appeal had been accepted for processing; and through letter No. JB-2014-2109 of the same date, informed Mr. Francisco Urbano Chimbo de Lucca of the matter;

THAT Article 1, in conjunction with Articles 180(b) and (o) of the General Law of Financial System Institutions, included among the functions and powers of the Superintendence of Banks and Insurance, within its competence, the supervision and control of the financial system, keeping in mind the protection of public interests, as well as requiring controlled institutions to present and adopt corresponding corrective measures;

THAT the Banking Board, with the purpose of ensuring effective compliance with provisions emanating from both the control body and the collegiate body, integrated into Chapter IV, Title XX, Book I of the Codification of Resolutions of the Superintendence of Banks and Insurance and the Banking Board, the procedure for handling complaints against financial system institutions, always attentive to the protection of public interests as mandated by law, whose Article 5 establishes that if the result of the analysis conducted by the Superintendence determines the need for the controlled institution to introduce corrective measures to regularize the situation that motivated the complaint, the Superintendent of Banks and Insurance or his delegate will issue the corresponding order. Likewise, if the situation that motivated the aforementioned complaint originated from an incorrect procedure by the controlled institution that 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 shall not exceed fifteen (15) days from notification to submit, under legal warnings, proof of compliance with the issued order;

THAT through letter No. DAYEU-ISFP-REQ-2014-496 of March 14, 2014, the control body insisted on the sending of the requested information, granting the banking institution an additional period to submit defenses regarding the complaint of Mr. Francisco Urbano Chimbo de Lucca, noting that in case the requested documented justifications are not submitted, the control body will resolve with the information at its disposal;

THAT from letter No. 044-2014 of April 3, 2014, it is observed that Banco Nacional de Fomento, while submitting information, does so partially; therefore, its assertion that it complied with the control body's requirements is unfounded, given that it attempted to disclaim its responsibility regarding the complaint by arguing that withdrawals were made at other financial institutions and that the respective files could not be obtained. In any case, no detailed historical log of movements of transactions performed on Mr. Francisco Urbano Chimbo de Lucca's account is observed, where alerts of failed operations, whether via email or cellular phone messages, and more informative data on said transactions could be seen;

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THAT the appellant argued that the client did not apply basic security recommendations for handling the debit card; however, from the review and analysis of the defenses presented by the bank and the documentation supporting the pending appeal, even though reference was made to the content of the agreement signed by the client with the bank, brochures, and others, there is no evidence that the user failed to safeguard his card and debit card PIN;

THAT Banco Nacional de Fomento, in letter No. 044-2014 of April 3, 2014, stated that the daily withdrawal limit authorized for ATM withdrawals for BNF clients is USD 300.00 and for BANRED clients is USD 100.00 per withdrawal. From the "Detailed Transaction Report OK card 6031600088032386", it is observed that in the period from November 23 to December 8, 2013, withdrawals of up to USD 300.00 daily were made, meaning the limit assigned to the card for this purpose was not exceeded; however, it is noted that withdrawals were executed daily and three times each, until reaching said limit. The bank determined: "TOTAL STOLEN DEDUCTED RATE AND VAT 4440.30";

THAT part of the bank's defense letter is the "CONFIDENTIAL REVIEW REPORT" of January 28, 2014, presented by the Deputy Managers of Operational Risk of Banco Nacional de Fomento, which states, on the one hand, that from the review of the complaint it was determined that the transactions were carried out normally and it was not possible to determine irregularities where the client used ATMs of other financial institutions, which may have been exposed to third-party manipulation, and subsequently states that "Taking into consideration the habitual nature of withdrawals, the amounts, location, and timing of their execution. It can be concluded that although the transactions claimed by the client present an atypical pattern, it was not possible to determine a compromise point of the client's card"[sic];

THAT numeral 4.3.4.8.10 "Security measures in electronic channels", numeral 4.3 "Information Technology", article 4, "Operational risk factors", chapter V "On operational risk management", title X "On risk management and administration", book I "General norms for the application of the General Law of Financial System Institutions", of the Codification of Resolutions of the Superintendence and the Banking Board, in effect at the date of the event, states: "(...) 4.3.8.10 Institutions must establish control procedures and mechanisms that allow recording each client's profile regarding their habits, transactions in the use of electronic channels and cards, and define procedures to monitor online and allow or reject in a timely manner the execution of transactions that do not correspond to their habits, which must be immediately notified via mobile messaging, email, or another mechanism (...)";

THAT Banco Nacional de Fomento stated that as of May 1, 2013, it has the Secure Transaction Insurance, issued by BANRED when clients use ATMs that do not belong to the card-issuing institutions themselves, insurance that applies based on established conditions;

THAT the bank, by arguing that the client could have reviewed the transactions in a timely manner, identifying the different withdrawals allegedly made from his savings book at financial institutions, which would have allowed him to prevent further transactions,

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lacks merit, given that Banco Nacional de Fomento, having become the custodian of the funds deposited by the client under Article 51 of the General Law of Financial System Institutions, has the obligation to reimburse them upon request by the owner or account holder, exercising due diligence to safeguard the client's assets;

THAT the user and/or client of the financial system, under 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 fund withdrawal through ATMs as a financial service, is obligated to ensure that these, whether owned or contracted, provide optimal security, among others, physical, mechanical, or electronic, referring not only to the use of the assigned PIN but also to the inviolability of the magnetic card delivered to the client, in order to fulfill its obligation to return deposited funds for custody to their legitimate owner; given that the file does not show that the bank has disproven, through the investigation of videos of the disputed transactions, the fact that apparently different persons than Mr. Francisco Urbano Chimbo de Lucca appear at the ATMs to carry out the transactions, as the client claimed; consequently, it is unfounded to disclaim the bank's responsibility as custodian of its clients' money;

THAT for the aforementioned reasons, an incorrect procedure by Banco Nacional de Fomento is observed for not providing the respective security for the disputed transactions through the ATM network made available as a financial service to the client, having allowed the bank's system to carry out around fifty withdrawals determined as "atypical" or unusual, as the bank stated, without any notification or alert delivered to the savings account holder, which caused him economic harm; therefore, the requirement established in Article 5, Section I, Chapter IV, Title XX, Book I of the Codification of Resolutions of the Superintendence of Banks and Insurance and the Banking Board is met;

THAT the National Legal Intendancy, through memorandum INJ-DNJ-SAL-2015-0045 of January 21, 2015, recommended to the Banking Board to reject the claim contained in the appeal filed by the Commercial Manager of Banco Nacional de Fomento Guayaquil (Acting); and,

IN exercise of its legal powers,

RESOLVES:

SINGLE ARTICLE.- REJECT the claim contained in the review appeal filed by Mrs. Mges. Ángela Mercedes Avilés Gómez, Commercial Manager of Banco Nacional de Fomento Guayaquil (Acting); and, consequently, CONFIRM the administrative act contained in letter No. IRG-DAYEU-V-R-2014-797 of July 16, 2014, by which the Regional Intendant of Guayaquil resolved: "REJECT the claim contained in the motion for reconsideration filed by BANCO NACIONAL DE FOMENTO; and, consequently, CONFIRM the administrative act contained in Letter No. IRG-DAYEU-V-R-2014-345, of April 29, 2014.", in which it ordered the aforementioned bank to proceed

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to reimburse Mr. Francisco Urbano Chimbo De Lucca the sum of US$ 4,862.35 debited from savings account No. 0230214582, which he holds at the aforementioned bank, without prejudice to the actions that the appellant deems appropriate to exercise against third parties through whom the service was provided.

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 (Acting)

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

Lcdo. Pablo Cobo Luna
SECRETARY OF THE BANKING BOARD