Banking Board Resolution JB-2015-3465

Banking Board of Ecuador

RESOLUTION No. JB-2015-3465

THE BANKING BOARD

CONSIDERING:

THAT through a complaint submission form addressed to entities under the control of the Superintendency of Banks, dated November 18, 2013, Ms. Sonia Mariana Córdova Rodríguez filed a complaint against the National Bank for Development (Banco Nacional de Fomento) with the aim that the regulatory body order the aforementioned financial institution to return the sum of "5,370.25" for unauthorized withdrawals made via an automated teller machine (ATM). The complainant asserts that she was a victim of debit card cloning; and that the National Bank for Development does not have timely and effective security measures to prevent such irregularities;

THAT the Regional Intendancy of Guayaquil, through letter No. IRG-DAyEU-V-R-2014-309 of April 15, 2014, resolved as follows: "(...) 2. ORDER the NATIONAL BANK FOR DEVELOPMENT to proceed to return to Ms. SONIA MARIANA CÓRDOVA RODRÍGUEZ the sum of (...) (US$5,370.25) (...) debited from savings account No. 0-15013371-7 (...)";

THAT through communication entered into the Superintendency of Banks on May 7, 2014, the National Bank for Development filed an appeal against letter No. IRG-DAyEU-V-R-2014-309 of April 15, 2014, which was rejected with letter No. IRG-DAyEU-V-R-2014-888 of August 13, 2014;

THAT through communication entered into the Superintendency of Banks on August 25, 2014, the economist Ángela Mercedes Avilés Gómez, Commercial Manager of the National Bank for Development, acting in charge, filed before the Banking Board an appeal against letter No. IRG-DAyEU-V-R-2014-888 of August 13, 2014;

THAT the customer delivers money to a financial institution with the option to withdraw it, in part or in full, at the time she requires it, while the depositary entity assumes the obligation to keep or safeguard the deposited funds and to satisfactorily attend to all withdrawal operations requested by the holder, with diligence and professional care;

THAT integral risk management is one of the responsibilities attributed to institutions that are part of the Financial System; as determined by the Compilation of Resolutions of the Superintendency of Banks and Insurance and the Banking Board, in articles 2 and 3 of Chapter I, Title X, Book I;

THAT from the analysis of the confidential review report of November 4, 2013, signed by Mr. Roberto Silva, Submanager of Operational Risk at the National Bank for Development, it is evident that "the customer accessed ATMs of other Banks where there may have been a possible compromise of her debit card information. It is recommended to the customer, for her security, to apply minimum protection measures for her information when making withdrawal transactions at other banking institutions (...)";

THAT in virtue thereof, it is evident that the financial institution disclaims all responsibility for transactions made at ATMs associated with BANRED and totally delegates to its customer the adoption of security measures to avoid infractions such as the present one. The financial institution also fails to determine with precision possible culpable or intentional acts or omissions by the customer that facilitated the execution of the objected transactions, as it limits itself to stating that Ms. Sonia Córdova Rodríguez should have complied with "minimum security measures," without detailing and documenting what her failures were;

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Banking Board of Ecuador Resolution No. JB-2015-3465 Page 2

THAT it is not appropriate to hold Ms. Sonia Mariana Córdova Rodríguez responsible for the cloning of her debit card, based solely on the fact that the complainant used the card at ATMs of banks associated with BANRED, that is, in the manner she was contractually authorized to do so; such a situation, by itself, does not constitute non-observance of the obligation to care for the card and keep the PIN confidential, nor does it exonerate the banking entity from its obligation to be a guarantor and custodian of the money deposited with it, nor does it transfer to the user the risks inherent to the organization and execution of the ATM service;

THAT it is worth highlighting that the contracts entered into between the institutions of the financial system and BANRED, among other service providers, with the aim of providing their customers with broader ATM coverage, are the exclusive responsibility of such entities, and they cannot transfer the operational risk of said service to users, such as Ms. Sonia Mariana Córdova Rodríguez, since this is offered on behalf of and as part of the facilities granted by banking entities to their customers;

THAT the use by Ms. Sonia Mariana Córdova Rodríguez of the ATMs of BANRED cannot be assimilated as an error, misuse, negligence, or breach, by the complainant, of the obligations to safeguard the debit card with utmost diligence and to keep the respective PIN confidential, nor did it transfer to her the risks inherent to the organization and execution of the service supplied by the National Bank for Development, nor does it exonerate the banking entity from its obligation to be a guarantor and custodian of the money deposited with it;

THAT the order to return values to the customer, in the face of a complaint such as the one at hand, has legal basis in Article 5, of Chapter IX, Title XX, Book I, of the Compilation of Resolutions of the Superintendency of Banks and Insurance and the Banking Board, when the regulatory body detects an incorrect procedure in the management of the financial institution. In light of the criteria expressed by lawyer Humberto Moya González, Regional Intendant of Guayaquil, as stated in letters Nos. IRG-DAyEU-V-R-2014-309, IRG-DAyEU-V-R-2014-888, and IRG-DAYEU-2014-313 of April 15, August 13, and October 7, 2014, respectively, the incorrect procedure in which the financial institution incurred consists of the following: "From the confidential review report transcribed, it is inferred that in the present case there was probably cloning of the debit card of Ms. Sonia Mariana Córdova Rodríguez, and that the decision of the National Bank for Development not to order the return of the withdrawals disputed by the complainant is based on the fact that the user accessed ATMs of other banks associated with BANRED (...) According to the entity, the possible cloning occurred when the user may have compromised her card information when transacting at ATMs associated with the Interbank Network of Automated Teller Machines (...)";

THAT it must be noted that through communication entered into the Superintendency of Banks on September 23, 2014, the National Bank for Development informed about a credit note issued in favor of Ms. Sonia Mariana Córdova Rodríguez as a consequence of the BANRED insurance, for a value of USD $300.50, which exposes that there was an acknowledgment of the incorrect procedure in safeguarding the user's money;

THAT the National Legal Intendancy, through memo INJ-DNJ-SAL-2015-0149 of February 9, 2015, recommended to the Banking Board to reject the claim contained in the appeal filed by the Commercial Manager of the Development Bank, acting in charge; and,

In exercise of its legal powers,

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Banking Board of Ecuador Resolution No. JB-2015-3465 Page 3

RESOLVES:

SINGLE ARTICLE.- REJECT the petition contained in the appeal filed; and, consequently, PARTIALLY RATIFY letter No. IRG-DAyEU-V-R-2014-888 of August 13, 2014, with the caveat that the value to be returned to the user, part of the referenced financial institution, is USD $5,069.75, due to the credit note issued by the National Bank for Development in favor of Ms. Sonia Mariana Córdova Rodríguez as a consequence of the BANRED insurance.

NOTIFY.- Given at the Superintendency of Banks and Insurance, in Quito, Metropolitan District, on the fourth of June of the two thousand fifteen.

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

I CERTIFY.- Quito, Metropolitan District, on the fourth of June of the two thousand fifteen.

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

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Banking Board of Ecuador