Banking Board Resolution JB-2015-3515

Banking Board of Ecuador

RESOLUTION NO. JB-2015-3515

THE BANKING BOARD

WHEREAS:

THAT this appeal is resolved in accordance with the First Transitory Provision of the Organic Monetary and Financial Code, published in Official Register Second Supplement No. 332, dated September 12, 2014, whose text states that resolutions recorded in the Codification of Resolutions of Banks and Insurance Companies and of the Banking Board, as well as regulations issued by control bodies, shall remain in force to the extent they do not conflict with 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 Transitory Provision, which states that the Banking Board shall continue to act until it resolves all claims, appeals, and other administrative proceedings pending as of the effective date of said Code, within a period of one hundred eighty (180) days, extendable at the discretion of the Monetary and Financial Policy and Regulation Board;

THAT by Resolution No. 054-2015-F, published in the Official Register Supplement No. 467, dated March 26, 2015, the Monetary and Financial Policy and Regulation Board extended by one hundred eighty (180) additional days the deadline for the Banking Board to continue acting and resolve all claims, appeals, and other administrative proceedings within its competence;

THAT by communication received at the Superintendencia de Bancos on March 27, 2014, Ms. Esthela Alexandra Sánchez Fernández filed with this control body a claim against Banco ProCredit S.A. and the Ecuadorian Social Security Institute (IESS), in the following terms:

"(...)

1.6. The National Director of Risks of the IESS, in letter No. 66000000-1423 dated December 29, 2008, informs the Director of Investments and the Director of Institutional Development of that Entity that the General Manager, in letter No. 66000000-1371 dated December 16, 2008, authorized the suspension of 'payroll deductions for unsecured loans to insured persons adversely affected by fraudulent concessions that have been occurring in recent weeks; regarding this, I forward the file of affiliated member Alexandra Sánchez Fernández, ID No. 171195706-6, so that the suspension of deductions for her pending fraudulent unsecured loan may proceed...' (emphasis added). This decision was communicated to my employer, who consequently suspended the debits generated by said unsecured loan.

(...)

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Therefore, for the reasons stated, I respectfully and courteously request that you, in your capacity as representative of the competent supreme control body and under its Authority, proceed without delay, unambiguously, and definitively to resolve my situation,...;"

THAT by letters Nos. DNAE-SAU-2014-03151, DNAE-SAU-2014-03152, dated May 21, 2014, and DNAE-SAU-2014-04610 dated July 23, 2014, respectively, the Deputy Director of User Services requested from Banco ProCredit S.A. and the Ecuadorian Social Security Institute (IESS) substantiated and documented information with corresponding physical backing regarding the aforementioned claim;

THAT by letter No. DNAE-SAU-2014-05504 dated August 29, 2014, the Deputy Director of User Services, after analyzing the submitted documentation, resolved the claim in the following terms:

"(...)

IV. DISPOSITION

(...), as referred to in Article 180, letters b) and o) of the General Law of Financial System Institutions and Article 5, Chapter IV, Title XX, Book I of the Codification of Resolutions of the Superintendencia de Bancos and the Banking Board, I inform you that your request cannot be favorably granted, since this control body has not proven that the financial entity failed to follow any procedure for opening the savings account. It is recommended to bring this case before the competent judicial authorities to adjudicate and resolve criminal acts typified in the Organic Integral Criminal Code, wherefore the administrative proceeding is concluded and the file is archived (...).

*(...);"

THAT by written submissions received at the Superintendencia on September 9 and 17, 2014, respectively, Ms. Esthela Alexandra Sánchez Fernández filed an appeal against the administrative act contained in letter No. DNAE-SAU-2014-05504 dated August 29, 2014, arguing the following:

• That it be resolved and authorized for the IESS to immediately return in full all values deducted under the unsecured loan, as requested but not yet realized by the affiliated member, as well as the interest generated at the maximum legal rate;
• That a letter be sent to the legal representative of Banco ProCredit S.A., instructing it to certify whether the savings account opened in the name of Esthela Alexandra Sánchez Fernández is active and, if so, to order its immediate cancellation or closure, and to report what operations or transactions were carried out in said account from its opening to the present date;

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• That a certification be issued by the Risk Central regarding credit history and, if the loan delinquency persists in said report, that the appropriate amendment and regularization be made; furthermore, that the IESS and any officials be investigated and sanctioned for providing erroneous information to the Superintendencia de Bancos;
• That a letter be sent to the IESS instructing it to certify in detail what was the use and destination of all forged documents used to trigger the events described, and what guarantees the IESS has provided and/or arranged so that the aforementioned does not perturb or harm her again in the future; and,
• That without prejudice to ongoing criminal actions filed by the IESS to discover perpetrators, accomplices, and abettors of the crime under investigation, the IESS shall resolve the problem generated by the granting of a fraudulent loan. Therefore, she requests recognition of her right as an adversely affected party to a fraudulent unsecured loan managed at the Ecuadorian Social Security Institute, in accordance with the principle of equality established by the Constitution of the Republic;

THAT regarding the arguments presented by the appellant, it must be noted that the Superintendencia de Bancos, in accordance with Articles 62, 152, and 157 of the Organic Monetary and Financial Code, is responsible for exercising supervision, auditing, and control over financial activities; exercising sanctioning authority over controlled entities within its competence; ensuring the stability, solidity, and correct functioning of controlled entities; and requiring them to present and adopt corrective and regularization measures to protect the rights of financial clients and users;

THAT in order to address the claim filed by Ms. Esthela Alexandra Sánchez Fernández, the Deputy Director of User Services, via letter No. DNAE-SAU-2014-03151 dated May 21, 2014, requested the Executive President of the Ecuadorian Social Security Institute (IESS) to submit substantiated information regarding the claimed facts along with respective physical backing. By letter No. IESS-DG-2014-0701-OF dated July 21, 2014, the General Manager of the Ecuadorian Social Security Institute stated regarding the claim:

"(...)

From letters 64000000-735 and 64000000-737 dated February 27 and 28, 2013, respectively, issued by the General Attorney's Office, it is evident that the IESS filed a particular accusation aimed at discovering perpetrators, accomplices, and abettors of the crime of fraud, due to alleged identity theft to the detriment of Ms. Esthela Alexandra Sánchez Fernández, ID No. 171195706-6, regarding the collection of an unsecured loan, which was recognized on May 28, 2009, by economist Fernando Guijarro Cabezas, former General Manager of the IESS, at the Fifteenth Criminal Court; likewise, said lady, exercising her rights, has filed a constitutional amparo action, which was decided by the Second Civil Court of

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Pichincha, who in its ruling denied the proposed action, leaving (sic) any rights she may be entitled to. The reports from the General Attorney's Office of the IESS conclude that regarding the return of values, these proceed when judicial authorities adjudicating the parties' rights order what is appropriate and the Institution regulates this type of contingency through regulations and procedures;

*(...)." (sic);"

THAT by memorandum No. IESS-DNGSFR-2014-0845-M dated July 9, 2014, the Acting National Director of Fund and Reserve Management and Supervision of the Ecuadorian Social Security Institute informed the General Attorney of the IESS, as follows:

"(...)

The letter 11000000.097.CD dated February 17, 2013, signed by Eco. Ramiro González, President of the IESS Board of Directors, referenced herein, contains among other aspects, a disposition to the General Manager instructing him to proceed with returning affected parties the values corresponding to fraudulent unsecured loan operations, return of reserve funds and salary deductions, and additionally filing the respective claim against the insurance company, through the policy contracted by the Institution to cover these cases;

The aforementioned letter does not specifically mention any affiliated member, but rather constitutes a general disposition;

This Directorate reviewed the correspondence files and systems for the year 2007, evidencing that in this Area no administrative and/or judicial claim from affiliated member Mrs. Esthela Sánchez was received;

This Directorate consulted (sic) the BIESS regarding whether it attended to Mrs. Sánchez's claim, noting that she does not appear in the list of affiliated members financially affected by loans with indications of possible fraud and that the loan corresponding to 2007 falls under IESS competence;

(...)

Based on the above, Madam Attorney, as a result of an initial analysis of the process followed for granting this loan, I presume that, as in other cases, the fraud likely originated outside the IESS management scope, when using false identification documents, a person opened and registered the bank account and possibly obtained the affiliated member key to access the IESS website;

After 14 payroll deductions were normally canceled and due to loan payment delinquency, the Fund Reserve and Salary Deduction Processes belonging to this Directorate executed normal debit processes on the affiliated member's individual accounts, as nothing indicated that fraud or indications thereof existed;

Complementarily and without ever doubting Mrs. Sánchez's assertions, the Fund Reserve and Salary Deduction Processes are concerned about the decision to be applied in this case and future events, as we lack supporting documentation demonstrating the consummation of a crime validating the return of values to the affiliated member or her individual accounts. This situation harms the IESS because sanctions are not applied and pertinent corrective measures cannot be taken;

*(...)." (sic);"

THAT by letters Nos. DNAE-SAU-2014-03152 dated May 21, 2014 and DNEA-SAU-2014-04610 dated July 23, 2014, the Deputy Director of User Services requested from Banco ProCredit S.A. that it submit substantiated information regarding the claimed facts. Through letter No. BPC-321-14 dated May 28, 2014, the General Manager of the Bank submitted documentation regarding the opening of savings account No. 06-0101-05909-7 in the name of Ms. Esthela Alexandra Sánchez Fernández;

THAT according to information submitted by the financial entity, this control body observes that savings account No. 06-0101-059097 was opened on October 26, 2007, with an initial cash deposit of US$ 10.00 by a person who identified herself as Esthela Alexandra Sánchez Fernández; subsequently, on November 19, 2007, an SPI transfer was registered for US$ 1,994.31; and on November 29 of the same year, a cash withdrawal was registered for US$ 2,000.00. On the other hand, the financial entity states that no additional movements occurred, except for the crediting of interest in the amount of US$ 1.12 in December 2007;

THAT from the file review, it is evident that Banco ProCredit S.A., upon opening savings account No. 06-0101-0590977 in the name of Ms. Esthela Alexandra Sánchez Fernández, complied with policies, processes, and procedures, i.e., all requirements established in Article 14 of Chapter IV; Title XIII; Book I of the Codification of Resolutions of the Superintendencia de Bancos and the Banking Board, in force by express mandate of the First Transitory Provision of the Organic Monetary and Financial Code, determines:

ARTICLE 14.- "Financial system institutions must design and adopt the initial commercial relationship request form, which shall incorporate at minimum the information and documentation detailed below:

14.1 Natural persons, partnerships in participation, and joint accounts:

14.1.1. Full names;

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14.1.2. Place and date of birth;

14.1.3. Identification number: citizen ID card, identity card, refugee identification document (visa 12 IV), or valid passport in the case of foreigners;

14.1.4. City and country of residence;

14.1.5. Home address and telephone number;

14.1.6. Email address, if applicable;

14.1.7. Full names of spouse or partner, if applicable;

(...)

The procedures implemented for customer identification must allow carrying out necessary diligences, through mechanisms provided by the institution, to confirm the veracity of data supplied by the customer in the initial commercial relationship request form with the financial system institution. (...)";

THAT as determined by the facts stated by Ms. Esthela Alexandra Sánchez Fernández and the documentation forming the file, the control body observes that the financial user was likely a victim of a criminal act known as identity theft, which is typified in the Organic Integral Criminal Code. For these reasons, based on competencies established by the Constitution of the Republic and in Law, the control body is not responsible for investigating, establishing, or determining liabilities regarding criminal facts and acts, which is the exclusive power of the Judiciary;

THAT regarding the status of savings account No. 06-0101-0590977 in the name of Ms. Esthela Alexandra Sánchez Fernández, it must be indicated that by letter No. BPC-321-14 dated May 28, 2014, the General Manager of Banco ProCredit S.A. stated: "(...) savings account No. 06-0101-0590977 was in an inactive state; however, by the disposition issued by the Superintendencia de Bancos, at present the account is cancelled (...)";

THAT regarding the credit obligation with the IESS, which is not recognized by Ms. Esthela Alexandra Sánchez Fernández, it must be clarified that the Ecuadorian Social Security Institute is the entity providing affiliated members and retirees with all benefits, such as the case at hand, the granting of unsecured loans; for which, the procedure established on its portal must be fulfilled, both for generating, obtaining, and printing the access key; as well as for executing respective crediting, transfer, and deduction authorizations in financial system accounts. Additionally, the IESS has established as a requirement for affiliated members to obtain web access key the obligation to appear in person at the Labor History Unit, carrying the key request form, the original citizen ID card, the voting ballot, and respective photocopies;

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THAT the control body notes that on November 15, 2007, the Ecuadorian Social Security Institute granted unsecured loan No. 838684 for an amount of US$ 2,043.99. The amount was recovered through dividends paid by the employer of Ms. Esthela Alexandra Sánchez Fernández. Upon loan payment delinquency, the IESS executed guarantees through automatic debits in individual reserve fund and salary deduction quotas for US$ 1,193.90 and US$ 286.31, respectively; likewise, it is observed that the loan was credited to savings account No. 06-0101-05909-7 of Banco ProCredit S.A., in the name of Ms. Esthela Alexandra Sánchez Fernández, who upon noticing the events occurred, on May 14, 2008, filed a claim with the Ecuadorian Social Security Institute, i.e., five months after unsecured loan deductions began;

THAT from the review of defenses submitted by the Ecuadorian Social Security Institute, the Superintendencia de Bancos has not legally determined an incorrect procedure by the IESS for granting the objected loan; furthermore, it is evident that two distinct identity documents appear in the file with Ms. Esthela Alexandra Sánchez Fernández as holder, which presumes falsification of the public document. Therefore, it corresponds to the Judiciary, through qualified experts, to determine the authenticity of said document;

THAT it must be considered as precedent that, regarding several similar cases occurring in previous years related to savings account openings in various financial entities to credit benefits and grant unsecured loans by the Ecuadorian Social Security Institute, the Superintendencia de Bancos through letter No. INSS-SG1-2012-027 dated January 12, 2012, addressed to both the Director of the Ecuadorian Social Security Institute and the Manager of BIESS, in order to safeguard the Institute's resources, instructed these entities as recommendations to adopt measures to avoid abnormalities in the benefit and loan granting process to affiliated members, among them: changing the fingerprint and biometric validation system; security measures on the web portal; assigning supervisors to validate bank account changes; requesting in the bank account change registry, from the Civil Registry a replica of data recorded on the citizen ID card; even if the bank account change is registered, the system must allow maintaining original information, so that formation is carried out with historical data; audit trail information; and contracting insurance policies for fraud events;

THAT in said letter, the IESS was recommended to collaborate with the State's General Prosecutor's Office to conduct the corresponding investigation of alleged irregularities. In the present case, it is observed in the file that through Letter No. 66000000-143 dated December 29, 2008, the Ecuadorian Social Security Institute analyzed Mrs. Esthela Alexandra Sánchez Fernández's case and through a written submission received at the Pichincha Provincial Court of Justice, Office of Draws and Judicial Mailboxes, on May 7, 2009, the

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economist Fernando Heriberto Guijarro Cabezas, in his capacity as General Manager and Legal and Judicial Representative of the IESS, filed the corresponding particular accusation requesting an investigation order to discover perpetrators, accomplices, and abettors of the fraud committed against the IESS, related to the unsecured loan granted to Ms. Esthela Alexandra Sánchez Fernández, a process in which the appellant requested several diligences such as requiring information from Banco ProCredit S.A. and different IESS departments, which determined that more than one hundred eighty days elapsed, causing the action to prescribe;

THAT on page 68 of the file stands process No. 17253-2011-1745 followed in the Third Criminal Guarantees Court, in which, by order of October 21, 2012, the Judge disposed: "(...) Attending the petition formulated by Dr. César Almeida, Fiscal Agent of Pichincha, since the complainant (Esthela Alexandra Sánchez Fernández) has not complied with what was disposed in the immediate prior ruling, and without contravening any provision, I order the archiving of the file in accordance with Arts. 38 and 39 of the Criminal Procedure Code (...).";

THAT it must be considered that the Banking Board through letter No. JB-2013-1822 dated September 5, 2013, instructed the Bank of the Ecuadorian Social Security Institute that within a peremptory period of fifteen days, it proceed to return or suspend deductions of values as amortization quotas for 42 clients who filed complaints with the respective authorities, given that they were adversely affected under the figure of identity theft for granting unsecured loans, for which bank accounts irregularly opened were used; it must be indicated that Ms. Esthela Alexandra Sánchez Fernández does not appear in the list of financially affected affiliated members by loans with indications of possible fraud;

THAT regarding the appellant's argument that the control body recognize her equality right before the law, it must be noted that the control body under no concept intends to disregard rights established by the Constitution of the Republic, but rather in strict compliance with its attributes in this case, considers that the fact claimed by Ms. Esthela Alexandra Sánchez Fernández constitutes a crime that must be investigated and sanctioned by the Ordinary Justice;

THAT as established by the second paragraph of Article 5 of Chapter IV, Title XX, Book I of the Codification of Resolutions of the Superintendencia de Bancos and Seguros and of the Banking Board, which is transcribed below, it corresponds to the control body to establish incorrect procedures incurred by controlled entities regarding the service offered to their clients and users. In this case, no incorrect procedures have been determined, which prevents the control body from favorably addressing the appellant's request;

ARTICLE 5.- "(...) If the situation that motivated the claim referred to in the preceding..."