Resolution No. JB-2015-3480 of the Banking Board of Ecuador

Banking Board of Ecuador

RESOLUTION No. JB-2015-3480

THE BANKING BOARD

CONSIDERING:

THAT by Resolution No. JB-2015-3322 of April 1, 2015, the Banking Board resolved: "REJECT the claim contained in the reconsideration appeal filed by Mr. Antonio Acosta Espinosa, Deputy President of Banco Pichincha C.A.; and, consequently CONFIRM the administrative act contained in letter No. IRG-DAyEU-V-R-2014-010 of February 14, 2014, through which the Regional Intendancy of Guayaquil rejected the motion for reconsideration filed by the bank, regarding letter No. IRG-DAyEU-V-R-2013-0249 of June 6, 2013, which resolved that the aforementioned banking entity "...proceed to reverse to Mr. GALICIO ALBERTO CANDELARIO CASTRO the sum of US$ 325.00 (...)"; fundamentally for the following considerations:

"(...)

THAT the second paragraph of the Third Transitional Provision of the Organic Code of Monetary and Financial matters determines 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 this Code, within a period of one hundred eighty days, extendable at the discretion of the Monetary and Financial Policy and Regulation Board;

THAT Mr. Galicio Alberto Candelario Castro, through communication received at the Regional Intendancy of Guayaquil on November 14, 2012, filed a complaint against Banco Pichincha C.A., requesting that the entity be ordered to reverse the sum of US$325.00 charged to his Visa Práctica Banco Pichincha C.A. credit card No. 4732930002818990 for the concept of five cash advances not made by him via ATMs;

THAT, having accepted the complaint for processing, the Intendancy of Guayaquil through letter No. IDG-DAYEU-ISFP-REQ-2012-1161, of November 21, 2012, transferred for the knowledge of the Deputy President of Banco Pichincha C.A. the complaint filed by Mr. Galicio Alberto Candelario Castro, and requested explanations and defenses regarding the case. In response to the requirement, the banking entity through letter No. BP-ACEC-2013-0143, of February 14, 2013, presented among other things the following documentation: a) Copy of the Credit Card Issuance and Use Contract duly signed by the parties; b) Copy of the record of delivery of issued cards and keys; c) Report on the computation of the daily limit authorized to perform cash withdrawal transactions through ATMs; and, d) Certified copies of the audit tapes corresponding to the transactions that are the subject of the complaint. Arguing principally the following:

"(...)

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Banking Board of Ecuador

Resolution No. JB-2015-3480 Page No. 2

Once the corresponding verifications were made in our ATM files, it was established that the transactions subject of the complaint were made with the credit card (...) issued in the name of Mr. GALICIO ALBERTO CANDELARIO CASTRO, holder of the aforementioned card,...

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The credit card and personal key of Mr.... constitute the only mechanism to access the cash advance service through an ATM, so the strict custody and care taken with the card, as well as keeping the personal key secret, are exclusive responsibilities of the CARDHOLDER... (sic).

... Regarding the videos, we must inform you that by internal procedures they are kept for a determined period of time, after which they are overwritten, which is why the videos requested in your letter are not available.". (sic).

THAT with letter No. IRG-DAyEU-V-R-2013-0249, of June 6, 2013, the Regional Intendancy of Guayaquil issued the administrative resolution, regarding the complaint filed by Mr. Galicio Alberto Candelario Castro, in the following terms:

"(...)

1. ACCEPT the complaint filed by Mr.... against... BANCO PICHINCHA C.A., on the grounds that it has not been evidenced that the complainant has given improper use to the credit card issued in his favor by the controlled institution. Furthermore, as the videos of the ATMs where the transactions were made were not sent, it was evidenced, thus, the lack of one of the security measures required by the regulations.

2. ORDER... BANCO PICHINCHA C.A. to proceed to reverse to Mr. GALICIO ALBERTO CANDELARIO CASTRO the sum of US$ 325.00 charged to the credit card..." (sic);

THAT through letter entered at the Regional Intendancy of Guayaquil on June 19, 2013, Banco Pichincha C.A. filed a motion for reconsideration against the administrative act contained in letter No. IRG-DAyEU-V-R-2013-0249, of June 6, 2013, which was resolved by the Regional Intendant of Guayaquil through letter No. IRG-DAyEU-RP-2014-010, of February 14, 2014, rejecting said claim and ratifying the appealed letter;

THAT through communication received at the Superintendency on February 25, 2014, Mr. Antonio Acosta Espinosa, Deputy President of Banco Pichincha C.A., with the legal sponsorship of Dr. Pablo Cadena Merlo and lawyer María José Araujo Álvarez, filed a reconsideration appeal before the Banking Board against letter No. IRG-DAyEU-V-R-2014-010, of February 14, 2014, arguing principally the following: Lack of motivation of the resolution of the public authority which leads to its nullity as indicated in literal I) of numeral 7, of article 76 of the Constitution; that he insists that the entity has no responsibility in this case, since the cash advances subject of the complaint were made with the credit card issued in the name of Mr. Galicio Alberto Candelario Castro, and that the credit card and personal key whose custody and care are the responsibility of the client are the only mechanism to access ATM systems; that the transactions subject of the complaint were carried out for 5 days without the client informing the bank that they were not made by him; that the client did not request the cancellation of his card until a month and days after the first claimed transaction; and, that the control organism alleges without basis that it has failed procedures that caused the present harm to the complainant, by not sending the videos regarding the claimed transactions, noting that in letter No. IDG-DAYEU-ISFP-REQ-2012-1161 no video was requested, so the return of the values cannot be ordered;

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Banking Board of Ecuador

Resolution No. JB-2015-3480 Page No. 3

THAT with letter No. JB-2014-524 of March 8, 2014, the Secretary of the Banking Board accepted the reconsideration appeal for processing; and, with letter No. JB-2014-525 of the same date, notified Mr. Galicio Alberto Candelario Castro regarding the acceptance of said appeal;

THAT regarding the argument of the lack of constitutional motivation consigned which leads to the nullity of the resolution of the public authority, and that the grounds of the motion for reconsideration have not been entirely the object of analysis and motivation by this Superintendency, it is specified that in this case, the Regional Intendancy of Guayaquil, prior to the respective analysis and motivation of each of the grounds indicated by the parties, in application of the provisions contained in the Codification of Resolutions of the Superintendency of Banks and Insurance and of the Banking Board, resolved both the initial complaint and the motion for reconsideration filed;

THAT regarding the argument that the bank has no responsibility in this case, since the transactions subject of the complaint were made with the credit card issued in the name of the complainant, which according to the audit tapes provided by the entity were reported as successful, and that the card and key whose custody and care are the responsibility of the client are the only mechanism to access ATM systems, as well as, that said transactions were carried out for five (5) days without the client informing the bank that they were not made by him, nor requesting the cancellation of his card until a month and days after the first claimed transaction; it must be indicated that, precisely what originated the user's complaint before the controlled entity is the use of his credit card without his authorization, to make the questioned cash advances; from this fact, given that, as reflected in the statement of account issued by the bank in October 2012, a copy of which is in the file, said advances occurred between September 1 and 16, 2012 in ATMs owned by the same; and, that while it is the responsibility of the client to take care of his credit card, it is no less true that the controlled institution cannot with such arguments pretend to transfer to the user the risks inherent to the organization and execution of the ATM service that it has made available to its clients, on the contrary, it is obliged to provide the necessary securities, through adequate risk management, in accordance with what is provided in article 2, numeral 2.9, chapter I "On Comprehensive Risk Management and Control", title X "On Risk Management and Administration", book I "General Norms for the application of the General Law of Institutions of the Financial System" of the Codification of Resolutions of the Superintendency of Banks and Insurance and of the Banking Board, which dispose:

"ARTICLE 2.- For the purposes of the application of this chapter, the following definition is determined:

(...)

2.9 Operational Risk (...)

Groups a variety of risks related to deficiencies in internal control; inadequate systems, processes and procedures; human errors and fraud; failures in computer systems; occurrence of adverse external or internal events, that is, those that affect the capacity of the institution to respond to its commitments in a timely manner or compromise its interests..." (Emphasis added).

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Banking Board of Ecuador

Resolution No. JB-2015-3480 Page No. 4

Furthermore, from the file formed around this appeal, it is observed that there is no documentary support to substantiate the client's responsibility for the mishandling of his credit card and personal and non-transferable key;

THAT the argument that the Superintendency alleges without basis that it has failed procedures that caused the present harm to the complainant, by not sending the videos of the claimed transactions and that in letter No. IDG-DAYEU-ISFP-REQ-2012-1161 no video was requested, does not proceed, since as stated in numerals 8 and 10 of the annex to the aforementioned letter, the respective sending was requested, specifically on which the bank itself pronounced itself in the defense letter No. BP-ACEC-2013-0143, of February 14, 2013, by stating: "... Regarding the videos, we must inform you that by internal procedures they are kept for a determined period of time, after which they are overwritten, which is why the videos requested in your letter are not available.". (sic).

THAT if the bank had presented the videos, they would have allowed verifying the facts subject of the complaint, if there are no videos, it is evident that there are not sufficient security measures in the ATMs, and that such insufficiency caused harm to the client;

THAT regarding what is mentioned in the preceding consideration, the controlled entity, by not properly substantiating its defenses, did not consider nor comply with the renumbered articles 38 and 40 contained in chapter I, title II, book I of the aforementioned Codification, related to the security measures it must have, which state:

"ARTICLE 38.- With regard to video surveillance systems (cameras) it must be considered that:...

38.2 Fixed location cameras, at a minimum, must adequately cover the places of access to the public and staff of the financial institution and the customer service counters; and,

38.3 Video recording and storage systems must guarantee the archive of at least three (3) months of recording, through tapes, digital video discs (DVD) or any other system.

(...)

"ARTICLE 40.- ATMs of financial institutions must comply with the following security measures:...

40.11 Video recording system.- For its operation, each ATM must have an exclusive video recorder, which must record the recording without degrading the definition captured by its cameras.";

THAT it is important to note that the administrative acts issued by the Superintendency arise from the control and supervision attributes as determined by articles 1 and 180 letter b) of the General Law of Institutions of the Financial System, in whose activity the interests of the public must be taken into account, therefore becoming inappropriate the argument exposed by the appellant that this control organism cannot order the return of values, more so when in the present case it has been determined non-compliance on its part with what the aforementioned regulations demand;

THAT as indicated, the arguments expressed by the appellant do not disprove the grounds for issuing the appealed letter No. IRG-DAyEU-V-R-

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Banking Board of Ecuador

Resolution No. JB-2015-3480 Page No. 5

2014-010 of February 14, 2014, consequently, in this case the requirement provided for in article 5 of chapter IV, title XX, book I of the Codification of Resolutions of the Superintendency of Banks and Insurance and of the Banking Board has been fulfilled, since Banco Pichincha C.A. incurred in an incorrect procedure by not complying with the security norms provided in the aforementioned Codification, which were transcribed in the preceding considerations;"

THAT through communication received by the Superintendency of Banks on May 8, 2015, Dr. Jaime Flor Rubianes, Legal Representative of Banco Pichincha C.A., with the professional sponsorship of Dr. Pablo Cadena Merlo and lawyer María José Araujo Álvarez, filed a motion for reconsideration against the administrative act contained in Resolution No. JB-2015-3322 of April 1, 2015;

THAT the Banking Board, in the session held on June 10, 2015, in accordance with the second paragraph of article 3, chapter II, title XVI, book I of the Codification of Resolutions of the Superintendency of Banks and Insurance and of the Banking Board, heard the appeal referred to in the preceding paragraph and determined that it does not comply with what is provided in the first paragraph thereof, that is, that there are no new elements of fact or law that motivate the preparation of corresponding reports, so it decided to deny it outright; AND,

IN exercise of its legal attributes,

RESOLVES:

SINGLE ARTICLE.- DENY the motion for reconsideration filed by Mr. Antonio Acosta Espinosa, Deputy President of Banco Pichincha C.A., against the administrative act contained in Resolution No. JB-2015-3322 of April 1, 2015; and, consequently, CONFIRM said resolution.

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

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

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

(Signature) Lcdo. Pablo Cobó Luna SECRETARY OF THE BANKING BOARD