Resolution JB-2015-3507 of the Banking Board

Banking Board of Ecuador

RESOLUTION No. JB-2015-3507

THE BANKING BOARD

CONSIDERING:

THAT through a communication entered into the Superintendency of Banks on December 10, 2013, Ms. Ruth Elena Dávila Andrade, a client of Banco Pichincha C.A. and holder of debit card No. 4381081082456964, filed a complaint against said financial institution, denouncing two unauthorized withdrawals via ATMs in Quito and Guayaquil (Samborondón) for amounts of USD $100.00 and USD $300.00, respectively; and an unauthorized purchase at a gas station for USD $18.91;

THAT by letter No. IRG-DAyEU-V-R-2014-200 of March 20, 2014, the Regional Intendancy of Guayaquil resolved the complaint in favor of Ms. Ruth Elena Dávila Andrade in the following terms: "(...) ACCEPT the complaint filed by Miss RUTH ELENA DÁVILA ANDRADE (...) and order the refund to the claimant's savings account... the sum of $118.91 (...) for the unauthorized withdrawal made on November 25, 2013, debited from the aforementioned savings account, as well as for the purchase made at the Primax gas station in La Puntilla (...)";

THAT through a communication entered into the Superintendency of Banks on April 3, 2014, Banco Pichincha C.A. filed an appeal for reconsideration before the Regional Intendancy of Guayaquil against letter No. IRG-DAyEU-V-R-2014-200 of March 20, 2014. The claim contained in said appeal for reconsideration was rejected by letter No. IRG-DAyEU-V-R-2014-399 of May 8, 2014;

THAT by document entered into the Superintendency of Banks on June 3, 2014, Banco Pichincha C.A. filed an appeal for review before the Banking Board against letter No. IRG-DAyEU-V-R-2014-399 of May 8, 2014;

THAT through Resolution No. JB-2015-3266 of February 11, 2015, the Banking Board ordered:

"SINGLE ARTICLE.- REJECT the claim contained in the appeal for review filed by Mr. Antonio Acosta Espinosa, Deputy President of BANCO PICHINCHA C.A.; and, consequently, CONFIRM letter No. IRG-DAYEU-V-R-2014-399 of May 8, 2014, by which Ab. Humberto Moya González, Regional Intendant of Guayaquil, resolved to confirm the administrative act contained in letter No. IDG-DAYEU-V-R-2014-200 of March 20, 2014, in which the Regional Intendancy of Guayaquil ordered Banco Pichincha C.A. to restore to Ms. Ruth Elena Dávila Andrade the sum of USD $118.91, into savings account No. 3577355800, which she holds at the aforementioned bank.";

THAT through a communication entered into the Superintendency of Banks on March 6, 2015, Mr. Antonio Acosta Espinosa, Deputy President of Banco

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Pichincha C.A., filed an appeal for reconsideration before the Banking Board against Resolution No. JB-2015-3266 of February 11, 2015;

THAT based on the explanatory report contained in letter No. DAYEU-2015-102 of May 25, 2015, it is evident that Banco Pichincha C.A. sent the video of "ATM I107 SAMBORONDON 4" to the control body;

THAT without prejudice to the foregoing, and regarding the appellant's argument that according to the new legal framework in force, the Superintendency of Banks does not have the authority to order the restitution of funds, it is necessary to point out that paragraphs 9 and 16 of Article 62, the second paragraph of Article 71, and Articles 156 and 157 of the Organic Monetary and Financial Code, published in the Second Supplement of the Official Register No. 332, of September 12, 2014, state:

*"Article 62.- The Superintendency of Banks has the following functions:

(...)

9. Require controlled entities to present and adopt the corresponding corrective and remedial measures;

(...)

16. Protect the rights of clients and financial users and resolve administrative disputes that arise with entities under its control, for which it may request or conduct ex officio, as appropriate, the necessary control actions for their clarification;

(...)"*

*"Article 71.- (...)

The Superintendency of Banks, within the acts of control, may order the application of any measure contemplated in this Code that leads to remedying the observations evidenced by the control body and apply sanctions in case of non-compliance.

(...)"*

"Article 156.- Control. The respect for the rights of clients and financial users will be monitored and protected by the control bodies referred to in this Code."

"Article 157.- Violation of rights. Financial users may file complaints or claims with the entity itself, the control body, or the Client Defender, or raise any administrative, judicial, or

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constitutional action recognized by law to demand the restitution of their violated rights and due compensation for damages and losses caused";

THAT the First Transitional Provision of the aforementioned Organic Monetary and Financial Code states that the norms contained in the Compilation of Resolutions of the Superintendency of Banks and the Banking Board will remain in force insofar as they do not contradict the aforementioned Code, until the Monetary and Financial Policy and Regulation Board decides what corresponds, according to the case;

THAT from the provisions contained in the Organic Monetary and Financial Code, it is evident that one of the main functions of the Superintendency of Banks is to protect the rights of clients and financial users and resolve administrative disputes that arise with entities under its control, for which it may order controlled institutions any measure established in the aforementioned legal body to remedy the observations evidenced. On the other hand, the Code grants financial users the right to file complaints or claims with the control body and to raise any administrative action to demand the restitution of their violated rights;

THAT for the reasons stated, it is concluded that the Superintendency of Banks, in fulfilling its function of protecting the rights of clients and financial users, when resolving a complaint or claim filed by said subjects, may order controlled institutions the restitution of the violated rights to them, among which are those of a patrimonial nature;

THAT according to the technical report contained in letter No. IRG-DAyEU-2014-234, the Regional Intendancy of Guayaquil determines that in the present case, Banco Pichincha C.A. incurred in an incorrect procedure that violated the rights of its client, regarding a purchase made at a gas station for USD $18.91, in the following terms: "(...) From the foregoing, it is determined that there is regulation linking the financial institution and the establishment regarding the validation and verification of the cardholder's identity, which holds BANCO PICHINCHA C.A. and the respective establishment responsible for the non-compliance indicated. The file evidences the lack of verification, by the commercial establishment, of the identity of the person who made the purchases, as it was not verified that the person who made the purchases was not Miss RUTH ELENA DÁVILA ANDRADE (...)";

THAT regarding the appellant's argument that the challenged resolution mentions that "the banking entity has only sent the video of ATM No. 02061746, installed in the city of Quito. (...)"; that in its letter BP-ACEC-2014-0097 it was brought to the attention of the Control Entity that the amount of the withdrawal made at ATM N746 NORTE 5 in the city of Quito had been credited to the client's account, so it would make no sense to send the video of a transaction that was resolved in favor of the client; as well as that in paragraph 5 of its letter it was mentioned that they attach a CD with the video of ATM I107 SAMBORONDON 4 where the complaint transaction was made; that consequently, its representative has sent the video

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correct corresponding to the transaction made in Samborondón, complying with the Superintendency's request; regarding this, the explanatory report issued by letter No. DAYEU-2015-102 of May 25, 2015, is on record, in which the Regional Intendancy of Guayaquil analyzes that, due to the record of the refund that Banco Pichincha C.A. made to the claimant, this office did not consider this amount ($300) in its resolutions and only proceeded to order the refund of the values of the transactions that were made without the financial user's authorization. From the analysis of the video of ATM I107 SAMBORONDON 4, which is in the file, it can be evidenced the time at which the challenged withdrawal was made, as stated in the detail sent by Banco Pichincha, that a lady approaches to make a transaction but it cannot be evidenced whether the money is dispensed by the ATM or with which card it is made due to the poor location of the security cameras, regarding which it mentions paragraphs 40.10.1 and 40.10.2 of Article 40, of Section VII, Chapter I, Title I of the Compilation of Resolutions of the Superintendency of Banks and the Banking Board, which establish the location of security cameras; as well as that Banco Pichincha C.A. has not complied with the indicated regulation. It concluded that: "Banco Pichincha C.A. intends to transfer to the financial user the risks inherent to the organization and execution of the ATM withdrawal service and purchases with the debit card issued by the institution, by holding her responsible for the same for compromising the custody of her debit card, facts of which there is no record in the file of the case in question, reasoning that also allowed, through the administrative act contained in letter No. IRG-DAyEU-V-R-2014-200, of March 20, 2014, to accept the financial user's complaint and reject the allegations of Banco Pichincha C.A., insisting that it is not appropriate to place the responsibility for the possible lack of custody and care of the debit card information on the claimant, and, therefore, the responsibility for said transaction made via ATMs...";

THAT Articles 52, 66, and 213 of the Constitution of the Republic of Ecuador and Article 4 of the Organic Law for Consumer Defense guarantee the right of users of the financial system to have access to services of optimal quality, with efficiency, effectiveness, and good treatment. At the same time, the Superintendency of Banks is called upon to monitor that the services provided by financial system institutions comply with the legal framework and attend to the general interest;

THAT in the present case, it is evident that the financial institution did not have timely, effective, and efficient security measures to mitigate the operational risk in the transactions subject to the complaint, as the client was not notified through electronic mechanisms such as SMS messages or email regarding the transactions made;

THAT for further clarification, it is necessary to point out the regulation that requires the financial institution to have security cameras at ATMs and their correct location. Article 40, of Chapter I, of Title II, of Book I, of the Compilation of Resolutions of the Superintendency of Banks and the Banking Board, provides the following:

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*"Article 40.- Financial institutions' ATMs must comply with the following security measures:

40.10 Surveillance cameras.- For their operation, each ATM must have at least two surveillance cameras in the following locations:

40.10.1 One peripheral with a panoramic view from top to bottom, which allows capturing the equipment's surroundings; and,

40.10.2 One frontal camera that allows capturing the user.

If there are adjacent ATMs in any location, entities may reduce the total number of peripheral cameras, with the respective technical support. Under no circumstances can the number of frontal cameras be reduced.

Surveillance cameras must operate uninterruptedly twenty-four (24) hours a day.

The functioning of the cameras must be evaluated permanently and maintain an updated record of their operational levels, in order to guarantee the clarity and fidelity of the recordings made.

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

Financial system institutions must maintain a recording archive that covers at least ninety (90) days, while recordings of transactions that are the subject of complaints will be kept until there is a final resolution from the competent body.

(...)"*;

THAT through a report contained in memorandum No. INJ-INSFPR-DNJ-SAL-2015-0433 of June 2, 2015, signed by the National Legal Intendant and the National Intendant of the Private Financial Sector, it is analyzed that in the present case, it is evident that the financial institution did not have timely, effective, and efficient security measures to mitigate the operational risk in the transactions subject to the complaint, as the client was not notified through electronic mechanisms such as SMS messages or email regarding the transactions made; as well as they recommend the Banking Board reject the request contained in the appeal for reconsideration filed; and, consequently, CONFIRM Resolution No. JB-2015-3266 of February 11, 2015; and,

In exercise of its legal powers,

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RESOLVES:

SINGLE ARTICLE.- REJECT the request contained in the appeal for reconsideration filed; and, consequently, CONFIRM Resolution No. JB-2015-3266 of February 11, 2015.

NOTIFY.- Given at the Superintendency of Banks, in Quito, Metropolitan District, on July 1, 2015.

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

I CERTIFY.- Quito, Metropolitan District, on July 1, 2015.

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