Banking Board of Ecuador

RESOLUTION No. JB-2015-3415

THE BANKING BOARD

CONSIDERING:

THAT this appeal is analyzed in accordance with the First Transitional Provision of the Organic Code of Monetary and Financial Affairs, published in the Official Register Second Supplement No. 332, on September 12, 2014, whose text states that resolutions contained in the Codification of Resolutions of the Superintendence of Banks and Insurance and the Banking Board, and the norms issued by the control bodies, will maintain their validity in all that does not oppose what is established in the Organic Code of Monetary and Financial Affairs, until the Monetary and Financial Policy and Regulation Board resolves what corresponds, according to the 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 that it was hearing as of the date of validity of the same, within a period of one hundred and eighty days, extendable at the discretion of the Monetary and Financial Policy and Regulation Board.

THAT by Resolution No. 054-2015-F, of March 5, 2015, published in the Official Register No. 467, on March 27, 2015, the aforementioned period has been extended by an additional one hundred and eighty days;

From the indicated provisions, it is established that the Banking Board is competent to resolve the present review appeal;

THAT by communication entered in the Regional Intendancy of Guayaquil on October 7, 2013, Mr. Oswaldo Xavier Huacon Moran, filed a complaint against the National Development Bank (Banco Nacional de Fomento), regarding debits from his savings account held at said bank, made on March 20, 2013, at 7:37 and 7:38, for USD 100.00 and USD 60.00, respectively, through an automated teller machine (ATM), without his authorization; and, as stated by the complainant, he kept the debit card in his possession and it was not manipulated by anyone other than the holder; he also noted that he requested the bank to provide the recording of the person who initiated these transactions and received no response;

THAT by letter No. DAYEU-ISFP-REQ-2013-1363, of November 1, 2013, the Director of User Attention and Education of the Regional Intendancy of Guayaquil, requested the Zonal Manager of the National Development Bank Guayaquil to send the explanations and defenses regarding the present complaint; a matter that was communicated to the complainant by the same means;

THAT by letter without number, of November 20, 2014, the Zonal Manager Guayaquil of the National Development Bank, presented part of the information required by the control body, offering to send the remaining part as an addendum;

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THAT by letter No. IRG-DAYEU-V-R-2014-269, of April 2, 2014, the Regional Intendant of Guayaquil, resolved:

1. ACCEPT the complaint filed by Mr. OSWALDO XAVIER HUACON MORAN, with citizenship ID No. 092511898-6, against the controlled financial institution BANCO NACIONAL DE FOMENTO, for the reasons stated in the sixth section of the present letter.

2. ORDER the controlled financial institution BANCO NACIONAL DE FOMENTO to proceed to restore to Mr. OSWALDO XAVIER HUACON MORAN, the sum of US $ 160.00 (ONE HUNDRED SIXTY WITH 00/100 DOLLARS OF THE UNITED STATES OF AMERICA) debited from savings account No. 400360715-0, on March 20, 2013, being able to exercise his right of recourse against the institution owning the automated teller machines where the disputed withdrawals occurred, and send to this Office, within a term of eight days, counted from the receipt of this letter, the documentation that accredits the compliance with the present resolution. (...);

THAT by document received in the control body on April 15, 2014, the General Manager of the National Development Bank, Guayaquil Branch, filed an appeal for reconsideration against letter No. IRG-DAYEU-V-R-2014-269, of April 2, 2014;

THAT by letter No. IRG-DAYEU-V-R-2014-739, of July 4, 2014, the Regional Intendant of Guayaquil resolved:

"REJECT the claim contained in the appeal for reconsideration filed by BANCO NACIONAL DE FOMENTO; and, consequently, CONFIRM the administrative act contained in Letter No. IRG-DAYEU-V-R-2014-269, of April 2, 2014.";

THAT by communication entered in the Superintendence of Banks and Insurance on July 17, 2014, Engineer Erika Palma Portilla, Commercial Manager of the National Development Bank – Guayaquil, with the professional sponsorship of lawyers Ma. Angélica Pazmiño M. and Licencia Rizzo Zambrano, filed before the Banking Board a review appeal against the administrative act contained in letter No. IRG-DAYEU-V-R-2014-739, of July 4, 2014; with the following arguments: that clauses fourth and eighth of the agreement celebrated between the savings account holder and the bank stipulate the responsibilities of the client as custodian of the card and the key delivered by the bank; that the client did not apply the basic security recommendations for the handling of the debit card, which were made known to him through different media; that the bank carried out a review of the case, identifying the different withdrawals allegedly made from his savings booklet in banking institutions, being able to notice at that time that in said booklet withdrawals not carried out by the affected person would have been registered, which would have allowed him to avoid further transactions and being prejudiced by the current value claimed; that the National Development Bank is carrying out permanent management efforts so that the information

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requested is delivered to the control body, since not having access to these files, they are subject to some entities having less predisposition than others, which has caused the information to be delivered partially; that the evidence provided by the bank through the documentation sent to the body regarding the client's complaint was not considered for resolution, which has resulted in a failure to comply with due process guarantees, so he considers it null;

THAT by letter No. JB-2014-1950, of July 24, 2014, the Secretary of the Banking Board, communicated to the appellant that the aforementioned review appeal has been accepted for processing; and, by letter No. JB-2014-1951 of the same date, communicated the matter to Mr. Oswaldo Xavier Huacon Moran;

THAT by letter No. IRG-DAYEU-2014-303, of September 30, 2014, in attention to letter No. SAL-2014-00185, of August 1, 2014, the Regional Intendant of Guayaquil, sent the respective technical report, in which he ratified the resolution issued in the appealed letter;

THAT article 1, in concordance with articles 180, letters b) and o) of the General Law of Institutions of the Financial System, in force at the date of the event, contemplated among the functions and attributions of the Superintendence of Banks and Insurance, within the orbit of its competence, the supervision and control of the financial system, taking into account the protection of the public's interests, as well as required that controlled institutions present and adopt the corresponding corrective measures;

THAT the Banking Board, with the purpose of achieving effective compliance with the provisions emanating from both the control body and the collegiate body, integrated into chapter IV, of title XX, of book I, of the Codification of Resolutions of the Superintendence of Banks and Insurance and the Banking Board, the procedure for the attention of complaints against institutions of the financial system, always attentive to the protection of the public's interests as mandated by law, whose article 5 establishes that if the result of the analysis carried out 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 complaint referred to in the previous paragraph originated in an incorrect procedure of the controlled institution, which 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 cannot exceed fifteen (15) days from the notification to send, under the legal warnings, the proof of compliance with the order issued;

THAT from the letter without number, of November 20, 2013, it is appreciated that the National Development Bank, although it sends information, does so partially, therefore its assertion that it attended the requirements of the control body becomes inappropriate, given that it tried to disclaim its responsibility regarding the complaint with the argument that the ATM where the withdrawals were made belongs to Banco Internacional S.A., an entity that confirmed to the National Development Bank, in an email of November 12,

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November 2013, that said ATM, "does not have a recording system". In any case, the sending of a detailed historical log of movements of the transactions carried out on the account of Mr. Oswaldo Xavier Huacon Moran is not appreciated, where the alerts of the operations being executed could be appreciated, whether by messages via email or cellular telephone and more informative data of said transactions;

THAT from the report of transactions carried out in automated teller machines in the month in which the claimed debits occurred, which is part of the file, it is observed that on March 8 and 20, 2013, the following observations were registered: "Banred notifies ATM 55 as possibly compromised from March 1 to 16, 2013";

THAT in the report of the Risk Management, Information Security, of May 30, 2013, it notes: "According to security incidents in automated teller machines of vandalism, skimming or malware evidenced and reported by the member institutions of the BANRED Security Committee, and received by our institution from the beginning of the review period, a possible coincidence with an ATM used by the client has been evidenced: 1. On March 21, 2013, the BANRED Security Committee reports to ATM 55 of the Bank of Machala as a possible point of compromise on the dates of March 1 to 16, 2013. (...) From the above, it is determined that the recording of the transactions were successful and carried out normally; it was not possible to find evidence of compromise of our client's card according to the coincidence analysis based on the reports of the BANRED Security Committee, however the client accessed automated teller machines of other Banks where there could have been a possible compromise of the information of his debit card" (...);

THAT it is observed that on the date on which the questioned withdrawals were made, the system highlighted again a notification of alert of possible compromise of the debit card information assigned to the client, in ATM No. 55, a matter that the file does not note that such alerts were communicated to the savings account holder;

THAT the appellant argued that the client did not apply the basic security recommendations for the handling of the debit card; however, from the review and analysis of the defenses presented by the bank and the documentation that backed the appeal in question, even though it referred 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 keep custody of his card and the key of his debit card; given that the client questioned the bank for not providing him as proof of the withdrawals the corresponding recording of them;

THAT arguing that the client could have reviewed the transactions in a timely manner, identifying the different withdrawals allegedly made from his savings booklet in banking institutions, which would have allowed him to avoid the transactions being carried out, has no basis, in view of the fact that the National Development Bank, having constituted itself as custodian of the funds deposited by the client under article 51 of the General Law of Institutions of the Financial System, has the obligation to reintegrate them at the moment of the request of its

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owner or holder of the account, taking care with due diligence of the client's patrimony;

THAT the user and/or client of the financial system, under the protection of 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; the National Development Bank, when offering financial service of fund withdrawal through automated teller machines ATMs, is obligated that these, whether own or contracted, provide optimal security, among others, physical, mechanical, or electronic referred not only in the use of the assigned key but in the inviolability of the debit card delivered to the client, in order to comply with its obligation to reintegrate the deposited funds for its custody, to its legitimate owner; consequently, it becomes inappropriate to disclaim the bank's responsibility to custodian the money of its clients;

THAT the preceding analysis evidences that the appealed letter complied with due process, for this reason, the bank's argument in this sense is not appropriate, since, in addition, the documentation of defenses presented by the National Development Bank was considered for its resolution;

THAT for the reasons expressed, an incorrect procedure of the National Development Bank is observed for not providing the respective security to the transactions in dispute, through the network of automated teller machines, placed as a financial service for the client's use, for not monitoring or implementing alerts on the movements that were occurring in the account entrusted to its custody, allowing the security controls of the debit card delivered by the bank to the client to be violated, which caused him economic harm, so the budget 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, for the control body to order the reintegro of the values in dispute;

THAT the National Legal Intendancy, through memorandum INJ-DNJ-SAL-2014-0980 of December 9, 2014, recommended to the Banking Board to reject the claim contained in the review appeal filed;

AND, in exercise of its legal attributions,

RESOLVES:

SINGLE ARTICLE.- REJECT the claim contained in the review appeal filed by Engineer Erika Palma Portilla, Commercial Manager of the National Development Bank Guayaquil; and, consequently, CONFIRM the administrative act contained in letter No. IRG-DAYEU-V-R-2014-739, of July 4, 2014, issued by the Regional Intendant of Guayaquil, through which the administrative act contained in letter No. IRG-DAYEU-V-R-2014-269, of April 2, 2014, was confirmed, in which it resolved: ORDER the controlled financial institution BANCO NACIONAL DE FOMENTO to proceed to restore to Mr. OSWALDO XAVIER HUACON MORAN, the sum of US $ 160.00 (ONE HUNDRED SIXTY WITH 00/100 DOLLARS OF THE UNITED STATES OF

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AMERICA)** debited from savings account No. 400360715-0, on March 20, 2013, being able to exercise his right of recourse against the institution owning the automated teller machines where the disputed withdrawals occurred, and send to this Office, within a term of eight days, counted from the receipt of this letter, the documentation that accredits the compliance with the present resolution. (...).

NOTIFY.- Given in the Superintendence of Banks, in Quito, Metropolitan District, on the thirteenth of May of two thousand fifteen.

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

I CERTIFY.- Quito, Metropolitan District, on the thirteenth of May of two thousand fifteen.

Lcdo. Pablo Cobo Luna
SECRETARY OF THE BANKING BOARD