Resolution No. JB-2015-3458 of the Banking Board of Ecuador

Banking Board of Ecuador

RESOLUTION No. JB-2015-3458

THE BANKING BOARD

CONSIDERING:

THAT this appeal is resolved in accordance with the First Transitional Provision of the Organic Monetary and Financial Code, published in the Official Register Second Supplement No. 332 of 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 norms issued by control bodies, will maintain their validity in all that does not oppose what is established in the Organic Monetary and Financial Code, 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: "(...) 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 this Code, within a period of one hundred eighty (180) days, extendable at the discretion of the Monetary and Financial Policy and Regulation Board (...)";

THAT from the aforementioned provisions, it is established that the Banking Board is competent to resolve the present review appeal;

THAT Mr. Edwin Naun Paredes Paredes, through a complaint form, filed on September 4, 2013, at the Regional Intendancy of Guayaquil, a complaint against the National Development Bank (Banco Nacional de Fomento), as he stated, due to two unauthorized withdrawals made on August 31, 2013, through ATMs of Banco del Pacífico S.A., amounting to US$ 191.00; an act that was reported to the General Prosecutor's Office of El Triunfo on September 3 of the same year;

THAT through Official Letter No. DAYEU-ISFP-REQ-2014-1246 of October 10, 2014, the Director of User Attention and Education of the Regional Intendancy of Guayaquil requested the Customer Service Supervisor of the National Development Bank Guayaquil to send explanations and defenses regarding the present complaint; a matter that was communicated to the complainant through the same means;

THAT through communication of November 13, 2013, the Director of the Customer Service Unit of the National Development Bank, presented information to the control body;

THAT through Official Letter No. IRG-DAyEU-V-R-2014-283 of April 7, 2014, the Regional Intendant of Guayaquil resolved:

"1.- ACCEPT the complaint filed by Mr. EDWIN NAUN PAREDES PAREDES, with citizenship ID No. 0602655177, against the controlled financial institution BANCO NACIONAL DE FOMENTO, for the reasons stated in the sixth section of this letter.

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2.- ORDER the controlled financial institution BANCO NACIONAL DE FOMENTO to proceed to restore to Mr. EDWIN NAUN PAREDES PAREDES the sum of US$ 191.00 (ONE HUNDRED NINETY-ONE 00/100 DOLLARS OF THE UNITED STATES OF AMERICA), debited from checking account No. 3001034989 on August 31, 2013, being able to exercise his right of recourse against the institution owning the ATM through which the challenged withdrawals were made (...)." [sic];

THAT through communication received by the control body on April 25, 2014, and Official Letter No. 037-DPTJ-AJZG-2014BNF, received at the Regional Intendancy of Guayaquil on June 27, 2014, the Commercial Manager of the National Development Bank, El Triunfo Branch, filed an appeal for reconsideration against Official Letter No. IRG-DAyEU-V-R-2014-283 of April 7, 2014;

THAT the Regional Intendant of Guayaquil, through Official Letter No. IRG-DAyEU-V-R-2014-801 of July 22, 2014, confirmed the administrative act contained in Official Letter No. IRG-DAyEU-V-R-2014-283 of April 7, 2014, through which it ordered the National Development Bank to reimburse the complainant the value of the withdrawals executed on August 31, 2013;

THAT through communication entered in the Superintendence of Banks and Insurance on July 31, 2014, Engineer Roberto Enrique Arce Icaza, Commercial Manager of the National Development Bank, El Triunfo Branch, with the professional sponsorship of lawyer Nicolás Rodríguez Campos, filed before the Banking Board a review appeal against the administrative act contained in Official Letter No. IRG-DAyEU-V-R-2014-801 of July 22, 2014, with the following arguments:

• That clauses fourth and eighth of the agreement celebrated between the 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 basic security recommendations for the handling of the debit card, which were made known to him through different media, among others:

"- SECURITY FLEX

• ATM MESSAGING

• TRANSACTION RECEIPTS

• CIRCULARS, ETC."

• That it was brought to the knowledge of the Regional Intendant of Guayaquil that the National Development Bank is permanently carrying out management actions in order for the requested information to be delivered to the control body, since without access to those files they are subject to some entities having less predisposition than others, which has

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caused the information to be delivered partially by said entity.

• That the additional documentation provided by the National Development Bank and sent to the control body was not considered for resolution, elements that do change the circumstances regarding the client's complaint;

THAT with Official Letter No. JB-2014-2106 of August 7, 2014, the Secretary of the Banking Board communicated to the appellant that the referred review appeal has been accepted for processing; and with Official Letter No. JB-2014-2107, of the same date, communicated the matter to Mr. Edwin Naun Paredes Paredes;

THAT Article 1, in concordance with Article 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 public interests, as well as required that controlled institutions present and adopt the corresponding corrective measures;

THAT by virtue of the legal norm previously invoked, 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, Title XX, 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 public interests as mandated by law, whose Article 5 establishes that if the result of the analysis performed 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 disposition. 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 damage to the complainant, the return of the claimed values may be ordered, granting the legal representative of the entity a period that cannot exceed fifteen (15) days from notification to send, under legal precautions, the proof of compliance with the issued order. Additionally, it states that for complaints of unauthorized withdrawals due to evidence of attempts or frauds produced in ATMs, the control body will order the return of the claimed values to the institution where the client maintains the account, if said withdrawals originated in an incorrect procedure of the controlled institution, which may then recourse against the institution owning and operating the ATM due to whose defects or lack of security the fraud occurred;

THAT regarding the defenses sent by Banco de Fomento in an undated and numbered letter, to which the "CONFIDENTIAL REVIEW REPORT" of October 25, 2013, was attached, it is observed that although on August 31, 2013, the date on which the complainant

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challenged the withdrawals, there are three successful transactions, carried out in ATM No. 01036 of Banco del Pacífico S.A., nevertheless, the previous transactions register observations such as "original card does not exist"; "insufficient funds"; "process error". And, subsequently, observations such as "incorrect key" are registered in two withdrawal attempts;

THAT the cited report determined: "According to security incidents in ATMs of vandalism, skimming, or malware evidenced and reported by member institutions of the BANRED Security Committee, and received by our Institution since the beginning of the review period, a possible coincidence has been evidenced with an ATM used by the client: 1. On August 14, 2013, the BANRED Security Committee reports ATM 19 of Banco de Machala as a possible compromise point on the dates of August 2 to 8, 2013. However, there is no official pronouncement from the institution owning the ATM.";

THAT the report of the movements of the debit card assigned to the account holder warns that from August 2, 2013, the system observed "Banred reports possible compromise point of ATM 19", and, subsequently, registers movements from the city of Guayaquil, through several ATMs, apparently for balance inquiries, and in others, notes "error" in the processes of fund withdrawal attempts, when the habitual nature of them is noticed from the locality of El Triunfo; however, it is not recorded in the file that Mr. Edwin Naun Paredes Paredes was informed regarding this possible coincidence registered on his account with the assigned debit card, in an ATM of the network; nor that the banking entity took any action to safeguard the client's funds;

THAT the information sent by the National Development Bank was partial, as it does not contain a historical log of detailed movements of the transactions carried out on the account of Mr. Edwin Naun Paredes Paredes, where the alerts of the operations being executed can be appreciated, whether by messages, via email, or cellular phone, and more informative data of said transactions, as part of the online monitoring process of the operations being executed with the aim of providing security in the withdrawal of funds through ATMs, as established by Resolution No. JB-2012-2148 of April 26, 2012, in numeral 4.3.8.7.; therefore, its assertion that it attended the requirements of the control body becomes inadmissible, given that it tried to disclaim its responsibility regarding the complaint with the argument that the ATMs where the withdrawals were made belong to a different bank, that is, Banco del Pacífico S.A., thereby transferring to third parties the exposure to risk of the questioned transactions, when its obligation is to reintegrate the deposited funds to its custody to their owner, under the contract signed between the parties, which was based, in turn, on Article 51 of the General Law of Institutions of the Financial System, in force at the date of the claimed event;

THAT the appellant argued that the client did not apply basic security recommendations for the handling of the debit card; however, from the review and analysis

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of the defenses presented by the bank and the documentation that supported 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. Additionally, the technical report issued by the Regional Intendancy of Guayaquil, through Official Letter No. IRG-DAYEU-2014-342 of October 24, 2014, stated: "From the review of the CD (...), in which the recording of the moment when the challenged transactions were carried out is recorded, it can be observed that a white card without the financial entity's logo was used, which would evidence that it was cloned (...)";

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, by offering as a financial service the withdrawal of funds through ATMs, is obliged to ensure that these, whether own or contracted, provide optimal security, among others, physical, mechanical, or electronic, referred not only to the use of the assigned key but also to the inviolability of the debit card delivered to the client;

THAT the file formed around the complaint, and the documentation inherent to the appeal presented, supported the appealed letter, for this reason, the argument of the appellant that not all documents presented by the National Development Bank were considered is not valid;

THAT an incorrect procedure of the National Development Bank is noticed for not providing the respective security to the transactions in dispute, through the ATM network, placed as a financial service for the client's use, by not monitoring or implementing alerts on the movements that were occurring on the debit card delivered by the bank to the client, which caused economic damage to Mr. Edwin Naun Paredes Paredes; consequently, the premise established in Article 5, 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 reimbursement of the values in dispute;

THAT the National Legal Intendancy, through memorandum INJ-DNJ-SAL-2015-0203 of March 9, 2015, recommended to the Banking Board to reject the claim contained in the appeal filed by the Commercial Manager of the National Development Bank-El Triunfo Branch; and,

IN exercise of its legal attributions,

RESOLVES:

SINGLE ARTICLE.- REJECT the claim contained in the review appeal filed by Engineer Roberto Enrique Arce Icaza, Commercial Manager of the Bank

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National de Fomento-El Triunfo Branch; and, CONFIRM the administrative act contained in Official Letter No. IRG-DAyEU-V-R-2014-801 of July 22, 2014, which rejected the appeal for reconsideration filed and confirmed the administrative act contained in Official Letter No. IRG-DAyEU-V-R-2014-283 of April 7, 2014, in which it ordered BANCO NACIONAL DE FOMENTO to proceed to restore to Mr. EDWIN NAUN PAREDES PAREDES the sum of US$ 191.00, debited from the checking account on August 31, 2013.

NOTIFY.- Given at the Superintendence of Banks and Insurance, in Quito, Metropolitan District, on June 4, 2015.

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

I CERTIFY.- Quito, Metropolitan District, on June 4, 2015.

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