Resolution No. JB-2015-3426 of the Banking Board of Ecuador

Banking Board of Ecuador RESOLUTION No. JB-2015-3426 THE BANKING BOARD

CONSIDERING:

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

THAT by communication No. DC-BG-0114-2014 of April 3, 2014, received at the Regional Intendancy of Guayaquil on the 4th of the same month and year, the lawyer Magno Bohórquez Saona, Client Defender of Banco de Guayaquil S.A., submitted the minutes of disagreement between the parties, as well as the file of Mr. Joffre Ruperto Paladines Rodríguez, so that the Superintendence of Banks and Insurance resolves the claim against Banco de Guayaquil S.A. regarding the return of US$ 2,100.00 improperly transferred from his savings account No. 5427236 of the aforementioned banking entity;

THAT through official letter No. IRG-DAyEU-V-R-2014-386 of May 8, 2014, the lawyer Humberto Moya González, Regional Intendant of Guayaquil, informed Mr. Víctor Hugo Alcívar Álava, General Manager of Banco de Guayaquil S.A., that the claim presented by Mr. Joffre Ruperto Paladines Rodríguez was accepted and consequently ordered the banking entity to restore US$ 2,100.00 debited from savings account No. 5427236;

THAT the lawyer Humberto Moya González, Regional Intendant of Guayaquil, through official letter No. IRG-DAyEU-V-R-2014-745 of July 8, 2014, rejected the claim contained in the motion for reconsideration filed by Banco de Guayaquil S.A. against the content of official letter No. IRG-DAyEU-V-R-2014-386 of May 8, 2014, and confirmed the administrative act contained therein, namely, that the aforementioned banking entity restore the US$ 2,100.00 debited from savings account No. 5427236 belonging to Mr. Joffre Ruperto Paladines Rodríguez through electronic transfer;

THAT by communication received on July 21, 2014, at the Superintendence of Banks and Insurance, Mr. Víctor Hugo Alcívar Álava, Executive Vice President - General Manager of Banco de Guayaquil S.A., under the provisions of Article 137 of the General Law of Institutions of the Financial System, and Article 5, Section II, Chapter II, Title XVI of the Compilation of Resolutions of the Superintendence of Banks and Insurance and the Banking Board, filed a review appeal against the content of official letter No. IRG-DAyEU-V-R-2014-745 of June 8, 2014;

THAT by official letter No. JB-2014-1967 of July 25, 2014, the lawyer Pablo Cobo Luna, Secretary of the Banking Board, informed Mr. Víctor Hugo Alcívar Álava, Executive Vice President - General Manager of Banco de Guayaquil S.A., that the filed review appeal was accepted for processing, and extended the term to resolve it by an additional sixty days;

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THAT by official letter No. JB-2014-1968 of July 25, 2014, the lawyer Pablo Cobo Luna, Secretary of the Banking Board, informed Mr. Joffre Ruperto Paladines Rodríguez that the review appeal filed by Mr. Víctor Hugo Alcívar Álava, Executive Vice President - General Manager of Banco de Guayaquil S.A., was accepted for processing;

THAT regarding the appellant's argument that the present case is one of computer fraud under the "phishing" modality and that for such cases the time limit for financial institutions to recognize the return of values to their customers was until March 21, 2011, according to what was stated in Interinstitutional Resolutions Nos. 001-FGE-SBS-2011 and No. 002-FGE-SBS-2011, of March 21 and April 25, 2011, respectively, it is necessary to point out that said resolutions issued by the Superintendents of Banks and Insurance and the Attorney General of the State were in no way cited in the text of official letter No. IRG-DAyEU-V-R-2014-745 of June 8, 2014, and therefore did not constitute grounds for the resolution adopted, by virtue of which, no pronouncement can be made on them within this appeal;

THAT according to Article 213 of the Constitution of the Republic, the Superintendence of Banks and Insurance is the technical body for surveillance, auditing, intervention, and control of financial activities and services provided by public and private entities that are part of the national financial system, with the purpose that these activities and services are subject to the legal framework and attend to the general interest. In harmony with this fundamental norm, Article 1 of the General Law of Institutions of the Financial System establishes that the Superintendence of Banks and Insurance is the entity in charge of the supervision and control of the financial system. Furthermore, financial activities are a service of public order and have the fundamental purpose of preserving public deposits;

THAT Article 180, letter b) of the General Law of Financial Institutions, which has an organic character, obliges the Superintendence of Banks and Insurance to ensure the stability, solidity, and correct functioning of institutions subject to its control; and, in general, that they comply with the regulations governing their functioning, attributions that are exercised in the administrative sphere as provided in Article 140 of the General Law of Institutions of the Financial System;

THAT Article 52, and numeral 25 of Article 66 of the Constitution of the Republic of Ecuador, provide as follows:

"Art. 52.- People have the right to dispose of goods and services of optimal quality and to choose them freely, as well as to receive precise and non-misleading information about their content and characteristics.

The law will establish the mechanisms for quality control and procedures for the defense of consumers; and the sanctions for violation of these rights, the repair and indemnification for deficiencies, damages, or poor quality of goods and services, and for the interruption of public services that were not caused by fortuitous event or force majeure.

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"Art. 66.- It is recognized and guaranteed to people:

(...)

25. 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.

(...)";

THAT the Organic Law for the Defense of the Consumer in numerals 1 and 2, of Article 4, establishes:

"Art. 4.- Consumer Rights.- The fundamental rights of the consumer, in addition to those established in the Political Constitution of the Republic, international treaties or conventions, internal legislation, general principles of law, and commercial custom, are the following:

1. Right to the protection of life, health, and safety in the consumption of goods and services, as well as to the satisfaction of fundamental needs and access to basic services;

2. Right that public and private providers offer competitive goods and services of optimal quality, and to choose them freely;

(...)";

THAT based on the right to dispose of goods and services of optimal quality guaranteed by the Constitution and the aforementioned normative text, it must be pointed out that Banco de Guayaquil S.A. offers various services to its clients, among which is the transfer of funds through virtual banking, for which it is obligated to evaluate and require the necessary security measures in order to provide a service of optimal quality to its clients; therefore, the appellant's argument that the claimed transaction is the exclusive responsibility of Mr. Joffre Ruperto Paladines Rodríguez is not valid;

THAT the aforementioned banking entity must adequately manage the risks that exist in transactions carried out through virtual banking, in compliance with what is provided in Article 3, Section II "Risk Management", Title X, Book I of the Compilation of Resolutions of the Superintendence of Banks and Insurance and the Banking Board, which states:

"ARTICLE 3.- Financial system institutions have the responsibility to manage their risks, for which effect they must have formal processes of comprehensive risk management that allow identifying, measuring, controlling/mitigating, and monitoring the risk exposures they are assuming.";

THAT it is essential to indicate that Article 8, of Chapter III, Title XXV of the Compilation of Resolutions of the Superintendence of Banks and Insurance and the Banking Board, incorporated the obligation of banking entities to establish in

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the agreement of the parties the responsibility of the financial institution to implement physical and technological security for transactions, with the following wording:

"ARTICLE 8.- Deposits, fund withdrawals, credits, debits, and any other transaction allowed in monetary deposit accounts, carried out through electronic or electromechanical means, must be supported by a written agreement between the bank and the account holder, in which the following conditions must appear, at least:

(...)

8.3 Banking entities will be obligated to maintain controls that guarantee the physical and technological security of this type of transaction, taking into account the risks inherent to their operation.";

THAT according to the transcribed regulation, banks are obligated to adopt security measures, for which effect they must establish in the contracts they conclude with their checking or savings account holders such an obligation;

THAT Article 5 of Chapter IV "Procedure for the attention of claims against Financial System Institutions", Title XX "Of the Superintendence of Banks and Insurance", Book I "General Norms for the application of the General Law of Institutions of the Financial System" of the Compilation of Resolutions of the Superintendence of Banks and Insurance and the Banking Board, provides:

"ARTICLE 5.- 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 claim, the Superintendent of Banks and Insurance or the official who has the delegation of said authority will issue the corresponding disposition.

If the situation that motivated the claim referred to in the previous paragraph originated in an incorrect procedure of the controlled institution, which caused harm to the claimant, the Superintendence may order the return of the claimed values, in exercise of the functions and attributions contemplated in letters b) and o) of Article 180 of the General Law of Institutions of the Financial System, granting the legal representative of the entity a term that cannot exceed fifteen (15) days from notification to send, under the warnings of the Law, the proof of compliance with the order issued.";

THAT in application of what is provided in the transcribed Article 5 of Chapter IV, Title XX, Book I of the Compilation of Resolutions of the Superintendence of Banks and Insurance and the Banking Board, it corresponds for the control body to order the return of the claimed value;

THAT numeral 9.6 of Article 9 of paragraph II "Right to information on financial products and services", of Chapter III "Transparency and user rights", of Book I "General Norms for the application of the General Law of

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Institutions of the Financial System", of the Compilation of Resolutions of the Superintendence of Banks and Insurance and the Banking Board, establishes the following:

"ARTICLE 9.- Access and receive directly clear, precise, timely, reasonable, adequate, validated, truthful, and complete information, related to the products and services offered by financial system institutions, especially in financial, legal, juridical, operational, fiscal, and commercial aspects, among others, including their associated risks:

(...)

9.6 Receive clear, non-misleading, and non-inducing advertising, which collects the necessary, complete, and adequate conditions of the advertised product or service. The advertising will have binding force when contracts or agreements are made based on the advertising offer; and,

(...)";

THAT from the constitutional, legal, and normative provisions transcribed, it is clear that since the Superintendence of Banks and Insurance is a technical entity for surveillance, auditing, intervention, and control of economic activities, and of the services provided by private entities, with the purpose that these activities and services are subject to the legal framework and attend to the general interest, according to what is provided in Article 213 of the Constitution of the Republic of Ecuador, which is transcribed below, it is appropriate for this control body to observe Banco de Guayaquil S.A. so that the services provided to the client are of optimal quality, which can also be chosen freely:

"Art. 213.- Superintendencies are technical bodies for surveillance, auditing, intervention, and control of economic, social, and environmental activities, and of the services provided by public and private entities, with the purpose that these activities and services are subject to the legal framework and attend to the general interest. Superintendencies will act ex officio or upon citizen request. The specific powers of the superintendencies and the areas that require the control, auditing, and surveillance of each of them will be determined according to the law.

(...)";

THAT what was stated above is corroborated by the fact that the public interest must be protected by the Superintendence of Banks and Insurance, according to the first paragraph of Article 1 of the General Law of Institutions of the Financial System, which textually provides as follows:

"Art. 1.- This Law regulates the creation, organization, activities, functioning, and extinction of private financial system institutions, as well as the organization and functions of the Superintendence of Banks, entity in charge of the supervision and control of the financial system, in all of which the protection of public interests is taken into account.

(...)";

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(...)";

THAT Banco de Guayaquil S.A. has pointed out the fact that the transfer was made through the IP address 186.162.78.229 located in Peru, being the mentioned IP not habitual for the claimant to make transfers, nor registered by him for such purposes; therefore, the transferred amount cannot be the responsibility of Mr. Joffre Ruperto Alcívar Álava;

THAT the National Legal Intendancy, through memorandum INJ-DNJ-SAL-2015-0052 of January 22, 2015, recommended to the Banking Board to reject the claim contained in the appeal filed by the Executive Vice President and General Manager of Banco de Guayaquil S.A.; and,

IN exercise of its legal attributions,

RESOLVES:

ARTICLE ONE.- REJECT the review appeal filed by Mr. Víctor Hugo Alcívar Álava, Executive Vice President - General Manager of Banco de Guayaquil S.A.; and, consequently, CONFIRM the administrative act contained in official letter No. IRG-DAyEU-V-R-2014-745 of June 8, 2014, through which the lawyer Humberto Moya González, Regional Intendant of Guayaquil, rejected the claim contained in the motion for reconsideration filed by Banco de Guayaquil S.A. against the content of official letter No. IRG-DAyEU-V-R-2014-386 of May 8, 2014, and confirmed the administrative act contained therein, namely, that the aforementioned banking entity restore the US$ 2,100.00 debited from savings account No. 5427236 belonging to Mr. Joffre Ruperto Paladines Rodríguez through electronic transfer.

NOTIFY.- Given at the Superintendence of Banks and Insurance, in Quito, Metropolitan District, on the twentieth of May of the two thousand fifteen.

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

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

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