Resolution No. JB-2015-3330 of the Banking Board of Ecuador

RESOLUTION No. JB-2015-3330

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, on September 12, 2014, whose text states that resolutions contained in the Compilation of Resolutions of the Superintendence of Banks and Insurance and the Banking Board, and the 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 that the Banking Board will continue to act until it resolves all claims, appeals, and other administrative procedures it was hearing on 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 Mr. Bolívar Edison Vera Zambrano, through communication received in this control body on June 13, 2013, filed a claim against Banco Pichincha C.A., stating: a) That on January 5, 2013, a withdrawal was made via automated teller machine (ATM) without his authorization against savings account No. 4694300100 held at Banco Pichincha C.A.; b) That on January 7, 2013, he filed the respective claim with Banco Pichincha C.A. regarding the disputed transaction, and after 15 days, the Bank informed him that it would not be responsible for transactions carried out with the customer's credit card and private key; c) And requests the Superintendence of Banks and Insurance to order Banco Pichincha C.A. to return the sum of US$ 500.00 debited without his authorization;

THAT through letter No. DAyEU-ISFP-REQ-2013-730, of June 26, 2013, the full content of the claim filed against the aforementioned bank was forwarded to it, granting a term of five (5) days to present pertinent explanations and defenses; in response to said requirement, with letter No. BP-ACEC-2013-0707, received in this control body on August 6, 2013, the financial entity presented the explanations and defenses related to the claim presented by Mr. Bolívar Edison Vera Zambrano, justifying its action, mainly on the following:

"The debit card and personal key generated by Mr. VERA ZAMBRANO BOLÍVAR EDISON constitute the only mechanism to access ATM services, so the strict custody and care taken with the card, as well as keeping the personal key secret, are specific responsibilities of the customer. It is important to indicate that Banco Pichincha is technologically prevented from knowing the customer's key."

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THAT with letter No. IRG-DAyEU-V-R-2014-092, of February 12, 2014, the Regional Intendancy of Guayaquil accepted the claim presented by Mr. Bolívar Edison Vera Zambrano and issued the administrative resolution deciding:

"2. ORDER the controlled financial institution BANCO PICHINCHA C.A. to proceed to restore to Mr. BOLÍVAR EDISON VERA ZAMBRANO, the sum of US$ 500.00 (FIVE HUNDRED 00/100 DOLLARS OF THE UNITED STATES OF AMERICA), debited from his savings account No. 4694300100, on January 5, 2013, 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 this resolution."

THAT through communication received in this control body on February 26, 2014, BANCO PICHINCHA C.A. filed an appeal for reconsideration against the administrative act contained in letter No. IRG-DAyEU-V-R-2014-092, of February 12, 2014; and, with letter No. IRG-DAyEU-V-R-2014-692, of June 26, 2014, the Regional Intendancy of Guayaquil rejected the appeal for reconsideration filed, and resolved to confirm the administrative act contained in letter No. IRG-DAyEU-V-R-2014-092, of February 12, 2014;

THAT through a document entered into the Superintendence on July 8, 2014, Mr. Antonio Acosta Espinosa, Deputy President of Banco Pichincha C.A., filed before the Banking Board an appeal for review against the administrative act contained in letter No. IRG-DAyEU-V-R-2014-692, of June 26, 2014, arguing:

a) That the factual and legal grounds contained in letter No. IRG-DAyEU-V-R-2014-692 have not been subject to analysis or motivation; b) That the customer's personal key has the character of secret and non-transferable, that is, it should only be known and handled by its holder, who is the sole custodian of the debit card, and that said key and debit card constitute the only mechanism to access ATM services, the banking institution adds that it has no responsibility regarding cash withdrawals made through automated teller machines; c) That the lack of video cannot be cited as a cause for a resolution, because all the evidence presented and/or affirmed by the Bank is being disregarded, and it is inappropriate for the Regional Intendancy of Guayaquil to base its resolution on what is provided in article 37 of the Compilation of Resolutions of the Superintendence of Banks, taking into account that the transaction claimed by the customer was carried out on January 5, 2013, and the documentation of defenses was requested on June 26, 2013, that is, more than 5 months after the withdrawal made by the customer; d) That in the present case, incorrect procedures regarding ATM transactions carried out by

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Banco Pichincha C.A. have not been evidenced, which would have caused harm to the claimant, for which reason the restitution of values ordered is inappropriate;

THAT with letter No. JB-2014-1869, of July 17, 2014, the Secretary of the Banking Board accepted the appeal for review filed for processing; and, with letter No. JB-2014-1870 of the same date, notified Mr. Bolívar Edison Vera Zambrano regarding the acceptance of said appeal;

THAT the Superintendence of Banks, as the competent body, in accordance with articles 1 and 180, letter b) of the General Law of Institutions of the Financial System, as well as what is provided in article 5 of chapter IV regarding the "Procedure for the attention of claims against Institutions of the Financial System", 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 Banking Board, has the function and attribution to ensure the stability, solidity, and correct functioning of institutions subject to its control; to supervise that they comply with the norms that govern them; and, to require that said institutions present and adopt the corresponding corrective measures when necessary; under this context, based on the referred legal and regulatory provisions, it is inferred that this control body has the legal and normative faculty to hear the claims of financial users, and in case of determining an incorrect procedure by the entities, to dispose of the restitution of values to them, therefore the administrative acts it issues to resolve them, arise from the attributions of control and supervision, in whose activity, the protection of public interests must be taken into account;

THAT from the documentation sent by the bank and by the claimant, it is appreciated that the withdrawal subject of the claim was made on January 5, 2013 in savings account No. 4694300100 with debit card No. 4381081087548427 issued in the name of Mr. Bolívar Edison Vera Zambrano, holder of the aforementioned account, and is detailed below:

ATM	Accounting Date	Transaction Date	Time	Card #	Sequential Number	Value USD.$	Transaction Result
1062 BEST BUY	07/01/2013	05/01/2013	8:48:03	1087548427	1203	500	SUCCESSFUL

THAT regarding the bank's argument, it is worth mentioning that the documentation presented by the controlled entity was duly valued in resolution No. IRG-DAyEU-V-R-2014-092, of February 12, 2014, which is mentioned in paragraphs fifth and sixth of the cited resolution, in which it was concluded that:

"(...) it is impossible to establish if indeed the ATM withdrawal from Banco Pichincha C.A. was carried out by the user, since

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the recording of the questioned withdrawal made on January 5, 2013, was not sent by said entity (...)";

THAT article 3 of chapter II, title XVI of book I of the Compilation of Resolutions of the Superintendence of Banks and Insurance and of the Banking Board establishes that: "the appeal for reconsideration must be based only on the existence of elements of fact or law not known by the Superintendence of Banks and Insurance or the Banking Board at the time of issuing the resolution, whose existence, if it had existed, could have decisively influenced the sense of the resolution", a norm that the Bank did not consider. Notwithstanding this blatant non-observance by the appellant, for the processing of the appeal for reconsideration raised, this control body considered the information sent as well as all that rests in the file and the arguments of fact and law raised in the appeal, and rejected it by virtue of its analysis;

THAT regarding the appellant's argument, related to the fact that the customer's personal key has the character of secret and non-transferable, that is, it should only be known and handled by its holder, it is worth pointing out that, although it is true, the customer is the custodian of the card issued by the bank and solely responsible for its use, in the case at hand, it is not evidenced that Mr. Bolívar Edison Vera Zambrano has compromised the security of his debit card, granted by the controlled entity. Likewise, it is worth indicating that if the claimant user used Banred ATMs, it is because it is a service that the bank made available to its customers;

THAT literal a) of article 51 of the General Law of Institutions of the Financial System, in force on the date of presentation of this appeal, states that banks are authorized to "Receive public resources in demand deposits. Demand deposits are banking obligations, comprising monetary deposits payable upon presentation of checks or other payment and registration mechanisms; savings deposits payable upon presentation of savings books or other payment and registration mechanisms";

THAT the above is reinforced by what is determined in the Constitution of the Republic of Ecuador in its article 308 which says "(...) Financial activities are a public order service, and may be exercised, with prior authorization of the State, in accordance with the law; they will have the fundamental purpose of preserving deposits and attending financing requirements for the achievement of the country's development objectives.(...)";

THAT from the cited regulatory framework, it is determined that the bank assumes the obligation to keep or custodian the deposited values and satisfactorily attend any type of operation, with diligence and professional care, as well as being responsible for the other services offered to its clients, it is obliged to evaluate and demand the necessary security measures in order to be able to fulfill its obligations as a custodian of the monies that its clients have entrusted to it;

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THAT it is necessary to specify that the use of automated teller machines arises from the contract signed for this effect by the bank and the client, hence the responsibility of the financial institution regarding events such as the one that motivated the appealed resolution;

THAT from the review of the file, it can be evidenced that the user presented his first claim regarding the disputed withdrawal to the banking entity on January 7, 2013, from that moment Banco Pichincha C.A. should have carried out the necessary investigations to clarify the facts denounced, among them that of safeguarding the security videos of the automated teller machine where the disputed transaction was carried out;

THAT it is pertinent to refer to paragraph 40.11 of article 40 of chapter I, title II, book I, of the Compilation of Resolutions of the Superintendence of Banks and Banking Board, whose text indicates:

"Article 40.- The automated teller machines of financial institutions must comply with the following security measures: (...)

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

The institutions of the financial system must maintain a file of recordings that covers at least ninety (90) days, while those of transactions that are the subject of claim will be kept until there is a final resolution of the competent body.";

THAT in the present case, the video of the automated teller machine in which the disputed transaction was carried out is fundamental evidence, the lack of said evidence prevents this body from carrying out an analysis in the sense of whether the claimed transaction was or was not carried out by the claimant; or, if a cloned card was used or not in the same;

THAT regarding the appellant's argument, related to the fact that the bank has not incurred in incorrect procedures regarding transactions carried out through automated teller machines, it is necessary to cite article 5, of chapter IV "Procedure for the attention of claims against Institutions of the Financial System", 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 of the Banking Board, which empowers this Control Body to dispose of the return of the values claimed by the controlled institutions, in exercise of the functions and attributions that both constitutional and legal norms establish, since it provides that: "(...) If the situation that motivated the claim referred to in the previous paragraph, originated in an incorrect

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procedure of the controlled institution, which caused harm to the claimant, the Superintendence of Banks and Insurance 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 the notification to send, under the legal warnings, the proof of compliance with the order issued.

For claims of unauthorized withdrawals due to evidence of attempts or frauds produced in automated teller machines, the Superintendence of Banks and Insurance will order the return of the claimed values to the credit card issuing institution or where the customer holds his account, if said withdrawals originated in an incorrect procedure of the controlled institution, which may repeat against the institution owning or operating the automated teller machine due to whose defects or lack of security measures the fraud occurred."

THAT Banco Pichincha C.A., entity depositary and custodian of its customers' money, by placing the Banred ATM service at the disposal of its users, has the legal obligation to ensure that the ATM channel, whether its own or third-party, provides its customers with all the security that the case merits, which do not reside only in the use of the secret key but also in the inviolability of the magnetic card delivered and, of the automated teller machines; so that in the present case, the banking institution incurred in an incorrect procedure consisting in the lack of security measures in the channels through which its customers execute transactions, it is worth highlighting that in the present case there is no evidence determining that the cardholder carried out the transactions or that there was negligence or mishandling of the debit card;

THAT the National Legal Intendancy, through memorandum INJ-DNJ-SAL-2015-0109 of February 4, 2015, recommended to the Banking Board to reject the claim contained in the appeal for review filed;

AND,

IN exercise of its legal attributions,

RESOLVES:

SINGLE ARTICLE.- REJECT the claim contained in the appeal for review presented 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-2014-692, of June 26, 2014, through which the Regional Intendancy of Guayaquil rejected the appeal for reconsideration filed, and resolved to ratify the administrative act contained in letter No. IRG-DAyEU-V-R-2014-092, of February 12, 2014, in which it was concluded "2. ORDER the controlled financial institution BANCO PICHINCHA C.A. to proceed to restore to Mr. BOLÍVAR EDISON

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VERA ZAMBRANO, the sum of US$ 500.00 (FIVE HUNDRED 00/100 DOLLARS OF THE UNITED STATES OF AMERICA), debited from his savings account No. 4694300100, on January 5, 2013, 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 this resolution."

NOTIFY.- Given in the Superintendence of Banks, in Quito, Metropolitan District, on April 1, two thousand fifteen.

[Signature]
Econ. Rodrigo Landeta Parra
GENERAL INTENDENT, S
PRESIDENT OF THE BANKING BOARD, E

I CERTIFY.- Quito, Metropolitan District, on April 1, two thousand fifteen.

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