Resolution No. JB-2015-3481 of the Banking Board of Ecuador

RESOLUTION No. JB-2015-3481

THE BANKING BOARD

CONSIDERING:

THAT through Resolution No. JB-2015-3330 of April 1, 2015, the Banking Board resolved: "REJECT the claim contained in the administrative review appeal filed by Mr. Antonio Acosta Espinosa, Vice 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 administrative reconsideration appeal 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 supervised 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.', fundamentally for the following considerations:

"(...)

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 the resolutions contained in the Compilation of Resolutions of the Superintendence of Banks and Insurance and of the Banking Board, and the norms issued by the control bodies, will maintain their validity in everything 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 complaints, appeals, and other administrative procedures that it was hearing as of the date of entry into force of the same, within a term 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 complaint against Banco Pichincha C.A., stating: a) That on January 5, 2013, they made an ATM withdrawal without his authorization against savings account No. 4694300100 that he holds at Banco Pichincha C.A.; b) That on January 7, 2013, he filed the respective complaint 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 client'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 dollars debited without his authorization;

THAT through letter No. DAyEU-ISFP-REQ-2013-730, of June 26, 2013, the full content of the complaint filed against said bank was forwarded to it,

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granting it a term of five (5) days to present the pertinent explanations and defenses; in attention to said requirement, with letter N° 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, in 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 client. It is important to indicate that Banco Pichincha is technologically impeded from knowing the client's key.";

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 resolving:

"2. ORDER the supervised 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 administrative reconsideration appeal 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 administrative reconsideration appeal 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, Vice President of Banco Pichincha C.A., filed before the Banking Board an administrative review appeal 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 client's personal key has the character of secret and non-transferable, that is, that 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 ATMs;

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 ignored, 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 client was carried out on January 5,

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January 2013, and the defense documentation was requested on June 26, 2013, that is, more than 5 months after the withdrawal made by the client;

d) That in the present case, no incorrect procedures regarding ATM transactions carried out by Banco Pichincha C.A. have 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 for processing the administrative review appeal filed; 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 Financial System Institutions, as well as what is provided in article 5 of chapter IV regarding the "Procedure for the attention of complaints 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 Financial System Institutions" 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 financial user complaints, and in case of determining an incorrect procedure by the entities, to order the restitution of values to them, therefore the administrative acts that it issues to resolve them, arise from the control and supervision attributions, in whose activity, the protection of public interests must be kept in mind;

THAT from the documentation sent by the bank and by the claimant, it is appreciated that the withdrawal subject of the complaint 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 supervised 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 said resolution, in which it was concluded that:

"(...) it is impossible to establish if the ATM withdrawal from Banco Pichincha C.A. was indeed carried out by the user, since the recording of the questioned withdrawal made on January 5, 2013, was not sent by said entity (...)";

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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 administrative review appeal must be based only on the existence of elements of fact or law not known to the Superintendence of Banks and Insurance or the Banking Board at the time of issuing the resolution, whose record, 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 reconsideration appeal 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 client's personal key has the character of secret and non-transferable, that is, that it should only be known and handled by its holder, it is worth pointing out that, although it is true, the client 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 supervised 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 clients;

THAT literal a) of article 51 of the General Law of Financial System Institutions, in force at 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 meeting 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 to satisfactorily attend all types of operations, 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 securities in order to be able to fulfill its obligations as a depositary of the money that its clients have entrusted to it;

THAT it is necessary to specify that the use of ATMs arises from the contract that the bank and the client have signed for this effect, 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 complaint 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 ATM where the disputed transaction was carried out;

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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 ATMs of financial institutions must comply with the following security measures: (...)

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

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

THAT in the present case, the ATM video in which the disputed transaction was carried out is fundamental evidence, the lack of said evidence prevents this body from carrying out an analysis as to 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 ATMs, it is necessary to cite article 5, of chapter IV "Procedure for the attention of complaints 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 Financial System Institutions", of the Compilation of Resolutions of the Superintendence of Banks and Insurance and of the Banking Board, which empowers this Control Body to order the return of the values claimed by the supervised 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 complaint referred to in the previous paragraph, originated in an incorrect procedure of the supervised institution, which would have 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 Financial System Institutions, granting the legal representative of the entity a term that may not exceed fifteen (15) days from the notification to send, under the warnings of Law, the record of compliance with the order issued.

For complaints of unauthorized withdrawals due to evidence of attempts or frauds produced in ATMs, the Superintendence of Banks and Insurance will order the return of the claimed values to the credit card issuing institution or where the client maintains his account, if said withdrawals originated in an incorrect procedure of the supervised institution, which may repeat against the institution owning or operating the ATM due to whose defects or lack of security measures the fraud occurred."

THAT Banco Pichincha C.A., entity depositary and custodian of its clients' 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 clients with all the securities 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 ATMs; therefore

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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 clients 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 carelessness or mishandling of the debit card;"

THAT through communication received by the Superintendence of Banks on May 8, 2015, Dr. Jaime Flor Rubianes, Legal Representative of Banco Pichincha C.A., with the professional sponsorship of Dr. Pablo Cadena Merlo and lawyer María José Araujo Álvarez, filed an administrative reconsideration appeal against the administrative act contained in resolution No. JB-2015-3330 of April 1, 2015;

THAT the Banking Board, in a session held on June 10, 2015, in accordance with the second paragraph of article 3, chapter II, title XVI, book I of the Compilation of Resolutions of the Superintendence of Banks and Insurance and of the Banking Board, heard the appeal referred to in the preceding paragraph and determined that it does not comply with what is provided in the first paragraph thereof, that is, that there are no new elements of fact or law that motivate the elaboration of corresponding reports, for which it decided to deny it outright; and,

IN exercise of its legal attributions,

RESOLVES:

SINGLE ARTICLE.- DENY the administrative reconsideration appeal filed by Mr. Antonio Acosta Espinosa, Vice President of Banco Pichincha C.A. against the administrative act contained in resolution No. JB-2015-3330 of April 1, 2015; and, consequently, CONFIRM said resolution.

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

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

I CERTIFY.- Quito, Metropolitan District, on the tenth of June of two thousand fifteen.

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