FINANCIAL
INSTITUTIONS
INDUSTRY NEWS
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January/ February 2015
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Source: McGladrey LLP
Used with permission as a member of the McGladrey Alliance
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USING A RISK ASSESSMENT TO CLARIFY YOUR AML PICTURE
The first step to solving any problem is defining it. The risk assessment process is an opportunity for management to gain an understanding of their institution's activity in regard to several areas within the institution and from various angles. For example, an IT risk assessment allows management to identify risks in system access and controls, while a fair lending risk assessment allows management to identify risks in underwriting and pricing
in loan products. The BSA/AML risk assessment is an opportunity for management to gain insight into its products, services, customers, entities and geographic locations that they serve. To read more go here.
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5 BIG IT THREATS FACING FINANCIAL INSTITUTIONS IN 2015
2014 was a tumultuous year for cybersecurity, with a new headline seemingly every week regarding the latest data breach or newly discovered vulnerability in widely deployed software. With that, the start of a new year can be a great time to look ahead and try to determine what sorts of threats financial institutions and their customers may face in the upcoming 12 months. Below we've compiled a list of five threats we think will see increased importance in the upcoming year. Read more here.
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3 KEYS TO GETTING THE MOST FROM EVOLVING AML TECHNOLOGY
Anti-money laundering (AML) technologies have seen tremendous strides in recent years. Especially among large, national banks, AML systems are moving beyond just transaction monitoring toward fully customized end-to-end solutions. At major institutions, evolving AML technologies are breaking down data silos to offer a single view of any customer across all business lines, from commercial banking to wealth management to retail. They are integrating previously disparate activities like alert generation, case management and customer risk rating and shifting from rules and static expected activity profile-based tools to dynamic systems that self-adjust to a customer activity and use artificial and predictive intelligence. From allowing electronic filings of suspicious activity reports to providing better audit trails for all AML activities, these new systems can help banks' AML professionals shift their attention from large volumes of low value alerts to more in-depth analysis in key areas of risk. However, as the complexity of monitoring systems grows, so do the regulatory expectations regarding monitoring system governance, validation, and ongoing system tuning and evaluation. To read more go here.
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FRAUD SURVEY HIGHLIGHTS UNIQUE CONTROL ISSUES FOR SPECIALTY LENDERS: 4 WAYS SPECIALTY LENDERS CAN CONTROL FRAUD
McGladrey recently conducted a survey about fraud experienced by specialty lenders. The survey found that half of the respondents had experienced fraud in the past 12 months. Following are some of the other key survey findings detailed in the 2014 specialty finance fraud survey report:
- Among the respondents who identified the positions involved in the fraud, the most common positions were branch managers and customer service personnel.
- Personnel committing fraud were usually not long-term employees, most having between one and five year's experience with the employer.
- Perpetrators were more than three times as likely to have a high school education or equivalent than a bachelor's degree.
- Of the types of fraud reported, thefts of cash and fraudulent loans were the most common.
- The majority of frauds were discovered within six months of being committed.
- Frauds were most likely to be detected by internal controls or management.
- The majority of frauds involved losses of less than $10,000.
Read more here. Download the Report here.
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2014 LOAN LOSS RESERVE SURVEY
The McGladrey 2014 Loan Loss Reserve Survey is an invaluable guide for community financial institutions nationally to evaluate their allowance for loan loss (ALL) reserves in context with peer institutions as well as to confirm the accuracy of the information upon which they base their accounting decisions. After yet another solid year for the U.S. economy, leaders of regional and community financial institutions expressed both confidence and some post-recession caution about the prospects for their local market economies. In our 2014 National Loan Loss Reserve Survey (LLR Survey), we take a deep dive into historical loan loss trends, recent and projected changes in allowance for loan loss reserves, and overall management of loan loss policies. Our survey also breaks down data by region and financial institution size, which may offer useful insights for your credit risk management and loan loss reserve practices. Specifically, the results of the survey provide a snapshot of banks and credit unions across the nation and their loan loss reserve factors, with clear views of data for classified and nonclassified loans by asset size. The data is also broken down by components of reserve requirements. Now in its 10th year of publication, financial institutions have found the data in the McGladrey survey invaluable not only to understand where their institutions stand in comparison to their peers, but to provide analysis support for internal use as well as for regulators. Download the 2014 Loan Loss Survey.
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Copyright © 2015 McGladrey LLP. All Rights Reserved. Used with Permission.
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Harding, Shymanski & Company, P.S.C.
800.880.7800
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