Enterprise Risk Management
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Is your bank’s reputation at risk because of a lack of fraud controls? Many banks are experiencing serious challenges trying to manage their ongoing enterprise fraud efforts. Tight deadlines combined with a lack of clear guidelines as to how financial institutions need to respond to the PATRIOT Act, led many organizations to either choose the wrong solution, or to incorrectly implement the one they selected. In many cases, the BSA/AML Officers are left unsure of how their programs will withstand future tests and are trying to make the best out of a bad situation. While frustrating, this situation is exposing organization to a variety of risks including the non-compliance and reputational risk.
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Cross channel fraud is growing. The increased adoption of self service tools has accelerated fraud. ATM and branch fraud are stable at 14% of total deposit fraud while credit card fraud has grown from 13% to 18% and online fraud has grown from 12% to 31%. As the regulators have monitored these trends, their focus on better controls has increased. AML examinations now focus more pointedly on: - Risk assessment processes
- Independent testing of the enterprise AML program
- Internal controls and adherence to bank policies
- Customer Due Diligence and Enhanced Due Diligence
- Role-based training
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Compliance costs are spiraling out of control.According to recently published studies, compliance costs grew significantly faster than net income and compliance spending, as a percentage of net income, grew from 2.8% to 3.7%. Many financial institutions compounded these costs by applying people to the problem, not technology. This short term bubble of staff now demands that financial institutions identify and implement long term technology solutions to improve performance and reduce costs.
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Regulations are growing – more than 1,000 new bills are pending. The current mortgage crisis has highlighted the need for banks to operate more effectively and has brought the Federal Government to their doorsteps. Aite Group reports that the number of bills pending in Congress for regulatory compliance exceeds 1,000 and the top three categories are Identify Theft, Banking Operations and Mortgages. Banks cannot afford to ignore the pending focus of legislators. Regulators will be placing more emphasis on fraud and compliance going forward.
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