Western Union to cut 175 jobs and consolidate operations

Western Union is to cut 175 jobs and consolidate its operations in an effort to achieve $50 million in annual savings by 2012. The global money transfer operator - which currently employs some 6,800 people - says the overhaul will simplify business processes and move decision making closer to the marketplace. The restructuring comes just over a month after the company named chief operating officer Hikmet Ersek to replace Christina Gold as CEO.

The upheavals will cut through a swathe of management layers, reducing the number of executive vice presidents, senior vice presidents and vice presidents. The company's bill payment business will be put under the command of America's president Stewart Stockdale, and a new position focusing on electronic channels and new customer segments for consumers and businesses will be created.

The proposed changes to business operations include the closing, consolidation, and downsizing of facilities and the creation of a new regional operations centre in Europe.

Most of the management changes will be effective in the next 30 days, while the changes to business operations - resulting in the migration of the work performed by approximately 550 positions - are expected to occur over the next 18 months.

The company anticipates recording a total of approximately $80 million of restructuring charges through 2011, which includes $75 million for severance, facility closure and other costs.

CEO-elect Ersek says: "Simplifying our structure will allow us to improve our productivity and customer focus, capitalize on growth opportunities, and enhance long-term financial returns for our shareholders."

Reserve Bank of India issues alert on fraud in remittance transactions

The Reserve Bank of India (RBI) has advised banks to exercise due caution and to be extra vigilant while opening or allowing transactions in remittances.

“It is clarified that any person resident in India collecting and effecting or remitting such payments directly or indirectly outside India would make himself or herself liable to be proceeded against with, for contravention of the Foreign Exchange Management Act, 1999 besides being liable for violation of regulations relating to know your customer (KYC) norms or anti money laundering (AML) standards,” the RBI said in a notification.

It has been brought to the notice of the RBI that fraudsters are seeking money from the gullible people, under different categories, such as, processing fees, transaction fees, tax clearance charges, conversion charges and clearing fees, said the RBI. The victims have also been persuaded to deposit the amount in accounts with banks in India, and such amounts have been withdrawn immediately.

Australian banks to launch iPad banking apps

Australia's major banks are rushing to develop applications for the Apple iPad tablet on the back of significant growth in mobile banking use.

St.George Bank has become the first of the major banks to announce a dedicated app, which is to be made available for free download from the Apple iTunes store next week.

The iPad is being launched to Australians this week.

The app will go beyond the stripped back service made available by most banks for the iPhone, offering users the full functionality of St.George Internet banking, as well as a branch and ATM locator, product and service information, interest rates and product selector tools, and access to St.George video content through the bank's YouTube channel.

St.George head of eDistribution, Travis Tyler said more than 110,000 St.George customers use the bank's mobile banking service.Tyler thinks the iPad is more likely to be used by customers at home.

"We wanted to make sure we provided the full functionality of Internet banking".

Tyler also revealed the bank has a dedicated "think tank" of in-house experts working on new functionality for both the iPhone and iPad as customers embrace what Tyler said is a far more feature-rich experience than that offered by traditional websites.

NAB has also developed a dedicated iPad app, which it will launch today. The app will include full service NAB Internet banking, an ATM and branch locator and currency exchange rates. The bank said it will expand functionality over coming months.

Sam Plowman, executive general manager for direct banking at NAB said that as customers continue to embrace new technologies, "internet banking should be available anywhere, anytime, on any device".

Ean van Vuuren, head of consumer online with Westpac said the bank is definitely looking at building for iPad as mobile banking continues to gain popularity, but it has no firm launch dates at this stage.

ANZ and CBA (Commonwealth Bank), meanwhile, are first looking to simply optimize its existing online site for viewing on an iPad.

"We believe that the iPad and devices like it will become very popular for accessing online services in the home," an ANZ spokesman said.

She said the bank has already made changes to its platform to ensure that its internet banking service works well on the iPad.

"We are also working on other concepts related to the iPad and our approach is to deliver a customer experience that fully utilises what Apple have created in terms of screen size, multi-touch and other capabilities."

A CBA spokesman described the iPad as "an exciting device."

"We have tested NetBank on the iPad and think it’s a good experience, so we won't be developing a specific iPad application," the spokesman said.

Spanish financial institution Banco Sabadell became the first bank to release a native iPad app in late April.

MasterCard to open up its payment system to mobile and internet payments

MasterCard has announced it is to let mobile and web developers integrate its payment technology directly into apps. The move appears to mirror the model announced by PayPal, which serves up its own payment software for programmers.

However, those behind the venture have suggested MasterCard will be willing to let third parties take even more of a hands-on approach, with the company looking to make its payments system as flexible as possible.

According to the New York Times, MasterCard's chief innovation officer, Josh Peirez, is keen to see what third parties can come up with. The idea is that those outside MasterCard will be able to utilize the technology in ways the company hasn't considered before.

"A big part of the strategy is to be able to harness the innovation of others in the developer community to really push our business forward," Peirez told the paper.

It's no surprise MasterCard is looking to open up, with the firm having previously “built” its own payment apps that relied on merchant agreements and repeated data entry - a set-up deemed unappealing by many.

MasterCard's new approach appears more open, with MasterCard Labs which is behind the project - stating 20 of its services are available for third parties to use in their applications.

The news follows a renewed bid by PayPal to make its PayPal X software the default choice for developers, with its in-app purchase system now available for Android as well as iPhone.

It would appear PayPal still has some time before MasterCard becomes a real competitor, however, with Peirez merely stating that the company aims to open up its technology “by the end of the year”.

US faces long wait for mobile payments at PoS - Boston Fed

Mobile payments are unlikely to take off on a large scale in the US for at least the next three years, according to an analysis by the Federal Reserve Bank of Boston.

The prospects for the emerging technology are considered in a public policy discussion paper issued by the bank, which suggests that the investment costs currently outweigh the potential benefits.

On the demand side, consumers and merchants are well served by the current card system, and face a low expected benefit-cost ratio, at least in the short run, suggests the paper. On the supply side, low market concentration and strong competitive forces of banks and mobile carriers make coordination of standards difficult.

"Although it appears that some useful standards, both proprietary and open, will be available in the short or medium term, they will not be widely adopted until a business model develops that gives industry participants incentives to support this product, or until consumer demand for mobile payment services increases substantially," the paper concludes.

It suggests that the Fed could intervene in a policy push to establish appropriate regulatory oversight for mobile payments and encourage private industry stakeholders to work together to establish common industry standards.

Download the full analysis directly from the Boston Fed at http://www.bos.frb.org/economic/ppdp/2010/ppdp1002.pdf

Visa and Bancomer Transfer Services launch new money transfer system for Remittances from the US

Visa and Bancomer Transfer Services (BTS) have launched of a new money transfer service that will provide an additional alternative for consumers that send money from the United States to friends and family living abroad.

Starting this month, consumers will be able to initiate a Visa money transfer transaction at any BTS location in the United States. The Visa money transfer transaction can reach any eligible Visa account in the world, including all key remittance destination countries; however, the initial deployment of the service will enable consumers to send funds from the United States to select countries such as El Salvador, Brazil, China and The Philippines, with plans to extend the program to allow remittances from BTS locations to any country within the Visa network.

The new program offered by BTS is an enhancement to its recognized service offering that enables US consumers to safely and securely send remittances worldwide.

"The expansion of Visa money transfer to enable remittances from the US to eligible Visa accounts in Latin America is a significant milestone for Visa and our clients," said Jim McCarthy, Global Head of Product at Visa Inc. "Our alliance with BTS is a great example of how Visa is expanding its business network to bring the convenience and security of Visa digital currency to more consumers in more countries around the world."

According to the Inter-American Development Bank (IDB), the Latin America corridor is one of the largest money transfer markets in the world, with a total of USD $58.8 billion transferred in 2009. In 2009, BTS alone accounted for USD $10 billion in consumer funds transferred to Latin America, making BTS one of the largest processor of remittances for this region. Other large remittances markets served by BTS from the U.S. include Asia, Europe and Africa.

"As a member of the BBVA Group, we are always working to help people simplify their lives via sound, innovative products and services," said Moises Jaimes, President and CEO of BTS. "This goes far beyond being a complement to our traditional money transfer services. Our work with Visa strengthens our commitment to the evolution of the remittances industry, and, by providing our consumers with a wider array of safe and secure services and channels, it gets us one step further in our quest towards serving this important segment in the financial services industry."

Visa money transfers initiated at a BTS location in the U.S. are processed through Visa's secure network and will become available to Visa cardholders, who won't need to go to a physical location to receive the money. Funds can be transferred to eligible Visa debit, credit or prepaid accounts. The agreement with Visa provides BTS with access to Visa's global network and has the potential for BTS to reach more consumers in more countries.

"The Visa money transfer and BTS agreement is a serious endorsement of Visa's ability to become an alternative channel for money transfer companies and banks," said Gwenn Bezard, Research Director at Aite Group. "Money transfer companies' desire to enable remittance transfers directly into bank accounts has grown in recent years, and Visa is positioned to become the go-to utility for that service."

For the launch of this new service, Visa worked closely with BTS and Visa Debit Processing Services (DPS), to securely connect BTS' money transfer platform to VisaNet, Visa's global processing network. DPS is Visa's issuer processing service in North America that connects outside parties, such as issuing financial institutions and merchants to VisaNet.

Mobile banking - SMS upgrades dominate recent development in the UK

The May 2010 update of Mapa’s UK Mobile Banking and SMS Competitor Intelligence dashboards recorded notable new services as well as removed services in the UK market.

Mapa’s UK mBanking Dashboard compares a list of 70 individual Mobile Banking services across 7 banks. All information is obtained replicating the customer experience through the live accounts that they hold with these banks.

Mapa’s SMS Banking Dashboard compares a list of 100 individual SMS Banking services across 21 competing providers. All information is obtained replicating the customer experience through the live accounts that Mapa hold.

Both Dashboards is updated quarterly, highlighting competitor changes that have occurred in the market during that time.

Barclays have been the most active player in the mobile field the last months. Following the removal of SMS Banking highlighted in the Mapa update from February, the bank has now introduced their new and upgraded SMS Banking service. Barclays LayerCustomers sign up within Internet Banking and can register for regular balance alerts as well as triggered transaction alerts for a flat fee of £2 a month.

The use of ‘Augmented Reality’ has now reached the UK financial market. Within the mobile phone application Layar, available on iPhone and Android, Barclays customers can search for branches, ATM’s and contactless retailers. By combining the use of camera and GPS, users are able to see hits on a map, in a list or on the screen as an extra layer in the reality seen live through the camera.

HSBC and First Direct continue to extend the free period for their mBanking service which now lasts until the end of 2010.

A&L have now shut down their mBanking and SMS Banking services following the takeover by Santander.

Halifax has extended their SMS Banking services to include all customers. Previously, only Reward account customers were able to sign up for alert when going into unarranged overdraft.

The main change in the UK credit card market was the introduction of free text alerts by MBNA. This service has been available before but with service charges. The new service also includes new ad hoc alerts.

Additionally, an interesting finding from Mapa research was the use text messages in correlation to the flight disruptions caused by volcanic ash. Several UK banks seized the opportunity to contact their customers via SMS with information on how they could get financial help from their bank.

Bank regulation reform on the cards in the UK

Financial regulation will be put back in the hands of the Bank of England under the proposed Financial Reform Bill announced in the Queen's Speech at the opening of Parliament yesterday .

It will abolish the tripartite regulation system that Labour introduced in 1997. Under that system responsibility is shared between the Bank of England, the Financial Services Authority (FSA) and the Treasury.

But there was no mention of a tax on banks' profits despite earlier reports. The Conservative-Lib Dem coalition government announced plans last week in its agreement document to introduce a levy on banks as well as measures to tackle "unacceptable" bank bonuses.

It also said an independent commission would be established to look at breaking up banks into their retail and investment banking arms to reduce risk.

However, there was no further mention of either of these in the Queen's Speech, although it is likely that there will be an update on the bank levy in the Budget on 22 June.

"Legislation will reform the framework for financial services regulation to learn from the financial crisis," the Queen said.

The proposed reform is one of 22 bills announced in the Queen's Speech, setting out what the new coalition government hopes to achieve over the next 18 months.

The Conservatives have long been in favour of getting rid of the FSA and giving the Bank of England responsibility for maintaining financial stability.

However, the Liberal Democrats have previously said they would keep the FSA and make it the single regulator, with the governor of the Bank of England having overall responsibility for systemic stability.

It is currently unclear what role, if any, the FSA will play under the proposed changes.

Banks reveal extent of 'dark pool' trading

Six big investment banks published trading volumes for their "dark pools" for the first time yesterday, showing them as a tiny fraction of the market and not the major hidden rivals to stock exchanges that some argue.

Citi, Credit Suisse, Deutsche Bank, JP Morgan Cazenove, Morgan Stanley and UBS together executed €596m of equity trades from 15 countries on their automated crossing systems on Friday, according to Markit data.

That accounted for about 0.4 per cent of all types of cash equity trades in Europe and 1.6 per cent of all over-the-counter (OTC) trades reported on the Markit BOAT service that day, according to Thomson Reuters data.

Dark pools are electronic platforms that allow would-be buyers and sellers of large orders of shares to avoid revealing pre-trade information and signaling their intentions to the rest of the market.

Bankers argue that for the bulk of OTC trades they act purely as dealers, using their own money or share inventories to take one or another side, or they act in a non-automated way to match buyers and sellers for big blocks of stock.

Japan may clamp down on N. Korea remittances

Japan is mulling tougher restrictions on sending money to North Korea in response to Pyongyang's sinking of a South Korean naval ship, domestic media said on Tuesday.

But Finance Minister Naoto Kan suggested stricter sanctions might be largely symbolic. Japan already has measures in place, including a trade ban and restrictions on remitting funds.

"There's a question about how effective these measures have been, but we should consider such options to show our stance under the current circumstances," he told reporters.

Regional tensions continued to rise on Tuesday, when South Korea's Yonhap news agency said North Korean leader Kim Jong-il had ordered his military to be on a combat footing. South Korea has banned all trade, investment and visits with North Korea.

The Japanese government already requires that remittances to North Korea of more than 10 million yen ($110,800) be reported to the finance ministry, but is considering lowering this limit, the Nikkei newspaper said.

Tokyo may also tighten restrictions on travel between the two countries and ban ships that have visited North Korea from entering Japanese ports, the paper said.

Japan already bans North Korean ships from visiting Japan, among a series of measures introduced over the past few years to protest the North's nuclear and missile tests and its abduction of Japanese citizens in the 1970s and 1980s.

Problems delay use of remittance system in the Philippines

Hardware and connectivity problems would delay the use of the central bank’s electronic payments system for interbank remittance transfers to the third quarter.

“Most of the banks expect to complete their migration to the new system only by end-May or end-June 2010 while two banks have indicated that they could comply by end-September,” the Bangko Sentral ng Pilipinas (BSP) said in a statement.

By “new system,” the BSP referred to the Philippine Payments and Settlements System (PhilPaSS) Remit System.

The central bank and the Association of Bank Remittance Officers, Inc. (ABROI), Bankers Association of the Philippines, the Chamber of Thrift Banks, and the Rural Bankers Association of the Philippines had signed a memorandum of agreement in December that would allow these banking groups’ members to use PhilPaSS for interbank remittance transfers.

The remittance system -- envisioned to reduce the cost of remittance transfers to P50 per transaction from P150 to P550 at present -- should have been operational in the first quarter.

But as the BSP explained, banks were hounded by “hardware and system connectivity” problems. It did not elaborate.

It said only one bank, which the BSP did not name, was able to migrate to the PhilPaSS Remit System.

“The BSP will call a meeting with the heads of the participating banks to facilitate the use of PhilPaSS and ensure that overseas Filipino remitters will benefit from further reduction in remittance charges,” it said.

PhilPASS was established in 2002 as the central bank’s electronic payments system. It allows banks, non-bank financial institutions and those with quasi-banking licenses to have real-time settlement of their transactions.

The PhilPaSS Remit System was essentially initiated by the BSP and ABROI to eliminate the use of couriers in bank-to-bank crediting of remittances -- a mode of transfer that has proven to be expensive and risky.

At present, a Filipino working abroad will make a deposit in a bank, which then hires a courier to deliver the funds to another bank, where the Filipino worker’s relatives claim the remittance.

“PhilPaSS ensures safer, faster and cheaper means of remittance transactions,” the central bank stressed.

ABROI members number 11, including the country’s biggest banks.

Remittances grew by 7% to $4.3 billion in the first quarter. The BSP sees remittances growing by 8% this year from $17.35 billion last year.

Operations Risk - Bank settles wire transfer security suit against customer

PlainsCapital Bank in the US has settled a lawsuit it bought against one of its own business customers after crooks stole over $800,000 from the company's account. Cybercrooks stole the money from the PlainsCapital account of Texas-based Hillary Machinery last year via ACH and wire transfer.

Around $600,000 was recovered but when Hillary Machinery called on its bank to refund the remaining $200,000 it was hit with a lawsuit asking the court to affirm that security was reasonable and that the transfers were processed in good faith.

The company fought back with its own suit, arguing that the transfers, which went to Europe, should have set off red flags in the bank's fraud detection systems.

The pair have now come to a settlement in what was widely seen as an important test case following a sharp rise in account hijackings of business credentials.

Terms of the settlement have not been disclosed, but it comes just days after the courts threw out a motion by the bank to hold the hearings in private.

Recent research from Guardian Analytics and Ponemon Institute found that the US banking industry is failing to protect its small business customers from a destructive epidemic of cyberfraud that is sweeping the nation.

The research found that 55% of businesses reported experiencing fraud in the last 12 months, with 58% of fraud enabled by online banking activities. Yet, despite the soaring crime rate, 80% of banks failed to catch fraud before funds were transferred out of their institution. In 87% of fraud attacks, the bank was unable to fully recover assets.

Operations Risk – IBM left red faced!

IBM has been left red-faced after distributing USB keys infected with malware to delegates at Australia's biggest computer security conference. IBM was forced to send out an e-mail to all delegates at the AusCert conference warning them not to use the keys, which were dished out from its stand as a freebie item.

"At the AusCERT conference this week, you may have collected a complimentary USB key from the IBM booth," IBM Australia chief technologist Glen Wightwick wrote. "Unfortunately we have discovered that some of these USB keys contained malware and we suspect that all USB keys may be affected."

The malware, which dated to 2008, was detected by most anti-virus products, he said.

Wightwick described how to remove the malware, which spreads through Windows PCs, and instructed recipients who were having trouble to contact the IBM Security Operations team.

New Indian mobile banking service launched

The State Bank of India has unveiled a new mobile banking service, "State Bank freedoM", which enables customers to move funds, check balances, make bill payments all by way of their mobile phones without having to visit for registration for the service. This is a free service offered by the bank. Customers will have to bear the charges imposed by the telecom operators however.

This service also allows users to conduct m-commerce transactions. The bank has linked up with Paymate for the payment for goods/services over the Internet.

The bank also has plans to set up a Mobile Wallet which will allow it to take the mobile banking to non customers.

TRAINING COURSE - Risk Management - Focus on Fraud

Join us in JOHANNESBURG, South Africa on 2 & 3 August 2010 for our 2-day training course “RISK MANAGEMENT - FOCUS ON FRAUD”

Fraud is on the increase. Recent studies have shown a surge in economic crimes. The statistics reveal that the three most common forms of crime are theft, accounting fraud and corruption.

Of these, fraud has shown a particularly sharp rise. The rise in fraud stems from a mixture of increased opportunities and growing incentives. Companies have been reducing the number of people employed to monitor workers at a time when employees are more tempted to break the rules because their living standards are eroding and their jobs are looking shakier. The proportion of frauds committed by middle managers has shown a particularly sharp rise, from 26% in 2007 to 42% today.

Just consider the following questions;

* Can your bank or organization cope with fraud?
* Can you identify a fraud in your working environment?
* Are you maximizing your staffs’ potential to reduce fraud and error in your systems?
* How aware are you or employees of fraud?
* Do they have a clear understanding of the role they play in detecting fraud?
* Do they understand you organization’s fraud policies and procedures?

The “Risk Management - Focus on Fraud” course in Johannesburg on 2 & 3 August 2010 is a 2-day intensive course on fraud and how it presents huge challenges for banks, requiring them to radically modify behavior and increase their vigilance in many of the traditional risks associated with banking activities.

Ensure that your staff are able to cope with the growing fraud threat. For more details including a fully descriptive course brochure e-mail us at courses@citadeladvantage.com today. Please indicate FRAUD-JHB in the subject line.

Securities and Exchange Commission is to put out for public comment Stock-By-Stock Circuit Breaker Rule Proposals

This is in a response to the market disruption of May 6. The national securities exchanges and the Financial Industry Regulatory Authority (FINRA) have filed proposed rules under which they would pause trading in certain individual stocks if the price moves 10 percent or more in a five-minute period. The SEC is seeking comment on the proposed rules.

The markets are proposing these rules in consultation with FINRA and staff of the SEC to provide for uniform market-wide standards for individual securities in the S&P 500 Index that experience a rapid price movement.

These rules reflect a consensus that was achieved among the exchanges and FINRA after SEC Chairman Mary Schapiro convened a meeting of exchange leaders and FINRA at the SEC early last week. That meeting took place within days after the market dropped significantly and after approximately 30 S&P 500 Index stocks fell at least 10 percent in a five-minute period.

“We continue to believe that the market disruption of May 6 was exacerbated by disparate trading rules and conventions across the exchanges,” said Chairman Schapiro. “As such, I believe it is important that all the exchanges quickly reached consensus on a set of uniform circuit breakers that would be triggered when needed. Today’s filings reflect that consensus. I am pleased by the constructive cooperation of the exchanges and FINRA as evidenced by their rapid response.”

Under the proposed rules, which are subject to Commission approval following the completion of the comment period, trading in a stock would pause across U.S. equity markets for a five-minute period in the event that the stock experiences a 10 percent change in price over the preceding five minutes. The pause would give the markets the opportunity to attract new trading interest in an affected stock, establish a reasonable market price, and resume trading in a fair and orderly fashion. Initially, these new rules would be in effect on a pilot basis through Dec. 10, 2010.

The markets will use the pilot period to make appropriate adjustments to the parameters or operation of the circuit breaker as warranted based on their experience, and to expand the scope to securities beyond the S&P 500 (including ETFs) as soon as practicable.

The proposed rules will be available on the SEC’s website as well as the websites of each of the exchanges and FINRA. The Commission intends to promptly publish the proposed rules for a 10-day public comment period, and determine whether to approve them shortly thereafter.

“I believe that circuit breakers for individual securities across the exchanges would help to limit significant volatility. They would also increase market transparency, bolster investor protection, and bring uniformity to decisions regarding trading halts in individual securities,” said Chairman Schapiro.

During the pilot period, Chairman Schapiro has asked the SEC staff to consider ways to address the risks of market orders and their potential to contribute to sudden price moves, as well as to consider steps to deter or prohibit the use by market makers of “stub” quotes, which are not intended to indicate actual trading interest. The staff will study the impact of other trading protocols at the exchanges, including the use of trading pauses and self-help rules. The SEC staff also will continue to work with the exchanges and FINRA to improve the process for breaking erroneous trades, by assuring speed and consistency across markets.

The SEC staff is working with the markets to consider recalibrating market-wide circuit breakers currently on the books – none of which were triggered on May 6. These circuit breakers apply across all equity trading venues and the futures markets.

Fraud - Ernst & Young's 11th Global Fraud Survey

Ernst & Young's 11th Global Fraud Survey sheds light on how businesses have coped with increasing fraud and corruption risk during the financial crisis, and examines the growing pressures on the CFO, internal audit, legal and compliance functions. It reviews the risks and challenges that businesses will face as they navigate clear of the financial crisis and begin to focus on growth.

This reflects the views of over 1,400 senior decision-makers in major companies in 36 countries across the world.

Fraud continues to rise as compliance struggles for recognition. The survey indicates continued need for anti-fraud measures, even against a tough financial background. However, this could be a result of the way fraud has come under the spotlight in recent years.

David Stulb, global leader of Ernst & Young's fraud investigation and dispute services practices says: "Regulators in western Europe have become much more aggressive and have been using US-style investigative techniques and settlement practices. In some jurisdictions, such as the UK, significant outreach efforts to encourage whistleblowers have been undertaken. These efforts are believed to have already yielded results."

Stulb explains that legislative developments have also been a factor. "While there was lively debate over the UK Bribery Act in the weeks before its passage, the final version of the Act is very robust, including penalties against corporations for failing to prevent bribery."

At the same time, there has been a drop in resources available to those that must prevent and react to instances of fraud. Ernst & Young states that one in five of the survey respondents from legal departments have seen their budgets fall in the last year.

Stulb says: "The UK lawyers and compliance officers I regularly meet are eager to hear about new and emerging risks for their organizations and what steps they can take to mitigate them. However, I suspect many of them face significant internal challenges to secure the investment required to take these steps."

The survey also shows the growing, and uncertain, nature of compliance as a specialty. More than half of those in the field have been in a compliance role for less than five years. This reflects the substantial growth in recruitment in this area, but also suggests some challenges ahead. Outside of specialist fields, there can be a lack of appreciation for the role that compliance can play in an organization. Some 70% of chief compliance officers interviewed said demonstrating the value of compliance to the wider organization was a significant challenge.

According to Stulb, though, this can be related to the industry that officers work in, particularly those under the scrutiny of external regulators.

"Many companies operating in heavily regulated industries, such as financial services and life sciences, have developed sophisticated compliance and internal audit systems. They are keenly aware of the value brought by investing time and effort to protect their brand, and, as a result, compliance is already high on their corporate agenda."

The report also looks at growth in the next year, in particular mergers and acquisitions. Fifty-three percent of global respondents said they are targeting growth for their companies in the next year, with 42% in Japan targeting aggressive growth.

This is likely to throw up particular issues as groups expand into new markets with different cultural practices, emphasizing the importance of thorough due diligence pre-acquisition.

Key findings specific to the UK include:

• Increased enforcement against fraud, bribery and corruption is a priority in many major markets. The passage of the UK’s Bribery Act is the latest example of a more robust approach to punishing the unethical conduct of individuals and corporates. Individual executives and directors will not be immune from prosecution. 76% of our UK respondents say their directors are concerned about personal liability for actions carried out by their company.
• Despite this concern, organizations are not behaving in a way that would increase their own protection. Alarmingly, 18% of UK companies have not performed a fraud risk assessment over the last 12 months, and 1 in 10 (8%) have never completed one. Performing such an assessment will help prioritise actions to deal with the most significant fraud risks and is therefore fundamental when budgets and resources are scarce.
• Having coped through the downturn, many companies are now looking for new growth opportunities, which may come through entering new markets or making acquisitions. These efforts can expose companies to numerous new risks, potentially including corruption issues. To minimize such risks, businesses should undertake thorough, focused pre-acquisition due diligence. However, 34% of UK respondents rarely or never perform fraud or corruption related pre-acquisition due diligence, while 47% rarely or never perform a similarly focused post-acquisition review. These steps are vital to reducing the risk of successor liability and subsequent regulatory enforcement actions.

When growth returns, we expect more challenges, more potential for fraud, more exposure to corruption and more interest from regulators. In the coming months, if they haven't done so already, companies will need to review or improve their procedures to achieve long-term sustainable and ethical growth.

Download Ernst & Young’s 11th Global Fraud Survey at:

http://www.ey.com/Publication/vwLUAssets/Driving_ethical_growth_-_new_markets,_new_challenges:_11th_Global_Fraud_Survey/$FILE/EY_11th_Global_Fraud_Survey.pdf

Phishing - Anti-Phishing Working Group publishes a global survey

Phishing has always been attractive to criminals because it has low start-up costs and few barriers to entry. But by mid-2009, phishing was dominated by one player as never before, the Avalanche phishing operation. This criminal entity is one of the most sophisticated and damaging on the Internet, and perfected a mass-production system for deploying phishing sites and crimeware - malware designed specifically to automate identity theft and facilitate unauthorized transactions from consumer bank accounts. Avalanche was responsible for 66% of all phishing attacks launched in the second half of 2009, and was responsible for the overall increase in phishing attacks recorded across the Internet.

The statistics also show that phishing remained highly localized in certain Internet namespaces, and that some anti-phishing measures had noticeable impacts. While phishing remains a damaging phenomenon involving many millions of dollars in losses, the increasingly concentrated nature of much phishing offers some opportunities for improved response and mitigation.

This new report seeks to understand such trends by quantifying the scope of the global phishing problem, especially by examining domain name usage and phishing site uptimes. The report examines all the phishing attacks detected in the second half of 2009. The data was collected by the Anti-Phishing Working Group (APWG), supplemented with data from several phishing feeds and private sources. The APWG phishing repository is the Internet’s most comprehensive archive of phishing and e-mail fraud activity.

You can download the full report at; http://www.apwg.org/reports/APWG_GlobalPhishingSurvey_2H2009.pdf

Mobile Banking - A new product is launched in Kenya

Kenya's largest mobile operator, Safaricom, and Equity Bank, have unveiled M-Kesho, a mobile banking product targeting rural areas. M-Kesho will allow M-Pesa (Safaricom's mobile money transfer service) account holders to deposit money, withdraw cash and access loans.

"If all M-Pesa customers are banked as is envisaged with the M-Kesho product, Kenya will be the most banked country in Africa and in the developing world," said Mr. James Mwangi, Equity Bank chief executive.

The product will transform M-Pesa accounts into bank accounts, enabling M-Pesa customers to open savings accounts where they will be able to transfer as little as a Ksh.100 (US$1.3) at no cost.

Speaking during the launch in Nairobi, Kenya’s President Mwai Kibaki said M-Kesho is a landmark product that will integrate the telecommunications and banking sectors and would improve access to cost effective financial services.

Other than deposits and withdrawals, M-Kesho customers will also be able to access micro-credit and micro-insurance products, and earn interest on their money.

Mobile Banking – New text service for UK customers

MBNA Europe, a wholly owned subsidiary of Bank of America, has introduced new mobile banking text service, to enable UK customers to text for their credit card information.

By using the mobile banking text service, customers can use their mobile phone to get credit card account information, including balance, payments and transactions, by texting to a dedicated mobile short-code number.

To use the service, customers with mobile phone numbers registered to their accounts can send “Bal”, “Trans” or “Bill” to the dedicated short-code number for the latest information on their accounts.

Ian Craig, sales, service and operations executive for Bank of America Europe Card Services, which operates the MBNA brand, said: "The mobile banking text service is one of a number of exciting new improvements we will be making to our services. With this service, we are able to provide our customers with another way to bank that is simple, straightforward and puts their credit card information at their fingertips whenever they need it.”

Remittances and the White House

A piece on the “White House Blog” lauds pending Wall Street reform Legislation as something that will provide “benefits (to) hardworking individuals here in the United States as well as their families abroad” by overcoming certain barriers which are specified as;

“Remittance transfer providers currently are not required to disclose, prior to initiating a transaction for a consumer, the amount that will be received at the other end, making it essentially impossible for consumers to effectively comparison shop. No federal agency is specifically charged with protecting the rights of consumers using remittance services and federal regulations that apply to many other consumer payments transactions generally do not apply to remittance transfers. Although most states regulate remittance transfer providers to some degree, few require disclosures designed with consumers in mind. Meanwhile, researchers have found that the millions of families sending financial assistance Mexico frequently have difficulty understanding the total cost of sending a remittances, specifically the exchange rate and fees charged by the provider, before they engage in a transaction.”

Will this legislation also extend to millions of illegals who really do need protection too?

Read the full entry at http://www.whitehouse.gov/blog/2010/05/20/wall-street-reform-and-sending-money-home

The US’ best mobile banking apps

Not every bank has jumped into the mobile banking market at full steam. This is also true of the US where even some of the coutries most popular banks don’t yet offer iPhone apps or mobile-ready websites.

A recent web based survey, looking for the most convenient “on-the-go” banking experiences found the following mobile banking offerings from four of the US’ most popular banks.

Chase

Chase offers applications for iPad, iPhone, iPod Touch and BlackBerry as well as access to accounts via standard text messaging.

Chase iPhone App

• Cost: Free. Client must be enrolled in Chase Mobile to make transactions with app.
• Standard functions: Text banking allows client to see account balances, review transaction history and check credit card due dates. The mobile app is much more helpful: Client can pay bills and schedule payments through Chase Online Bill Pay, transfer money between Chase accounts, wire money to outside accounts, and check balances and history.
• Extras: The Chase Mobile app includes a helpful “Find ATM/Branch” feature that uses the phone’s geo-location capabilities to find the nearest Chase branches. The app also provides the hours, contact information and number of ATMs at each branch. If the client needs help managing his/her accounts, the “Contact Us” tab includes one touch dialing to Chase’s help lines.
• Aesthetic appeal: The Chase Mobile app runs quickly on the iPhone and features easy-to-read white text on Chase’s familiar blue background.

Bank of America

Bank of America has a standard text messaging banking system as well as apps that work on the BlackBerry, iPad, iPhone and iPod Touch devices.

Bank of America iPhone App

• Cost: Free. Clent must be enrolled in the Bank of America “Online Banking” service to use certain features of the app.
• Standard functions: Bank of America’s text banking lets client check account balances, view credit card account details and see transaction history. The BofA app allows the client to access account details and balances, transfer funds to other Bank of America accounts and pay bills.
• Extras: The BofA app helps the cleint find nearby locations based on the phone’s geo-location abilities. One can also input a zip code or address in order to plan ahead.
• Aesthetic appeal: The BofA app uses smaller fonts and weaker colors than the Chase platform does. It also takes a bit longer to load pages.

Citibank

Citibank boasts three separate mobile apps. One works on the iPhone and iPad, the second on the iPod Touch, BlackBerry and Palm smartphones, and the third on many kinds of basic cell phones.

Citibank iPhone

• Cost: Free. User must be a Citibank client to make any transfers or view account information.
• Standard Functions: All three of Citbank’s apps allow the user to view balances, wire money to others and transfer money between your Citibank accounts. The iPhone and iPad versions also allows the client to track their Citibank credit card accounts.
• Extras: If the user wants to be reminded often of the status of her accounts, the cleint can sign up for a very comprehensive text alert system. The cleint can choose to be alerted when your balance dips below a certain level, when deposits are made, when bills are due or when CD accounts are about to mature, for example. The iPhone and smartphone apps provide lists of the bank branches closest to the phone’s current location. The user can also search by zip code or address.
• Aesthetic appeal: Citigroup’s app suffers from the same ailment as many other iPhone and smartphone platforms: Some of the fonts are too small for comfortable reading.

Wells Fargo

Wells Fargo users have access to apps for Blackberry, iPhone, iPad and iPod Touch, as well as the ability to get account info via text message.

Wells Fargo iPhone

• Cost: Free. To access account information or make transactions you must be a Wells Fargo Mobile customer.
• Standard Functions: The iPhone app allows the cleint to check available balances, monitor credit card activity, transfer funds and pay bills. The bank’s text service provides balance and account activity information.
• Extras: The Wells Fargo application includes bank-finding functionality and the ability to filter search results depending on what services each particular branch offers. If the user does not have any room for additional apps on his iPhone, he can visit wf.com, which has a fast and easy-to-use site that fits the iPhone perfectly.
• Aesthetic appeal: Wells Fargo’s mobile properties have a very standard look (not nearly as slick as Chase’s offering). But the apps load screens quickly and the app’s toggle menus make searching for branches easy.

The mobile banking apps offered by these popular banks are more alike than they are different. Considering the fact that all the apps come free of charge and all offer similar benefits, a clear leader in the mobile banking market has not emerged.

Flash crash prompts circuit breaker roll-out

The Securities and Exchange Commission (SEC) has called for uniform circuit breakers on all S&P 500 stocks in response to the "flash crash" that caused mayhem earlier this month.

Under the proposed rules, which are subject to Commission approval following the completion of a comment period, trading in a stock would pause across US equity markets for five minutes if its price changes by more than 10%.

The pause rules, which will be piloted for six months from June, will give the markets a chance to attract new trading interest in the stock, establish a reasonable market price and resume trading in a "fair and orderly fashion", says the SEC.

The plan - which has the backing of the national securities exchanges and Finra - comes after tthe so-called "flash crash" on 6 May, which saw the Dow Jones industrial average plummet in minutes, with 30 stocks in the S&P falling at least 10%.

Mary Schapiro, chairman, SEC, says: "We continue to believe that the market disruption of May 6 was exacerbated by disparate trading rules and conventions across the exchanges. As such, I believe it is important that all the exchanges quickly reached consensus on a set of uniform circuit breakers that would be triggered when needed."

In a statement welcoming the rules, Nyse Euronext says: "The adoption of this market-wide mechanism will promote investor protection and is designed to help prevent similar events from taking place in the future. This result is a meaningful step towards re-affirming the integrity of, and confidence in, America 's capital market system."

Although the SEC says the plunge was compounded by a lack of consistency, it has still not identified the underlying cause.

A joint report, carried out in partnership with the US Commodity Futures Trading Commission (CFTC), suggest a "severe mismatch in liquidity" played a part.

However, it "found no evidence that these events were triggered by "fat finger" errors, computer hacking, or terrorist activity, although we cannot completely rule out these possibilities."

Meanwhile, CME Group has carried out its own investigation into the crash, concluding that high-frequency traders were not, as has been suggested, responsible.

CME Group says "there is no visible support of the notion that algorithmic trading models deployed in the context of stock index futures traded on CME Group exchanges caused the market fluctuations in question".

In fact the operator goes further, claiming "automated trading contributes to market efficiencies, generally bolsters liquidity and thereby contributes to the price discovery function served by futures markets".

The joint report may be downloaded at

http://www.sec.gov/spotlight/sec-cftcjointcommittee/sec-cftc-prelimreport_may62010.pdf

Operations Risk - Banks warned over World Cup fraud risks

This summer's World Cup could leave banks struggling to protect themselves and customers against card fraud, as a surge in unusual transactions throws off risk scoring mechanisms, claims vendor Actimize.

Banks generally see sharp increases in fraud during large one-off events such as the World Cup and Olympics, says the security firm, struggling to identify suspect transactions because of the statistical "noise" generated.

Jackie Barwell, manager, financial crime products, Actimize, says: "Because of the increased volume of amateurish 'noise' created by opportunists, many of the phishing emails created by organised criminals look incredibly professional. These more professional schemes will direct unsuspecting victims to convincing Web pages asking for credit card details or online banking log-ins."

Banks, already alert to the fact that customers' cards are at risk, should amend their transactional risk scoring and anti-fraud processes so as to distinguish genuine suspicious activity across all customer channels - ATM, debit and credit card transactions as well as online transactions, says Actimize.

The firm calls on banks to tap behavioral profiling to keep ahead of the scammers, using multiple scoring tiers and sophisticated analytics to identify high-risk transactions in real-time.

US regulators fines Deutsche Bank and National Financial Services over short sales violations

Deutsche Bank Securities and National Financial Services (NFS) have been fined a total of US$925,000 by US regulators for violating short order rules by circumventing their direct market access (DMA) trading systems.

The Financial Industry Regulatory Authority (Finra) fined Deutsche Bank's New York securities business US$525,000 and Fidelity unit NFS US$350,000 for executing "numerous short sale orders" in violation of Regulation SHO and related supervisory violations.

Regulation SHO says that brokers or dealers cannot make a short sale without identifying a source from which to borrow the security. This is generally referred to as obtaining a "locate" and these must be obtained and documented before making a short sale.

Finra says both Deutsche Bank and NFS implemented DMA trading systems for their customers that were designed to block the execution of short sale orders unless a "locate" had been obtained and documented. Yet on several occasions Deutsche Bank disabled its system and NFS created a separate one for certain customers, meaning some short orders were not blocked.

In Deutsche Bank's case, the firm's systems sometimes experienced outages that prevented the importing of locate data and, as a result, short sale orders placed for execution were automatically rejected, even when a client had already obtained a valid and properly documented locate. Finra says that during these outages, the bank disabled the system's automatic block, permitting client short sale orders to automatically proceed for execution.

Meanwhile, NFS created a separate manual locate request and approval process for around 12 prime brokerage clients. Requests for, and approvals of, the multiple simultaneous locates were transmitted via e-mail with account representatives on the firm's Prime Services Desk, and were not required to be entered into its stock loan system, says the watchdog.

Further, Finra says both firms supervisory systems were inadequate. Deutsche Bank was aware that its system to block short sale orders in the absence of locates was periodically disabled over a period of more than four years - from January 2005 through September 2009 - but failed to roll out a replacement. Similarly, NFS created a flawed system for certain customers that failed to ensure that some short sale orders had valid and timely locates for nearly four years - from January 2005 through August 2008).

James Shorris, acting chief of enforcement, Finra, says: "The locate requirement is an essential component of ensuring that short sales are executed properly. The failure to design, implement and supervise systems that reasonably ensure that shares of a security are available to be borrowed before a short sale is executed significantly undermines the effectiveness of Regulation SHO."

TRAINING COURSE “MIGRANT WORKERS REMITTANCES – ISSUES & OPPORTUNITIES”

Johannesburg, South Africa – 28 & 29 July 2010

The transfer of migrant’s remittances represents a huge business opportunity for banks and other financial institutions which is still largely overlooked. The financial services industry, which plays such an important role in the Payments Industry, is missing an important opportunity if they ignore a very large component – Remittances.

The flow of funds from migrant workers back to their families in their home country is an important source of income in many developing economies. The total value of these remittances has been increasing steadily over the past decade and it is estimated that in 2008 the total value worldwide was over US$ 397 billion equivalent, involving some 190 million migrants.

For some recipient countries, remittances can be as high as a third of GDP. Remittances also now account for about a third of total global external finance. Additionally the flow of remittances seems to be significantly more stable than that of other forms of external finance. This is borne out by evidence from the recent financial crisis. Because of measurement uncertainties, particularly about unrecorded or informal remittances, the actual flows may be much higher – estimated by experts at 50% or more.

Informal channels are the greatest competition to formal financial sector in the Remittance space. Understanding what these are and how they operate is key to understanding their success. And their success factors are themselves critical to permitting banks to successfully compete for this important market sector.

This course is the definitive A to Z on Remittances – from informal systems to the revolutionary appearance of the Mobile Phone as a remittance tool.

This intensive 2-day course provides an insight of the payment system aspects of remittances, and is designed to assist financial institutions that want to improve their understanding of this important market as well as extend and develop the many business opportunities that present themselves. Processing these money transfers is a business opportunity with vast potential especially with the recent rise of the Mobile Phone is now set revolutionize the Remittance world.

We examine how the public and private sectors can collaborate to encourage the providers of remittance services to switch from informal to formal channels and how they can make the formal sector more efficient and competitive.

The course has been specifically designed for Senior Bankers involved with

• Payment Systems and Money Transfers 
• Payment Strategy
• Micro Finance
• International & Correspondent Banking 
• Retail Banking Services
• Banking Product Development

Central Bankers involved with

• Payment Systems
• Payment Strategy & Policy
• International & Correspondent Banking 
• Payment System Regulation & Oversight

Senior Staff of

• Corporations who employ migrant workers
• Money Transfer Operators
• Government agencies involved in migrant workers
• Development Agencies

For a fully descriptive brochure please send a blank e-mail to courses@citadeladvantage.com with REM-JHB in the Subject line.

TRAINING COURSE - ENTERPRISE RISK MANAGEMENT (ERM)

Johannesburg, South Africa – 26 & 27 July 2010

Organisations are experiencing an increased concern and focus on risk management. The challenge for management of both private and public organizations today is to determine how much uncertainty to accept as it strives towards achieving the organization’s objectives and delivering value to its stakeholders.

The solution to this challenge is the establishment of an Enterprise Risk Management (ERM) system and processes that effectively identify, assess, and manage risk within acceptable levels.

The COSO Enterprise Risk Management – Integrated Framework is designed to provide best practice guidance for management of businesses and other entities to improve the way they are dealing with these challenges.

COSO – ERM integrates various risk management concepts into a solid framework in which a common definition is established, components are identified, and key concepts described. This enables COSO to provide a starting point for organizations to assess and enhance their Enterprise Risk Management.

This practical 2-day hands-on training course is designed for managers, professionals, consultants, internal and external auditors that deal with the complexities of organizational risk management function on a daily basis.

The objective is to provide participants with the necessary perception, knowledge and skill set to understand the risks and benefits of Enterprise Risk Management and learn how the COSO – ERM framework enables organizations and management to:

• Comply with the requirements for corporate governance (such as the various international standards like the Cadbury Report)
• Align risk appetite and strategy
• Enhance risk response decisions
• Reduce operational surprises and losses
• Identify and manage multiple and cross-organizational risks
• Provide integrated responses to multiple risks
• Improve the deployment of capital.

Additionally to provide attendees with an understanding of the requirements needed to design and implement an appropriate Enterprise Risk Management system, i.e. policies, procedures, practices, and accountability required to establish the right levels of Risk Management in compliance with current standards and other requirements for their organizations.

The course provides an opportunity for delegates to benchmark their ERM practices against the COSO – ERM framework, and learn how to implement an effective ERM system.

For a fully descriptive brochure please send a blank e-mail to courses@citadeladvantage.com with ERM-JHB in the Subject line.

Broker blamed for Dow crash

A Kansas-based stockbroker may have contributed to the “flash crash” that wiped $1 trillion off US stock markets at the beginning of the month.

On May 6, Waddell & Reed placed a large sell order for a group of stock futures that regulators believe may have contributed to the short but shocking market crash. The flash crash briefly wiped 1,000 points off the Dow Jones — its biggest intra-day trading drop — before the index regained much of the lost value.

Speculation initially focused on human error — known as a “fat finger” trade — with rumors that someone had typed billions instead of millions into an order. Regulators have discounted that story.

They are now targeting computer-generated high speed trading and heavy trading in “E-minis”, future contracts used to bet on the performance of the stock market index.

Waddell sold a large order of E-minis during a 20-minute span that corresponded with the plunge, according to a document obtained by Reuters. Waddell said it was one of about 250 investors trading E-minis on the day in question.

Operations Risk - Police expose Latvian hacker who “tweeted” bankers' pay details

Neo, the Latvian hacker who stole millions of classified tax documents from government computers and leaked the information via Twitter, has been caught by police.

In February this year, Neo and his colleagues at the “People's Army of the Fourth Awakening” contacted a local TV station to claim they had downloaded the documents from the state revenue service. They exposed salary details for senior officials through Twitter, revealing that management at a Latvian bank that received bail out money had not taken the pay cuts they promised at the time.

The revelations prompted anger in a country devastated by the global financial crisis and forced to embark on austerity measures to meet the terms of a €7.5 billion IMF and EU led bailout.

The hacker, who took his name from the central character in the Matrix film, attained cult status for his actions and was hailed as a "virtual Robin Hood".

Police have now detained the mystery tweeter, who according to local press reports, is Ilmars Polkans, a researcher in artificial intelligence at the University of Latvia's computer science department. According to AFP, hundreds of protesters chalked slogans outside the main government building in central Riga, calling for Polkans' release.

However, the suspect has confessed and criminal proceedings have been launched, although he has been freed from detention until a trial.

His unmasking came after a police raid on the house of a television journalist recently. This latter action has enraged the country's reporters and prompted the ombudsman to investigate whether freedom of speech regulations have been breached.

Abu Dhabi hotel installs gold ATM

An ATM that dispenses gold bars has been installed in the lobby of Abu Dhabi's five star Deluxe Emirates Palace hotel.

The “Gold to go” machine - developed by Germany's TG-Gold-Super-Markt - dispenses 24 carat one gram, five gram and 10 gram pieces of gold as well as coins bearing designs such as the Krugerrand, Maple Leaf and Kangaroo.

A computer in the machine - itself gold-plated - constantly keeps prices in line with the firm's online store.

Last May the company showcased a machine at Frankfurt railway station and claimed it would install 500 of them ATMs in Germany, Switzerland and Austria.

Malawi launches mobile banking

Opportunity International Bank of Malawi (OIBM), a provider of microfinance services in Malawi, has launched a mobile phone banking system named 'banki m'manja'. It has done this to encourage rural Malawians’ access to the bank’s services. The OIBM innovation will enable its customers to check their account balance, transfer funds, conduct merchant payments, top-up mobiles, view a mini-statement and change their PIN.

OIBM Chief Executive Officer, Alexandr-Alain Kalanda, said: “We would like to help our customers, who most of the time live in the rural areas where by they spend a lot of money on transport alone to access our services, to have these services right in their palms.”

The service, which is being implemented in collaboration with local telecommunications company, Telekom Networks Malawi (TNM).

Square mobile payment system goes live

Twitter co-founder Jack Dorsey has started to ship out hundreds of free credit card “dongles” that plug into the headphone jack of an iPhone, Android phone or iPad.

The system is called Square, and the free app is available to download now for iPhone OS and Android. Basically, you fire up the app, attach the dongle, punch in the amount (say, whatever you agreed on for selling a couch on say Craigslist), and then have the buyer swipe their credit card through the adapter. No personal information is stored, and the buyer has to sign the phone with their finger. Once that happens, an SMS or email is sent to the buyer confirming the purchase.

It's a pretty simple solution, and it has the potential to revolutionize small business for whom it's quite difficult to get a proper credit card system setup, and the fees can be outrageous. With this, setup costs are essentially nothing, and the fee structure is much more reasonable.

Mobile banking set to rocket

For consumers, mobile banking is about convenience: the ability to check account balances, pay bills and transfer funds from a device they take with them everywhere. For financial institutions, it is a means to deepen customer relationships, streamline operations and cut costs.

Several forecasts predict that by 2015, 50% or more of US mobile users will be conducting transactions from their mobile devices.

“The ubiquity of these devices offers banks an opportunity to connect with customers outside the online channel, including those who are always on the go as well as the under banked and unbanked consumers who lack consistent Internet access,” said Noah Elkin, eMarketer senior analyst and author of the new report “Mobile Banking: Financial Services Firms Look to Cash In.”

Estimates of mobile banking adoption vary widely, although it appears to be growing at a good pace. For example, studies conducted in 2009 by Mercatus, Mintel Comperemedia and Experian Simmons put the usage rate between 7% and 11%.


However, in a January 2010 survey by Luth Research for the Mobile Marketing Association, mobile banking usage was 17% among the overall US population and 19% among mobile phone users. A March 2010 study by OnePoll for mobile billing and message delivery firm mBlox uncovered a 25% usage rate among US mobile phone users.

Research among smartphone users reveals much more extensive mobile banking adoption. Data Innovation’s January 2010 “Mobile Money Study” found that nearly 70% of smartphone users had accessed mobile banking, payment or financial services in the past three months.

Mobile Banking and phishing

Online fraudsters continue to use advanced methods with their victims. Now a phisher has de-activated a bank's mobile alert system.

An SMS alert informing money withdrawals was blocked by phishers after fraudulently obtaining online banking information of a Chennai (India) based victim through a phishing e-mail. A first-of-its-kind case reported here, a thorough probe is under way to find its modus operandi.

The victim received the phishing e-mail in February supposedly sent from a his bank where he held an account with online and mobile banking facility. “Taking it for real, the complainant responded to the e-mail asking to update his online and mobile bank account to refrain from debarment,” said Additional Deputy Commissioner of Police (Cyber Crime Cell) M. Sudhakar.

The victim realized that all the money from his account was withdrawn only after visiting an ATM a few days later. Puzzled about not receiving any SMS alert on his mobile phone on the withdrawal, he contacted the bank and later, lodged a police complaint.

Preliminary police investigations revealed that the phishing mail was sent from Lagos in Nigeria and Rs. 60,000 that was illegally transferred from the victim's account was deposited in two bank accounts in Lucknow and Jaipur. The accounts were blocked immediately and sums of Rs. 43,000 and Rs.17,000 were recovered from them.

“After obtaining confidential online banking details of the complainant through the phishing e-mail, the culprit de-activated the SMS alert in order to keep the victim unaware of the money transfer from his account as long as possible,” Dr. Sudhakar said.

This is the first case reported here, in which an SMS alert was blocked before money transfer, he added.

Even though the money lost was minimal, the Cyber Crime Cell carried out a detailed investigation into how the phisher in Lagos managed to go to the extent of deactivating the mobile alert system.

On the other hand, police search to track the account-holders of the bank accounts in Lucknow and Jaipur hit a barrier after it was found to be opened for non-existing business houses.

He also said that illegal online money transfer could be reduced, only if banks would verify with the respective customer on every request for an online money transfer from overseas. “The culprit in Lagos cannot be apprehended as there is no international law to extradite him.”

Referring to the case, city Police Commissioner T. Rajendran said that an international body to investigate cyber crime is essential. “The number of arrests made in cyber crime cases here is very low now as most culprits operate from overseas,” he added.

Operational Risk - Computer-based trading under scrutiny after Dow dive

US regulators are scrambling to deal with the aftermath of a wild day of trading on the Dow Jones Industrial Average which shipped more than 600 points in seven minutes before the close of trading in New York on Friday.

The sickening lurch in the Dow caused scenes of chaos in US markets as computer-based programs kicked in and exchanges and currency markets struggled to handle an unprecedented surge in volumes.

The panic spilled over into other markets as investors fled for the safety of government bonds causing yields to drop and pushing the dollar sharply higher.

US regulators are undertaking a forensic investigation of the day's trading in an effort to pinpoint the cause of the collapse as exchanges move to cancel obviously erroneous trades.

Nasdaq issued a statement saying it would cancel all trades executed between 14:40:00 and 15:00:00 that showed a 60% swing in price during the peak trading period.

"There is no indication at this time that a Nasdaq market participant experienced a technological failure in connection with this event," the statement continued.

The Chicago Mercantile Exchange also felt moved to responded to rumors concerning irregular trades by Citigroup in stock index futures: "While our policy is not to comment on individual participation in our markets, in light of volatile market conditions, CME Group confirmed that activity by Citigroup Global Markets Inc. in CME Group stock index futures markets does not appear to be irregular or unusual in light of market activity today."

Whatever the cause, the freefall in the markets will stoke up regulatory concerns about the role played by high frequency traders and automated trading programs in the ensuing market meltdown.

Giles Nelson, chief technology strategist of Progress Software, gives the vendor perspective: "Unfiltered access to trading destinations can end up causing trading errors or even a 1,000 point crash on the Dow Jones Industrial Average. This is why pre-trade risk management tools are absolutely essential - to monitor position limits, trading limits and to catch fat fingered errors before they happen. Banks and regulators must act to stop this happening. It is completely avoidable."

Remittances - National Bank of Pakistan signs deals with 2 Saudi banks

The National Bank of Pakistan (NBP) has signed deals with two Saudi banks for remitting money to Pakistan.

The launch of remittance facilities by Al-Rajhi Bank's Tahweel Al-Rajhi and Bank Albilad's Injaz is expected to start later this week, said Khalid Bin Shaheen, NBP's senior executive vice president, who was in Jeddah recently to oversee the arrangements.

So far NBP, Pakistan's largest commercial bank, has had such an agreement with Samba Financial Group.

Shaheen said the new deals were likely to boost remittances to Pakistan, which in recent months have recorded remarkable growth in money received from its overseas nationals.

According to the latest figures released by the State Bank of Pakistan, the nation's central bank, home remittances in March was $763 million, a growth of 30 percent over what was received in February. Similarly, in the nine-month period ending in March, remittances were up 28 percent over the corresponding period of last year.

March remittances from Saudi Arabia also reflected the global trend. Pakistan received $193.91 million from Saudi Arabia, which was $44.46 million or 30 percent more over February figure.

Shaheen said the credit for the growth goes to the structural changes that have taken place following the launch of Pakistan Remittance Initiative (PRI) in August 2009. PRI, a joint venture of the Ministry of Finance, Ministry for Overseas Pakistanis and the State Bank, is an effort to increase the flow of remittances through official channels.

Along with PRI, the State Bank has launched Real Time Gross Settlement (RTGS), which has drastically reduced the time it takes for funds to be settled between the many banks in Pakistan.

Shaheen said the deals with Al-Rajhi and Bank Albilad as well as Samba ensure free of cost cash to cash transfer through large number of NBP branches in Pakistan. "No account is required for this service. Payment will be made on proper identification," he said.

Instant electronic transfer from account to account is also free of charge. NBP has reduced the requirement of minimum balance of Rs.3,000 unlike other banks which have set the limit at Rs.10,000.

Remittances - Money transfer firms target mobile services

The shifting fortunes in the money transfer market are pushing traditional agents such as Western Union and MoneyGram to develop mobile solutions, which they are relying on to recapture a share of the local market.

Hit by declining market share following the advent of mobile money services, the two operators have had to change strategy as they move to defend their core business.

“If it’s a remittance transaction, we want to touch it, whether online, by phone or at one of our global agent locations. There will be more opportunities ahead for mobile transfers and more transfers direct to cards,” said Thomas Christophersen, MoneyGram’s head of new product and channel development.

According to data from Financial Service Deepening (FSD), traditional money transfer operators have lost significant market share since the advent of mobile money services such as M-Pesa and Zap.

Their market share in Kenya has fallen to just three per cent of the total transfer market, down from a tenth of the total transfers market in 2007.

FSD says that the proportion of people using the service stood at 17 per cent before mobile money transfer commenced, a figure that has dropped as the telecommunications firms continue to eat into a larger share of the money transfer market.

In 2009 MoneyGram moved to double its agent locations in Kenya while Western Union implemented a lower tariff structure as they both attempted to fend off rising competition from mobile operators by adding PostBank’s branches to its agent network.

Many users cite the high cost of transferring money using operators such as MoneyGram and Western Union as a barrier to access, preferring the lower rates offered by mobile service providers.

World Bank estimates indicate that reducing remittance commission charges by just two to five per cent could increase the flow of formal remittances by 50-70 per cent, which would boost local economies.

Reducing the cost of sending each individual remittance encourages the delivery of lower value remittances, says the World Bank, at values far less than today’s average transfer of $200.

Previous data from Safaricom and Zain indicate that most Kenyans who use the service typically send smaller amounts, ranging between Sh1,000 and Sh2,500 at an average cost of Sh55.

In December, MoneyGram joined forces with SMART Communications, to kick off the pilot phase of its MoneyGram mobile money transfer service that allows delivery funds from any MoneyGram agent location direct to any SMART Money account.

For its part, Western Union has formed partnerships with mobile firms aimed at defending its share of the international remittances market, said to be worth US$300 billion.

The two operators will have to fight off a growing number of mobile service providers who have found that offering financial services through mobile handsets can add to the attractiveness of mobile money services, and help to retain customers to networks.

Rohit Bhatia, CEO of Seamless, a Swedish software company specialized in solutions for Mobile Money, prepaid e-Top Up, and Value Added Services, says the lack of basic services like banking and fixed internet, high growth markets will use the mobile phone as the main service enabler, especially for functional services like remittances, purchases and payments.

“Our research shows a major interest for such functional services in emerging markets, and this will drive innovation. These low ARPU (average revenue per user) markets’ and low income segments will adopt new functional services faster than the global average.

MNOs (mobile network operators) that recognize mobile money as a growth potential and a differentiator will emerge winners,” said Mr. Bhatia.

Players in the financial sector and mobile industry view mobile money as a fast, easy and new way for the un-banked to carry out their everyday money transactions.

“If MNOs can leverage existing airtime distribution networks, keep their proposition to stakeholders simple and yet innovative, expand slowly and steadily, simplify registration and subscription to the service, and above all, select a long-term business partner as their technology vendor, they are sure to be winners in the mobile money space,” said Mr Bhatia.

Mobile banking – Cheque deposit anyone?

Traditional bankers' hours aren't too convenient if you've got a cheque to deposit at night or on a weekend. But now, there's an app for that.

Digital Federal Credit Union (DCU) is among a small number of US banking institutions to launch a mobile deposit system, Mobile PC Deposit, where members can take a photo of a cheque and deposit it securely using an Apple iPhone or Google Android mobile device, DCU officials said this week.

"This is huge," said Denise Gonthier, DCU's administrative services manager. "It's a very tech-savvy world out there, and we want to give members what they want. They can now deposit a cheque from anywhere, at any time."

DCU with branches in Massachusetts and New Hampshire, worked with Vertifi Software LLC to develop the system, in which members use their iPhone or Android to take a digital photo of the front and back of the cheque. The cheque is then processed electronically from start to finish, Gonthier said.

The applications use the same digital security encryption as DCU's PC Deposit, a program launched in 2008 that lets users scan cheque from their home computers and deposit them safely, Gonthier said. Since the PC Deposit program started, about 7,600 members have used it every month, and about $300 million has been deposited since the launch two years ago.

In the few weeks Mobile PC Deposit has been live, about 2,500 users have already tried it out, Gonthier added.

Applications are available as free downloads through the Apple App Store and Google's Android Market.

Plans are in the works to build systems for BlackBerry users, as well as other mobile devices. "It is our intention to roll this particular application out full-force," said John LaHair, DCU public relations manager.

The PC Mobile Deposit system is "a great application of advanced technology," said Dan Egan, president of the Massachusetts Credit Union League.

Convenience is the top factor in a customer's decision to select a bank or credit union, so staying on the cutting edge of technology is important, Egan said. Egan uses an iPhone, and said he does a lot of his banking and bill-paying with the device.

Mobile Banking - Banc Sabadell launches iPad app

The iPad hasn’t yet launched in Spain, but that hasn’t stopped Banc Sabadell from getting an early jump on launching its own iPad app. The bank says it will be the first financial institution in Europe and among the first worldwide to offer an iPad-specific banking experience.

The bank reworked its iPhone mobile banking service to “make the most of the new interactivity and touch-screen features offered by Apple’s iPad device,” it said in a press release. The new version of BS Mobile is designed for both personal and corporate customers.

The application is already available in the Apple iPad application store.