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.