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.