Commentary: Financial instability persists | Financial institutions shrink compliance departments | OCC seeks feedback on changes to Volcker rule
August 15, 2017
IIA Financial Services SmartBrief
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Internal Audit Watch
Fed rethinks requirements for bank directors
The Federal Reserve has proposed reduced requirements for banks' boards of directors to help directors focus on the big picture, rather than getting lost in details. The five main criteria for evaluating boards of banks with assets exceeding $50 billion will include institutions' support of independent internal audit and risk-management functions.
ABA Banking Journal online (8/3),  Reuters (8/3),  The Examiner (Washington, D.C.) (8/3),  The Wall Street Journal (tiered subscription model) (8/3) 
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Reference Guide: Finance Auditing with Data Analytics
Successful audit leaders today recognize that data analytics optimizes the internal audit process. Whether you're a novice or a super user of analytic tools, download this guide of finance audits and learn about the wide variety of tests and analyses that you can perform to enhance your audits.
Risk Management
Commentary: Financial instability persists
While central banks' actions after the financial crisis helped prevent a greater fallout and have strengthened the financial system as a whole, governments have not stepped up to the plate, writes Mohamed El-Erian. Many pre-crisis stability risks have moved to nonbank entities and governments have failed to step in to improve current and future growth dynamics.
Bloomberg View (8/10) 
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Becoming a relevant partner through combined assurance.
Many departments have taken on an advisory role to help deepen trust in auditors as risk and control experts. Within internal audit, we have an opportunity to assume the role of relevant partner through the process of combined assurance.
Regulation & Compliance
Financial institutions shrink compliance departments
Financial institutions are pulling back on compliance staff for the first time in nine years, in part because of automation and a sense that the harshest regulatory actions are behind them.
Bloomberg Professional Services (8/4) 
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OCC seeks feedback on changes to Volcker rule
The Office of the Comptroller of the Currency has invited industry comment on possible amendments to the Volcker rule, aiming to clarify permissible and nonpermissible activities and to implement the rule without full revision or repeal. Banks have said the rule is unclear on which investments are banned and puts an unnecessary compliance burden on banks with little systemic risk.
The Hill (8/2),  Reuters (8/2) 
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Fed simplifies Volcker rule's seeding guidance
The Federal Reserve has published additional guidance on Volcker rule compliance for banks starting up and spinning off hedge funds and private equity funds. Banks can apply for a two-year extension to the one-year limit to complete seeding investment.
Reuters (7/24) 
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Financial Services Exchange, Washington, D.C.
As the regulatory environment becomes more complex, the Financial Services Exchange is the event for internal auditors. New session highlights J. Keith Mularski, supervisory special agent, cyber initiative and resource fusion center, cyber division at the FBI shares how to fight cyber crime with a criminal mind. Uncover cyber underground. Register today and stop hackers in their tracks. Earn up to 14.4 CPE credits. Sept. 18-19. Register by August 31!
Fraud & Ethics
Trader loses court appeal against spoofing conviction
Former high-speed trader Michael Coscia -- convicted of manipulating futures prices, or spoofing, and sentenced to three years in prison -- lost last week in a federal appeals court, which dismissed his lawyers' assertions that the evidence was insufficient and the anti-spoofing statute is unconstitutionally vague. Coscia's is the first criminal case brought to court under an anti-spoofing regulation embedded in the Dodd-Frank Act.
Reuters (8/7),  The Wall Street Journal (tiered subscription model) (8/7) 
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South Korea to increase fines for false reporting
South Korea's Financial Services Commission says it will increase financial holding firms' fines for false disclosures of accounting and other business reports. The regulator plans to raise fines as much as 12 times above their current levels, which an official called too weak to prevent wrongdoing.
The Korea Herald (Seoul)/Yonhap News Agency (8/8) 
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FSAC Talks Responsible Deregulation with Richard Chambers
There is danger in signaling the shackles are being taken off without a companion message that organizations should remain committed to sound risk management.​ In the Chambers on the Profession video, IIA President and CEO Richard Chambers makes the call for responsible deregulation. Watch now.
Text messaging presents challenges for banks
Text messaging presents challenges for banks
Banks' use of text messaging to communicate has increased as customers crave convenience, but so has the number of cyberattacks via SMS. Secure messaging can alleviate risk, writes Galina Datskovsky.
ThinkAdvisor (free registration) (7/25) 
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Experts: AI, machine learning can benefit hedge funds
Major finance-sector companies are among those working to harness artificial intelligence and machine learning, which have potential to help hedge fund managers handle data more efficiently and effectively, experts say. Blockchain innovation could aid regulatory compliance, says Cillian Leonowicz of Deloitte.
Hedgeweek (London) (8/2) 
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Data officers look to help banks innovate
Chief data officers are expanding from a largely compliance role to helping firms tap into data as a source of innovation. With all banks passing the Federal Reserve's Comprehensive Capital Analysis and Review, CDOs can look beyond meeting data provenance regulations.
Bloomberg Professional Services/CIO (8/8) 
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Stand Out From Your Peers
Interested in advancing in the competitive niche of financial services auditing and communicating your breadth of knowledge? Earning your CFSA designation can be your key to demonstrating your competence and distinguishing yourself as an expert.
IIA News
Audit Focus: Sales practice risks
Financial-services retail operation sales ​are under increased scrutiny by boards. Learn how internal auditors at financial-services organizations can leverage data analytics to monitor, assess and report on retail sales practice risk. ​Read more.
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Poll results: Technology audit capabilities
Technology disruptions are increasing the demand for cyber-related audits. Find out how your peers in the financial-services industry are addressing these challenges. Download the infographic.
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Happiness is the consequence of personal effort.
Elizabeth Gilbert,
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About the IIA Financial Services Audit Center (FSAC)
FSAC is an IIA specialty center for audit professionals in the banking, asset management, and insurance sectors. FSAC advances the professional practice of auditing in the financial services industry through thought leadership, education and training events, professional guidance, and advocacy. Learn more about FSAC and how you can add the center to your IIA membership.
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