Researchers find financial risks using agent-based models | SEC's Peirce: CAT data collection on retail investors is excessive | EBA: Banks risk instability by stalling Brexit relocations
October 15, 2019
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Internal Audit Watch
Citi penalized $30M by OCC regarding real estate rules
Citibank has paid a $30 million fine to the Office of the Comptroller of the Currency for allegedly violating holding-period rules for other real estate owned, with the OCC citing "deficient processes and controls." Citi has neither admitted nor denied wrongdoing and says it has "strengthened controls, processes and procedures to ensure the timely disposition of these assets."
Banking Dive (10/14),  The Wall Street Journal (tiered subscription model) (10/11) 
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The next recession will be different. Are you ready?
In the decade since the last recession, companies' recession muscle memories have atrophied. They will have to relearn some hard lessons, but they don't intend to just retrench and try to ride it out. Grant Thornton surveyed C-suite executives about when they expect a recession, how they are preparing and how they will respond. Read our report.
Risk Management
Researchers find financial risks using agent-based models
Oxford University chaos theory researcher Doyne Farmer says agent-based models used in science can help spot risks in the financial system and explain the behavior of complex systems.
BNN Bloomberg (Canada) (10/3) 
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SEC's Peirce: CAT data collection on retail investors is excessive
Securities and Exchange Commission member Hester Peirce has said the amount of data the consolidated audit trail will track on transactions by retail investors goes beyond what is necessary. "These are people who have been accused of no wrongdoing, there's no evidence that they've done anything wrong, and we, the government and a bunch of the self-regulatory organizations, are going to be watching everything they do," she said.
Pensions & Investments (free access for SmartBrief readers) (10/4) 
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EBA: Banks risk instability by stalling Brexit relocations
European Banking Authority Chairman Jose Manuel Campa has warned banks that they are risking financial instability if they wait until the last minute before a possible no-deal Brexit to relocate employees to EU divisions.
BNN Bloomberg (Canada) (10/8) 
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Strategic Planning for Internal Audit: A CAE's Guide to Driving Value Creation
Many boards have recently begun focusing on their organization's strategies around disruptive change. Moving forward, CAEs must learn how to balance the needs of their internal audit functions with the needs of their organizations.
Regulation & Compliance
Fed approves Volcker rule revisions
The Federal Reserve has joined the Federal Deposit Insurance Corp., Commodity Futures Trading Commission, Office of the Comptroller of the Currency and Securities and Exchange Commission in signing off on the changes to the Volcker rule. The revised rule will go into force on Jan. 1, 2020, but banks will have until 2021 to comply.
The Associated Press (10/8),  BNN Bloomberg (Canada) (10/8),  Reuters (10/8) 
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Number of financial institutions serving cannabis industry increases
The number of financial institutions that will work with the cannabis industry grew from 337 in January 2017 to 715 in June of this year, according to the Financial Crimes Enforcement Network. Banks are reluctant to hold accounts because cannabis is illegal under federal law and they are waiting for a vote from the US Senate on a cannabis banking bill.
Crain's Chicago Business (tiered subscription model) (10/14) 
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FSAC Report: Fraud Identification and Deterrence, Part 1.
The IIA Standards require internal auditors to consider fraud risks in each audit engagement. Learn how internal audit can incorporate fraud auditing into the audit plan. Explore the components of a fraud risk management program including practical applications and auditing techniques for targeted focus areas of the financial organization. Read more.
Fraud & Ethics
Money laundering bills may be combined before House vote
A bill sponsored by Reps. Emanuel Cleaver II, D-Missouri, and Steve Stivers, R-Ohio, which would increase staffing for the government's financial crimes unit and increase the monetary amount for suspicious activity reports, may be merged with another bill before the House of Representatives votes. The second bill, sponsored by Reps. Carolyn B. Maloney, D-N.Y., and Peter T. King, R-N.Y., would require corporations to reveal the owners of some companies who attempt to hide assets behind limited liability corporation filings.
Roll Call (free content) (10/7) 
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FSAC Report: Fraud Identification and Deterrence, Part 2.
Following up on Part 1's introduction to fraud and deterrence in the financial services arena, Part 2 further explores components of a fraud risk management program and identifies practical applications and internal auditing techniques for targeted focus areas of the financial organization. Read more.
Fed's Brainard: FSB turns attention to banks' cloud use
The Financial Stability Board is examining banks' reliance on cloud services from companies such as Amazon and Microsoft, Federal Reserve Governor Lael Brainard says. The FSB is reviewing banks' ability to automatically switch to a second system if the primary one fails, Brainard has told the House Financial Services Committee.
MLex (free content) (9/27) 
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Report: Financial firms need better cybersecurity collaboration
The global financial system's coordination of cybersecurity must change to address the growing threat of cyberattacks, according to a white paper from Depository Trust & Clearing Corp. "With the threat of potential disruptions continuing to grow, firms can no longer afford to focus on disaster recovery, business continuity management and cybersecurity in isolation," the report says.
Financial Regulation News (9/26),  Futures & Options World (subscription required) (9/23) 
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Audit: Fed lacks systemwide approach to cybersecurity
For 15 years the Federal Reserve has failed to implement a centralized, systemwide strategy for dealing with information technology risks, according to an audit by the central bank's inspector general. The Fed has embraced cloud computing to meet IT needs but that has heightened risks due to the "limited insight into or knowledge of" security precautions undertaken by contractors, the report said.
MLex (subscription required) (10/18) 
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GAM 2020 — Registration is Open.
2020 Vision - Influencing the Next Decade of Internal Audit is the theme of GAM 2020. The IIA is looking forward to bringing you another future-focused event for leaders in the internal audit industry. Early registration is open so don't wait! Register Today and save $200!
IIA News
Practice Guide: Internal auditing in financial services
‚ÄčThe demand for internal auditors with financial-services knowledge and experience is growing rapidly, propelled by regulatory pressures to appropriately staff internal audit programs. Download the guide.
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FSAC membership
The Financial Services Audit Center is the premier resource for auditors in the financial-services industry, delivering low-cost, high-quality knowledge sharing as well as relevant reporting on trends, benchmarking and critical content. Join now.
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Ultimately, we can never change someone else's behavior -- we can only change our own.
Jennifer Lopez,
singer, performer, actress
National Hispanic Heritage Month is Sept. 15 to Oct. 15
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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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