Financial Services
Solving the regulatory compliance issue: In terms of best practice, it all really starts with the data, creating sound risk management strategies, and...
Increased volume of fraud attempts during back to school shopping season. Is your fraud strategy prepared to handle the increased volume?
Surveillance and fraud staging are the seemingly benign and often-transparent account activities that fraudsters undertake after an account has been compromised but before that compromise has been detected or money is moved.
Understanding shelf companies and shell companies In our world of business challenges with revenues level or trending down and business loans tougher than ever to get, “shelf” and “shell” companies continue to be an easy option for business opportunities. Shelf companies are defined as corporations formed in a low-tax, low-regulation state in order to be sold off for its excellent credit rating. Click on the internet and you will see a plethora of vendors selling companies in a turn-key business packages. Historically off-the-shelf structures were used to streamline a start-up, where an entrepreneur instantly owns a company that has been in business for several years without debt or liability. However, selling them as a way to get around credit guidelines is new, making them unethical and possibly illegal. Creating companies that impersonate a stable, well established companies in order to deceive creditors or suppliers in another way that criminals are using shelf companies for fraudulent use. Shell companies are characterized as fictitious entities created for the sole purpose of committing fraud. They often provide a convenient method for money laundering because they are easy and inexpensive to form and operate. These companies typically do not have a physical presence, although some may set up a storefront. According to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network, shell companies may even purchase corporate office “service packages” or “executive meeting suites” in order to appear to have established a more significant local presence. These packages often include a state business license, a local street address, an office that is staffed during business hours, a conference room for initial meetings, a local telephone listing with a receptionist and 24-hour personalized voice mail. In one recent bust out fraud scenario, a shell company operated out of an office building and signed up for service with a voice over Internet protocol (VoIP) provider. While the VoIP provider typically conducts on-site visits to all new accounts, this step was skipped because the account was acquired through a channel partner. During months one and two, the account maintained normal usage patterns and invoices were paid promptly. In month three, the account’s international toll activity spiked, causing the provider to question the unusual account activity. The customer responded with a seemingly legitimate business explanation of activity and offered additional documentation. However, the following month the account contact and business disappeared, leaving the VoIP provider with a substantial five figure loss. A follow-up visit to the business showed a vacant office suite. While it’s unrealistic to think all shelf and shell companies can be identified, there are some tools that can help you verify businesses, identify repeat offenders, and minimize fraud losses. In the example mention above, post-loss account review through Experian’s BizID identified an obvious address discrepancy – 12 businesses all listed at the same address, suggesting that the perpetrator set up numerous businesses and victimized multiple organizations. It is possible to avoid being the next victim and refine and revisit your fraud best practices today. Learn more about Experian BizID and how to protect your business.
A recent Experian survey found that while consumers are getting better about protecting their information on a regular basis, many do not take the same precautions when traveling. According to the survey, 1 in 5 consumers has had an item with sensitive information lost or stolen while traveling, and 39% have experienced identity theft while traveling or know someone who has. Organizations can protect themselves and customers by using innovative fraud-detection tools designed to reduce potential losses while preserving the customer experience. >> Video: The reputational impact of fraud and identity theft
With more than one-third of customers interacting with a single business in five or more channels and more than 85 percent of consumers using online or mobile to conduct business, omnichannel fraud prevention has become a necessity. Implementing a layered approach to authentication and integrating device intelligence into the process to associate a consumer with a known device are critical components of a fraud mitigation strategy. In addition to providing another layer of validation, verifying a customer through his or her device makes it easier for the customer to interact with the business and is a huge benefit to the overall customer experience. Perspective paper: Protecting the customer experience - The impact of fraud on the customer relationship
By: Mike Horrocks The other day in the American Banker, there was an article titled “Is Loan Growth a Bad Idea Right Now?”, which brings up some great questions on how banks should be looking at their C&I portfolios (or frankly any section of the overall portfolio). I have to admit I was a little down on the industry, for thinking the only way we can grow is by cutting rates or maybe making bad loans. This downer moment required that I hit my playlist shuffle and like an oracle from the past, The Clash and their hit song “Should I stay or should I go”, gave me Sage-like insights that need to be shared. First, who are you listening to for advice? While I would not recommend having all the members of The Clash on your board of directors, could you have maybe one. Ask yourself are your boards, executive management teams, loan committees, etc., all composed of the same people, with maybe the only difference being iPhone versus Android?? Get some alternative thinking in the mix. There is tons of research to show this works. Second, set you standards and stick to them. In the song, there is a part where we have a bit of a discussion that goes like this. “This indecision's buggin' me, If you don't want me, set me free. Exactly whom I'm supposed to be, Don't you know which clothes even fit me?” Set your standards and just go after them. There should be no doubt if you are going to do a certain kind of loan or not based on the pricing. Know your pricing, know your limits, and dominate that market. Lastly, remember business cycles. I am hopeful and optimistic that we will have some good growth here for a while, but there is always a down turn…always. Again from the lyrics – “If I go there will be trouble, An' if I stay it will be double” In the American Banker article, M&T Bank CFO Rene Jones called out that an unnamed competitor made a 10-year fixed $30 million dollar loan at a rate that they (M&T) just could not match. So congrats to M&T for recognizing the pricing limits and maybe congrats to the unnamed bank for maybe having some competitive advantage that allowed them to make the loan. However if there is not something like that supporting the other bank…the short term pain of explaining slower growth today may seem like nothing compared to the questioning they will get if that portfolio goes south. So in the end, I say grow – soundly. Shake things up so you open new markets or create advantages in your current market and rock the Casbah!
Source: IntelliViewsm powered by Experian Sales of existing homes dropped 50% from the peak in August 2005 to the low point in July 2010. The spike in home sales in late 2009 and early 2010 was due to the large number of foreclosure sales as well as very low prices. Since 2010, sales have increased to almost to the level they were in 2000, before the financial crisis. However, the homeownership rate has steadily gone down. How could sales have picked up while the homeownership rate declined? Investors have entered the market snapping up single family homes and renting them. Therefore, the recent good news in the existing home market has been driven by investors, not homeowners. But as I point out below, this is changing. Looking at the homeownership rate by age, shown in the table below, it is clear that since the crisis the rate has declined most for people under 45. The potential for marketing is greatest in this cohort as the numbers indicate a likely demand for housing. Homeownership Rate by Age Source: U.S. Census Bureau and Haver Analytics as reported on the Federal Reserve Bank of St. Louis Fred database The factors that have impeded growth, described above, are beginning to reverse which, along with pent-up demand, will present an opportunity for mortgage originators in 2015. Home prices have risen in 246 of the 277 cities tracked by Clear Capital.With prices going up, investors have begun to back away from the market, resulting in prices increasing at a slower rate in some cities but they are still increasing.Therefore the perception that homeownership is risky will likely change.In fact, in some areas, such as California’s coastal cities, sales are strong and prices are going up rapidly. Lenders and regulators are recognizing that the stringent guidelines put in place in reaction to the crisis have overly constrained the market.Fannie Mae and Freddie Mac are reducing down payment requirements to as low as 3%.FHA is lowering their guarantee fee, reducing the amount of cash buyers need to close transactions.Private securitizations, which dried up completely, are beginning to reappear, especially in the jumbo market. As unemployment continues to go down, consumer confidence will rise and household formation will return to more normal levels which result in more sales to first time homebuyers, who drive the market.According to Lawrence Yun, chief economist for the National Association of Realtors, “…it’s all about consistent job growth for a prolonged period, and we’re entering that stage.” The number of houses in foreclosure, according to RealtyTrac, has fallen to pre-crisis levels.This drag on the market has, for the most part, cleared and as prices continue to inflate, potential buyers will be motivated to buy before homes become unaffordable.Despite the recent increases, home prices are still, on average, 23% lower than they were at the peak. Focusing marketing dollars on those people with the highest propensity to buy has always been a challenge but in this market there are identifiable targets. “Boomerangs” are people who owned real estate in the past but are currently renting and likely to come back into the market.Marketing to qualified former homeowners would provide a solid return on investment. People renting single family houses are indicating a lifestyle preference that can be marketed to. Newly-formed households are also profitable targets. The housing market, at long last, appears to be finally turning the corner and normalizing. Experian’s expertise in identifying the right consumers can help lenders to pinpoint the right people on whom marketing dollars should be invested to realize the highest level of return. Click here to learn more.
End-of-draw approaching for many home equity lines of credit (HELOCs) originated during the U.S. housing boom period of 2006 – 2008
By: Linda Haran Complying with complex and evolving capital adequacy regulatory requirements is the new reality for financial service organizations, and it doesn’t seem to be getting any easier to comply in the years since CCAR was introduced under the Dodd Frank Act. Many banks that have submitted capital plans to the Fed have seen them approved in one year and then rejected in the following year’s review, making compliance with the regulation feel very much like a moving target. As a result, several banks have recently pulled together a think tank of sorts to collaborate on what the Fed is looking for in capital plan submissions. Complying with CCAR is a very complex, data intensive exercise which requires specialized staffing. An approach or methodology to preparing these annual submissions has not been formally outlined by the regulators and banks are on their own to interpret the complex requirements into a comprehensive plan that will ensure their capital plans are accepted by the Fed. As banks work to perfect the methodology used in this exercise, the Fed continues to fine tune the requirements by changing submission dates, Tier 1 capital definitions, etc. As the regulation continues to evolve, banks will need to keep pace with the changing nature of the requirements and continually evaluate current processes to assess where they can be enhanced. The capital planning exercise remains complex and employing various methodologies to produce the most complete view of loss projections prior to submitting a final plan to the Fed is a crucial component in having the plan approved. Banks should utilize all available resources and consider partnering with third party organizations who are experienced in both loss forecasting model development and regulatory consulting in order to stay ahead of the regulations and avoid a scenario where capital plan submissions may not be accepted. Learn how Experian can help you meet the latest regulatory requirements with our Loss Forecasting Model Services.
Do you really know where your commercial and small business clients stand financially? I bet if you ask your commercial lending relationship managers they will say they do - but do they really? The bigger question is how you could be more tied into to your business clients so that you could give them real advice that may save their businesses. More questions?? Nope, just one answer. Finagraph with Experian’s Advisor for relationship lending is a perfect setup to gather data that you currently are using within your financial institution that can then be matched that up with real financial spreads from the accounting systems that your business client use in their everyday process. By comparing the two sources of records you can get a true perspective on where your business clients stands and empower your relationship managers like ever before.
Apple Pay fraud solution Apple Pay is here and so are increased fraud exposures, confirmed losses, and customer experience challenges among card issuers. The exposure associated with the provisioning of credit and debit cards to the Apple Pay application was in time expected as fraudsters are the first group to find weaknesses. Evidence from issuers and analyst reports points to fraud as the result of established credit/debit cards compromised through data breaches or other means that are being enrolled into Apple Pay accounts – and being used to make large value purchases at large merchants. Keir Breitenfeld, our vice president of Fraud and Identity solutions said as much in a recent PYMNTS.com story where he was quoted about whether the Apple Watch will help grown Apple Pay. The challenge is that card issuers have no real controls over the provisioning or enrollment process so they currently only have an opportunity to authenticate their cardholder, but not the provisioning device. Fraud exposure can lie within call centers and online existing customer treatment channels due to: Identity theft and account takeover based on breach activity. Use of counterfeit or breached card data. Call center authentication process inadequacies. Capacity and customer experience pressures driving human error or subjectively lax due diligence. Existing customer/account authentication practices not tuned to this emerging scheme and level of risk. The good news is that positive improvements have been proven with bolstering risk-based authentication at the card provisioning process points by comparing the inbound provisioning device to the device that is on file for the cardholder account. This, in combination with traditional identity risk analytics, verifications, knowledge-based authentication, and holistic decisioning policies vastly improve the view afforded to card issuers for layered process point decisioning. Learn more on why emerging channels, like mobile payments, call for advanced fraud identification techniques.
The follow blog is by Kyle Enger, Executive Vice President of Finagraph With the surge of alternative lenders, competition among banks is stronger than ever. But what exactly does that mean for the everyday banker? It means business owners want more. If you’re only meeting your clients once a year on a renewal, it’s not good enough. In order to take your customer service to the next level, you need to become a trusted advisor. Someone who understands where your clients are going and how to help them get there. If you’re not investing in your clients’ business by taking the following actions, they may have one foot out the door. 1. Understand your clients’ business One of the biggest complaints from business owners is that bankers simply don’t understand their business. A good commercial banker should be well-versed in their borrower’s company, competitors and the industry. They should be willing to get to know their business, commit to them, stop by to check-in and provide a proactive plan to avoid future risks. 2. Utilize technology for your benefit The majority of recent bank innovations have been used to make the customer experience more convenient, but not necessarily the more helpful. We’ve seen everything from mobile remote deposit capture to online banking to mobile payments – all of which are keeping customers from interacting with the bank. Contrary to what many think, technology can be used to create strong relationships by giving bankers information about their customers to help serve them better. Using new software programs, bankers can see information like the current ratio, quick ratio, debt-to-equity, gross margin, net margin and ROI within seconds. 3. Heighten financial acumen Banks have access to a vast amount of customer financial data, but sometimes fail to use this information to its full potential. With insight into consumer purchasing behavior and business’ financial history, banks should be able to cater products and services to clients in a personalized manner. However, many lenders walk into prospect meetings without knowing much about the business. Their mode of operation is solely focused on trying to secure new clients by building rapport – they are what we call surface bankers. A good banker will educate clients on what they need to know such as equity, inventory, cash flow, retirement planning and sweep accounting. They should also know about new technology and consult borrowers on intermediate financing, terming out loans that are not revolving, or locking in with low interest rates. Following, they will bring in the right specialist to match the product according to their clients’ needs. 4. Go beyond the price Many business owners make the mistake of comparing banks based on cost, but the value of a healthy banking relationship and a financial guide is priceless. So many bankers these days are application gatherers working on a transactional basis, but that’s not what business owners need. They need to stop looking at the short-term convenience of brands, price and location, and start considering the long-term effects a trusted financial advisor can make on their business. 5. A partner in your business, not a banker “Sixty percent of businesses are misfinanced using short-term money for long-term use,” according to the CEB Business Banking Board. In other words, there are many qualified candidates in need of a trusting banker to help them succeed. Unbeknownst to many business owners, bankers actually want to make loans and help their clients’ business grow. Making this known is the baseline in building a strong foundation for the future of your career. Just remember to ask yourself – am I being business-centric or bank-centric? To view the original blog posting, click here. To read more about the collaboration between Experian and Finagraph, click here.
By: Mike Horrocks Experian has announced a new agreement with Finagraph, a best-in-class automated financial intelligence tool provider, to provide the banking industry with software to evaluate small business financials faster. Loan automation is key in pulling together data in a meaningful manner and this bank offering will provide consistent formatted financials for easier lending assessment. Finagraph’s automated financial intelligence tool delivers advanced analytics and data verification that presents small business financial information in a consistent format, making it easier for lenders to understand the commercial customer’s business. Experian’s portfolio risk management platform addresses the overall risks and opportunities within a loan portfolio. The company’s relationship lending platform provides a framework to automate, integrate and streamline commercial lending processes, including small and medium-sized enterprise and commercial lending. Both data-driven systems are designed to accommodate and integrate existing bank processes saving time which results in improved client engagement “Finagraph connects bankers and businesses in a data-driven way that leads to better insights that strengthens customer relationships,” said John Watts, Experian Decision Analytics director of product management. “Together we are helping our banking clients deliver the trusted advisor experience their business customers desire in a new industry-leading way.” “The lending landscape is rapidly changing. With new competitors entering the space, banks need innovative tools that allow them to maintain an advantage,” said James Walter, CEO and President of Finagraph. “We are excited about the way that our collaboration with Experian’s Baker Hill Advisor gives banks an edge by enabling them to connect with their clients in a meaningful way. Together we are hoping to empower a new generation of trusted advisors.” Learn more about our portfolio risk management and lending solutions and for more information on Finagraph please visit www.finagraph.com.
Regulations helping ensure deposit accounts for everyone