Birgul COTELLI, Ph. D.

🏦 ECB consults on governance and risk culture The European Central Bank (ECB) has launched a public consultation on its new draft Guide on governance and risk culture, inviting feedback from banks and stakeholders until October 16, 2024. This initiative aims to replace the 2016 supervisory statement and outlines updated expectations for banks' internal governance. Key highlights include: - Focus on Diversity and Effectiveness: The Guide emphasizes the need for diverse and effective management bodies, a priority for the Single Supervisory Mechanism (SSM). - Clarified Expectations: It details how management bodies should operate, the roles of internal control functions, and the importance of a robust risk culture. - Practical Reference: The Guide serves as a roadmap for banks, incorporating recent updates from the European Banking Authority and examples of best practices. - Ongoing Scrutiny: The ECB will intensify its oversight to ensure banks implement necessary governance improvements, particularly in light of past financial crises. A stakeholder meeting is scheduled for September 26, 2024, to discuss these developments further. This consultation marks a significant step towards strengthening governance standards in the European banking sector. Link - https://lnkd.in/gbZfJe4u #riskspotlight #operationalrisk #operationalriskmanagement #riskculture #riskgovernance #riskmanagement

20

1 Kommentar

MENAFATF 2024: Iraq Shows Strong Commitment to Combating Financial Crime.  The Middle East and North Africa Financial Action Task Force (MENAFATF) recently approved their mutual assessment report on Iraq.  This report recognizes Iraq's significant progress in implementing international standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT). The MENAFATF report highlights: - Strong understanding: Iraqi authorities demonstrate a clear grasp of money laundering and terrorist financing risks. - Effective implementation: Iraq has established and enforces measures to combat these crimes, including: > International cooperation > Confiscation of criminal proceeds > Investigations and prosecutions A collective achievement: This positive outcome is a testament to the dedicated efforts of: - The Iraqi Prime Minister and President of the Judicial Council - The Anti-Money Laundering and Combating the Financing of Terrorism Council - The Anti-Money Laundering and Terrorist Financing Office - Judicial and government bodies - The Central Bank of Iraq Looking ahead: This is a significant step forward for Iraq's financial system. As a business consultant, I'm optimistic that this enhanced AML/CFT framework will foster trust and transparency for businesses operating in Iraq.   Kadhum Jabbar Business Consultant Masar Consulting Services www.KadhumJabbar.com #Kadhum_Jabbar #Consulting #MasarServ #Economy #Business #Iraq #MENAFATF #AML #CFT #FinancialCrime

1

📢 Our Response to the ECB’s Draft Guide on Governance and Risk Culture   We reiterate the principle that banks should have the autonomy to define their governance and risk culture. While we acknowledge the ECB’s effort to reflect the diversity of the European banking landscape in its draft Guide, the ECB approach requires further adjustments to avoid new layers of uncertainty. It is paramount to preserve the specific governance features of #cooperative banks, which are part of their business identity and provide a system of checks and balances. Other key concerns include: 1️⃣ Inconsistencies with industry practices and national legislation 2️⃣ Ambiguous wording leading to multiple interpretations 3️⃣ The unclear role of the guide within the EU legal framework   Read more ➡️ https://lnkd.in/eXk5cXiF   #Banking #RiskCulture #ECB #Governance #CoopBanks #BankingRegulation  

17

On 18 December 2024, FINMA released Guidance 08/2024 on governance and risk management for artificial intelligence (AI) applications in supervised financial institutions. This new guidance outlines best practices for identifying and managing risks associated with AI. It builds on FINMA's earlier guidance in its 2023 Risk Monitor, which briefly addressed the use of AI in the financial sector. Read more: https://lnkd.in/dwTKubed.

15

1 Kommentar

Some nuggets from the recent EBA & ECB report on payment fraud across Europe: 🔐 SCA has been a force for good and is effective at preventing fraud 💳 card payments have by far the highest fraud rates both in value and volume: 📈 0.031% in H1 2023, increasing from 0.026% in H1 2022 or 7.31 million fraudulent transactions out of a total of 48.77 bn total card payments 📱 credit transfer fraud rate by comparison is significantly lower at 0.003% (or 616k fraudulent transfers out of total of 21.81 bn) 💰 credit transfers are often used for high-value payments (AOV €6485), which means that the average value of of a fraudulent credit transfer is higher for credit transfers vs other types of payments, but still significantly lower than the AOV, at €1835 #payments #fraud #cardpayments #report #openbanking https://lnkd.in/dwFMUKUe

18

The old chestnut of effective AML supervision... This week, the Financial Action Task Force (FATF) released its review of the non-financial sector (DNFPBs) and their technical compliance with the FATF recommendations. The majority of FATF member states performed well with a few, unsurprising, exceptions. What the FATF can't judge, at least at the moment, is the effectiveness of supervision in the DNFPB sector. The new round of mutual evaluations, which has already kicked off, will go some way to addressing this with the changes made to the Immediate Outcomes and I suspect that many of us think that a number of countries will perform quite badly when it comes to effectiveness, particularly in the supervision of lawyers and accountants - a topic never far from our hearts at the Centre for Finance and Security (CFS) at RUSI With thanks to the EU Mission to the UK, Maria Nizzero and I held a series of roundtables earlier this year with experts from across the UK and EU to identify common challenges to effective supervision. It was fascinating to see how much common ground there was, despite the variety of supervisory models in place and how core themes such as information sharing, the need for feedback loops, and the balance between incentives and deterrents resonated with all attendees. We've published a report summarising the fascinating discussions. Many thanks to all of those who contributed so brilliantly! https://lnkd.in/eHK7M2sj

25

How will the new Financial Action Task Force (FATF) grey list reforms impact low-income countries? In a landmark move, FATF President Elisa de Anda Madrazo announced that low-income nations earning below $10 billion will generally avoid grey listing, easing financial pressure and supporting development. This change could reduce the grey-listed countries by 47%. Head to our website for full details on how these reforms will reshape global financial compliance. Learn more: https://buff.ly/3Yji901 #AML #FATF #FinancialCrime #Compliance #GreyList #Finance #RegTech #GlobalFinance

11

🗞 July 9, 2024, the FATF published its 5th annual Targeted Update on the implementation of the FATF Standards on VAs and VASPs. Here are the main findings ✅ R. 15 implementation progress According to the FATF's April 2024 assessment, 97 out of 130 jurisdictions are partially or not compliant, 32 are largely compliant, and one is fully compliant with FATF requirements. The proportion of partially or non-compliant jurisdictions is the same as in April 2023. Some jurisdictions believe it is easier to prohibit VAs and VASPs than to create and enforce supervisory regimes. However, the FATF noted that successful prohibition is still challenging,  citing the experience of some jurisdictions. The FATF reported that 82 out of 94 jurisdictions require VASPs to be licensed or registered, with 69 having done so in practice — showing improvement since 2023. However, identifying and licensing offshore VASPs remains challenging. ✅ Travel Rule (TR) implementation progress In the 2024 survey, 65 of 94 jurisdictions have passed legislation implementing the TR while 15 reported that they are in the process, which shows improvement since 2023. Although TR enforcement remains weak, some jurisdictions noted that they impose enforcement actions for non-compliance with TR requirements and mentioned deficiencies that may lead to them. The challenges of implementing the TR remain the same as before: - Interoperability issues  - Issues with Travel Rule compliance tools - Differences in jurisdictional requirements and the sunrise issue - VASP counterparty due diligence  The FATF identified additional questions on interoperability of tools to assist VASPs in selecting TR solution providers, particularly: "- How does the tool transmit Travel Rule data to or receive Travel Rule data from external counterparty VASPs as well as transaction type and amount that are not covered by the tool? - Does the tool have limitations regarding to/from which VASPs it can send/receive data? - What is the tool's customer base? Does it sufficiently cover thea VASP's need to transfer VA overseas?" ✅ Market developments and emerging risks The FATF indicates that virtual assets continue to be used to support the proliferation of WMDs, scammers, terrorist groups, and other illicit actors. Many jurisdictions recognize the risks of DeFi arrangements and are conducting risk assessments. In contrast, many have not yet evaluated the risks of self-hosted wallets or P2P transactions. NFTs are rarely used for proliferation or terrorist financing but are prone to fraud, scams, and theft. 42 of 80 respondents primarily regulate NFTs as VAs where appropriate, while two jurisdictions reported that NFTs are regulated as art or cultural objects. Find all the information here: https://lnkd.in/ebDBQ-zA

11

4 Kommentare

🚨📖 The EBA issues final guidance on internal policies, procedures and controls to ensure the implementation of EU & national restrictive measures. Guidelines can be accessed here ⏩ https://lnkd.in/dxxxh3-g Key taweaways in this short clip ⏬

11

1 Kommentar

A distressing analysis published by #FinCEN (Financial Crimes Enforcement Network ) on the alarming rise of elder financial exploitation. It states that reported cases of elder financial exploitation (#EFE) are on the rise, with a 64% increase between 2013 and 2021, leading to $27 billion in reported suspicious activity and $3.4 billion of reported loss between 2013 and 2021. Given that these are self-reported complaints, the $3.4 billion loss likely represents a smaller proportion of the amount lost to EFE each year. In June 2023, #AARP issued a report estimating approximately $28.3 billion in annual EFE losses in the USA. The analysis identified two main categories: elder scams (80% of reports) involving unknown perpetrators and elder theft (20% of reports) by trusted individuals, often adult children. Isn't that shocking? EFE isn’t merely a financial loss. When elders lose, families bear the burden. Healthcare, education, and quality of life suffer. The ripple extends to communities, straining social safety nets. And this isn’t just an American issue—it reverberates globally. The stakes are higher in #India, where multi-generational households are typical. Countries like India, with its vast #aging population, face a double-edged sword. On one hand, cultural reverence for elders fosters strong family bonds. On the other, it makes them susceptible to exploitation. EFE knows no borders; it thrives where trust meets vulnerability. Imagine the impact: grandparents losing their nest eggs, dreams deferred, and dignity tarnished. Awareness is important. Workshops, community talks, and digital literacy programs can arm elders against scams. In addition to educating branch staff and customers about the signs of elder abuse, many banks use existing #fraud detection, anti-money-laundering (#AML), or Bank Secrecy Act (#BSA) compliance software to find them. Such programs are typically rules-based. Rules-based transaction monitoring software can see what happened but cannot predict what is likely to occur. In such cases, fintech innovations can be a shield. Biometric authentication, #AI-driven fraud detection, and secure digital channels can safeguard elders’ assets. This truly is an area where AI can potentially play a significant role. #ElderFinancialExploitation #FinCEN #FinancialInclusion #SeniorProtection #FinancialSecurity #AwarenessMatters #banks https://lnkd.in/dS-7qSRB

2

ECB's New Governance Guidelines: Why Banks Must Act Now to Address Deep-Rooted Risk Culture Issues" The recent 2023 Supervisory Review and Evaluation Process (SREP) results reaffirm the ECB's longstanding concerns regarding governance and risk culture shortcomings in European banks. The newly proposed Guide on governance and risk culture offers deeper insights into these issues, particularly regarding risk culture, remuneration, and the evolving requirements under CRD6. The ECB's conclusion is clear: governance issues stem from deeper behavioural and cultural drivers that need to be addressed. This goes beyond policy and process fixes, signalling that a cultural shift is needed within banks. Sadly, there seems to be an increasing focus on the (useless and outdated) three lines of defence. This is an obstacle to building an effective risk culture in banks. The introduction of a fit and proper framework under CRD6, with a January 2026 compliance deadline, adds urgency. Experience from the UK's SMCR regime suggests that banks should begin preparations early, ensuring clarity in roles and responsibilities across management bodies. Additionally, the ECB's growing emphasis on emerging risks—such as those arising from digitalisation and geopolitical developments—further underscores the need for a forward-looking risk culture. Institutions must be proactive in identifying and managing these risks by aligning internal expertise and accountability. Failure to address these issues in a timely manner could prove costly. With the ECB empowered to use Periodic Penalty Payments for non-compliance, banks that delay governance and culture improvements face increasing financial risks. Now is the time for banks to take these guidelines seriously, assess gaps, and begin addressing the root causes of governance deficiencies. At a loss of where to start? Find help here: https://lnkd.in/enSBa2Xh

3

The European Central Bank has released its new Draft Guide on #governance and #RiskCulture, replacing the 2016 SSM Supervisory Statement. This guide emphasizes the importance of robust governance frameworks in risk management, highlighting the principle that "well-run banks mean safer banks". The guide aims to bolster the stability and #resilience of the #EU's #banking sector, ensuring a secure #financial system. The consultation period runs until 16 October 2024. For more details, read the full article here: https://lnkd.in/dADfgiCa #GTG #FinancialServices #Fintech #DORA #ECB #RiskManagement #RiskCulture Ian Gauci l Cherise Abela Grech l J.J. Galea

9

#MoneyLaundering & #TerroristFinancing: Consolidated assessment ratings Through its nine Financial Action Task Force (FATF)-Style Regional Bodies (FSRBs), the Financial Action Task Force (FATF) brings together a global network of 205 jurisdictions that have each committed at the highest political level, to implementing the FATF Recommendations https://lnkd.in/dc-Rx8NU  Financial Action Task Force (FATF) and FSRBs conduct peer reviews on an ongoing basis to assess how effectively their respective members' AML/CFT measures work in practice, and how well they have implemented the technical requirements of the Financial Action Task Force (FATF) Recommendations.  This table provides an up-to-date overview of the ratings that assessed countries obtained for effectiveness and technical compliance (last updated on 19 December 2024). ACCOBIN Association of Chief Compliance Officers Super Pearls Professionals

17

3 Kommentare

📢 **FSUG Recommendations to the European Commission** 📢 The **Financial Services User Group (FSUG)**, attached to the DG FISMA of the European Commission, unveiled on **Thursday, June 20**, a comprehensive set of recommendations for the next Commission. These recommendations aim to address critical challenges faced by citizens, including consumers of financial services, retail investors, and pension savers. 🔍 **Main Objectives:** - Ensure a **strong and inclusive financial services market** that benefits all EU citizens. - Address the needs of **financial services consumers**, **retail investors**, and **pension savers**. 📅 **Coverage Period:** 2024 to 2029 🔗 **Learn more:** [FSUG calls for action: Financial services should work for the benefit of citizens - European Commission](https://lnkd.in/exZACnXd) 🌍 **#FSUG #FinancialServices #EuropeanCommission #Investors #Savers #FinancialInclusion #DGFSMA** 🌍

1

🚨BCBS239 – A Renewed ECB Priority : The Role of the Management Board🚨   On 3rd May 2024, the #ECB released its Guide on Effective Risk #Data Aggregation and Risk Reporting (#RADRR). The Guide outline seven areas deemed crucial by the ECB for sound data governance and effective risk identification, monitoring, and reporting.   To help you navigate these important updates, Avantage Reply has created a series of seven one-pagers, each summarising the key messages. Our first one-pager focuses on the critical role of the Management Board.   👉 Read the one-pager here: https://bit.ly/4aTeFol   #BCBS239 #RiskManagement #DataGovernance #Management

44

1 Kommentar

Targeted update on implementation of FATF standards on #VirtualAsset (VA) and VA Service provider (VASP) by Financial Action Task Force (FATF). 5th targeted review of implementation of the FATF’s Standards on VAs and VASP including #TravelRule. Compared to the 2023 survey results, jurisdictions, incl. some with materially important VASP activity, made progress in putting AML/CFT regulation in place or are in the process of doing so. This report sets out key areas for improvement and recommendations for both public and private sectors. 75% jurisdictions (97/130) are only partially or not compliant with Recommendation 15 re new technologies. 27% jurisdictions (39/147) have yet to decide if and how to regulate the VASP sector 30% respondents (29/94), excluding those that prohibit VASPs explicitly (i.e., including those that permit VASPs and those that prohibit VASPs partially), have not passed legislation implementing #TravelRule. #FinTech #Blockchain

36

1 Kommentar

ECIIA | European Confederation of Institutes of Internal Auditing's latest publication, The #AI #Act: #Road to #Compliance, offers essential guidance to ensure compliance and #manage #risks effectively. The #European #Union took a significant step towards the regulation of AI with the #Artificial #Intelligence #Act. Having entered into force in August 2024, this #legislation will gradually introduce a series of #requirements for #all #organisations that #deploy, or #plan to deploy, AI #systems within the European market. One of the primary goals of the AI Act is to #safeguard #fundamental #rights and #personal #data while simultaneously promoting #innovation and fostering #trust in AI #technologies. The #obligations and #requirements differ depending on the #risk #category and the role of the organisation in the AI #value #chain. 🔷 General obligations: ♦️AI #literacy: measures shall be taken to ensure a #sufficient #level of AI #literacy of those dealing with the operation and use of AI systems. ♦️AI #registry: companies must submit their high-risk AI systems to a central AI #repository. For ensuring compliancy, companies should build an AI registry, containing all AI systems they use or put on the market. ♦️AI #risk #assessment: All AI systems on the AI registry should be risk assessed according to the risk #classification method used in the AI Act. It should be noted that the classification method is prescribed within the AI act.

24