Issue 9
October 2024
Welcome to the MBA's News Digest!
Dear readers,
Ready, get set, transform!
Mauritius remains committed to global responsibilities and regulatory innovation, as it continues to evolve its financial ecosystem.
The country has pledged to reduce greenhouse gas emissions by 40% by 2030, and enacted new legislation to regulate virtual assets and initial token offerings on the regulatory front, which has resulted in being rated “compliant” or “largely compliant” with all 40 FATF recommendations, writes Financial Express.
In the UK, regulatory pressure on operational resilience has intensified with both the UK Operational Resilience and EU DORA compliance deadlines looming in 2025. Financial services leaders now find themselves having to precariously balance compliance, operational resilience, technology investment and cost efficiency.
This begs the question; how can financial service executives walk this tightrope?
Best wishes,
The MBA team
Major retail banks to introduce Singpass Face Verification, further strengthening resilience against phishing scams
18 September 2024
‘Monetary Authority of Singapore (MAS) and The Association of Banks in Singapore (ABS) today announced that major retail banks in Singapore will progressively implement Singpass Face Verification (SFV) over the next three months to strengthen the digital token (DT) setup process for retail banking customers. SFV will be triggered in higher risk scenarios to strengthen and complement existing authentication methods for DT setup. SFV uses a face scan to verify a customer’s identity against national records before the customer’s DT can be activated for use. This makes it more difficult for a scammer to take over a customer’s DT by setting it up on his own device using phished credentials such as an SMS, one-time passwords (OTPs) and/or bank card information.’
UK Banks and Building Society write to the Governor of the Bank of England on a collaborative approach to innovation in payments
16 September 2024
‘Innovation in money and payments (for example in the form of programmability and interoperable platforms for innovation) creates the capability to make payments with security, efficiency and speed. These developments could potentially be driven by a retail Central Bank Digital Currency (CBDC), or by private sector initiatives, as encouraged by the Bank. Such initiatives may have the potential to provide enhanced security and authentication for customers. We believe a private sector solution, resting on shared public-private objectives and priorities, could deliver significant benefits, while preserving the singleness of money as we have today, minimising financial stability risks and ensuring continued use of central bank reserves as the monetary anchor.’
UK Finance announces successful outcome of Regulated Liability Network Experimentation Phase
17 September 2024
‘This is a new type of financial market infrastructure that can deliver new capabilities for payments and settlement, including tokenisation and programmability. Across the use cases explored, a number of potential benefits were discovered, including reducing fraud, improving efficiency in the process of home buying and reducing the cost of failed payments in the UK. The work looked at various technical, legal and business case questions surrounding the development of a ‘platform for innovation’ and the main conclusions are: Such a platform, in collaboration with other important initiatives such as Open Banking, could deliver economic value and support innovation in the market. New functionality, such as programmable payments and locking/unlocking of funds, was demonstrated across a range of use cases…’
Consumer Duty outcomes monitoring: What does good look like?
18 September 2024
‘In practical terms and taking a customer complaints journey as an example, an intended outcome for a customer complaint could be something like “a customer receives appropriate redress where they have experienced harm”. This is the outcome we want our assessment of a complaint to have resulted in. To assess whether this outcome has been delivered we would need to review the quality of complaint handling to look at whether the customer experienced actual or potential harm at all customer touch points, decisions points, interactions and regulatory requirements of the product or service being complained about. This individual outcome assessment would feed into a broader collection of complaints outcome testing which would be reported into appropriate governance. Outcomes Monitoring and Testing is a critical part of the overall Outcomes Monitoring Framework. The Framework will include all your data about customer usage, price and value, customer understanding, customer support and feed into your holistic assessment as to the outcomes your products and services are delivering for customers.’
Next Gen financial services operations
17 September 2024
‘Financial services leaders now find themselves having to precariously balance compliance, operational resilience, technology investment and cost efficiency. This begs the question; how can financial service executives walk this tightrope? They should, and most already are attempting to, identify how to best leverage technology to maximise the productivity of the high value humans who not only crave, but demand complex and impactful work. Many have turned to Gen AI in the search for productivity, 60% of UK financial institutions believe Gen AI can deliver significant cost savings and improvements to operational effectiveness, and banking as a sector has the highest AI investment budget allocation globally.’
New Nacha Rules and Tools Aim to Enhance Fraud Funds Recovery
12 September 2024
‘Fraud prevention and funds recovery are critical priorities for all financial institutions. The latest Nacha Rules, set to begin taking effect on Oct. 1, 2024, are intended to improve funds recovery between financial institutions after fraud has occurred. To support this effort, Nacha has introduced a new feature in the Risk Management Portal offered to the industry called Secure Exchange. This feature enables secure communications between financial institutions to work on funds recovery. Secure Exchange enables banks that receive ACH payments (RDFIs) to securely send notifications to originating banks (ODFI) that are required under the Nacha Operating Rules and Guidelines – 1) notifying the ODFI of the status of a request to return funds, and 2) notifying the ODFI that the RDFI has not provided funds availability for an ACH credit payment.’
FDIC proposes new recordkeeping requirements for bank-fintech partnerships
17 September 2024
‘The FDIC board unanimously voted today to advance a proposed rule to establish new recordkeeping requirements for banks that enter into arrangements with third-party fintech firms to provide deposit products and services. According to the agency, the rule would require FDIC-insured banks holding certain custodial accounts to maintain accurate account records so that the individual owner of the funds can be identified, including a requirement to reconcile the account for each individual owner on a daily basis. “If a bank fails, the FDIC cannot pay deposit insurance to the depositors based on inaccurate or incomplete records,” FDIC Chairman Martin Gruenberg said. “Knowing the identity of the actual owners of the deposits — the so-called ‘beneficial owners,’ who are often consumers — and knowing their account balances are necessary for the deposit insurance to pass through the nonbank third-party company… to the actual owners of the funds.” ’
RBI fines HDFC, Axis Bank for non-compliance with regulations
11 September 2024
‘The monetary penalty on Axis Bank pertains to violations done in FY23. The bank allotted multiple customer identification codes to certain customers instead of a unique customer identification code for each customer and obtained collateral security for agricultural loans up to ₹1.60 lakh in certain cases. Besides, Axis Bank’s wholly-owned subsidiary undertook business as a technology service provider, which is a violation of the Banking Regulation Act… The penalty on HDFC Bank pertains to FY22. HDFC Bank gave over ₹250 as gifts to depositors while accepting certain deposits. The gift was in the nature of the first-year premium for the complimentary life insurance cover. The bank failed to ensure customers were not contacted after 7 p.m. and before 7 a.m.’
CFPB: Banks need proof of customer consent for ATM, debit card overdraft fees
17 September 2024
‘Banks and credit unions can be held legally liable if there is no proof that they obtained affirmative consent from customers before charging overdraft service fees for ATM and debit card transactions, the Consumer Financial Protection Bureau said today in a circular intended for regulators and law enforcement. The circular re-states Regulation E’s “opt-in” requirement that financial institutions must obtain the customer’s consent — or opt-in — before imposing a fee for an overdraft resulting from a point-of-sale debit card or ATM transaction.’
Directors Briefing: How boards can prepare banks for disasters
23 September 2024
‘Maintaining operational continuity during events such as natural disasters, severe weather, and IT disruptions is crucial for depository institutions. This approach not only preserves the integrity of the nation’s payment system but also reinforces customer trust in the banking sector. It falls on the board to ensure that management is equipped with comprehensive plans and procedures to handle a wide range of scenarios, including emerging threats like cyberterrorism. While it’s impossible to predict every potential challenge a bank might face, having robust business resumption and contingency plans enables both the board and management to navigate emergencies effectively. A well-crafted plan provides a strategic framework for decision-making and helps institutions quickly recover and resume operations, regardless of the scale of the disruption.’
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