Tag: banks

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FinTech outlook for 2018: US Banks look to AI
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U.S. Regulation CC amendments reallocate risks for remote deposit check payments
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Voice biometrics and fraud prevention in payments
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U.S. Banking regulators issue a “Joint Fact Sheet on Foreign Correspondent Banking”: Is this a response to global fears of US “DeRisking”? And if so, does it go far enough?
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Bitcoin operators exposed to cyber threats
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FinTech in the UK: Regulating Disruption
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Banks Partnering with Fintech Startups – Deutsche Bank, ANZ Bank

FinTech outlook for 2018: US Banks look to AI

By Cameron Abbott and Harry Crawford

With 2017 at a close, US banks have set out their 2018 FinTech new year resolutions. According to American Banker, US banks are likely to focus their FinTech investment in 4 major areas in 2018:

  • Artificial intelligence and machine learning
  • Open banking
  • Cybersecurity and biometrics
  • Commercial banking innovation

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U.S. Regulation CC amendments reallocate risks for remote deposit check payments

By John ReVeal

More than three years after proposing amendments to the Regulation CC to add new indemnities for remotely deposited checks (cheques), new warranties for electronic checks and electronic returned checks and new indemnities for electronically-created items, the U.S. Federal Reserve has at last issued final rules. These new rules also modify the expeditious return rules, including by making electronic returned checks subject to those requirements. The final rules were issued on May 31, 2017, and will take effect on July 1, 2018.

Perhaps the rules of most importance to the banking and emerging payments industries are those providing for indemnities for remotely deposited checks. An inherent problem with remote deposits is that the person depositing the check retains the original paper check and can negligently or intentionally deposit or cash it again. The bank on which the check is drawn will usually refuse to pay it twice, as it should. This leaves the writer of the check, the bank that accepted the remote deposit, and the bank or check cashing store that accepted the original paper check arguing over who should take the loss. Under current rules, unless the parties have entered into side agreements to allocate losses, the bank or check store paying the original check can normally bring a Uniform Commercial Code (UCC) holder-in-due-course claim against the check writer and that person has no remedy unless recovery is possible from the negligent or crooked payee that cashed the item twice.

To read the full alert, click here.

Voice biometrics and fraud prevention in payments

By Claire de Koeyer and Jim Bulling

The ability to transfer funds from one account to another in near real-time using just an email address or mobile number is getting closer for Australians with the RBA advising that developments are on track to allow the first payments to be made through a new payment platform towards the end of 2017. The new platform, the development of which was commenced by the RBA in 2012, allows for near real-time funds transfer between bank accounts, regardless of who people bank with.

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U.S. Banking regulators issue a “Joint Fact Sheet on Foreign Correspondent Banking”: Is this a response to global fears of US “DeRisking”? And if so, does it go far enough?

By Judith Rinearson

This summer, “de-risking” has become a hot topic.  De-risking is the term used to describe the process many banks have taken to cancel bank accounts and correspondent banking relationships with customers whom they deem to be too risky, or not worth the cost of ensuring compliance. Losing a bank account relationship can be devastating for small businesses and many emerging payments companies have found it increasingly difficult to obtain banking service due to perceptions that providing banking services for “fintechs,” blockchain companies and other innovative payments companies would be “high risk”.

The concerns about derisking are not limited to its impact on small businesses; it has also impacted on small countries.  IMF President Christine LaGarde noted in July 2016 that “regulators in key financial centers need to clarify regulatory expectations …and global banks need to avoid knee-jerk reactions and find sensible ways to reduce their costs.”

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Bitcoin operators exposed to cyber threats

By Cameron Abbott and Rebecca Murray

Reuters has reported that a third of bitcoin trading platforms have been hacked, and nearly half have closed since they entered the scene 6 years ago. This increasing risk for bitcoin holders is compounded by the fact there is no depositor’s insurance to absorb the loss. That approach heightens cybersecurity risks and also exposes the fact that bitcoin investors have little choice but to do business with under-capitalized exchanges.

This issue was evident when Bitfinex was hacked earlier this month and an estimated $70 million in bitcoin was stolen. The virtual bank’s customers were forced to share the losses resulting in a generalized loss percentage of 36.067%. Read our blog post on this hacking here.

Experts say trading venues acting like banks such as Bitfinex will remain vulnerable. These exchanges act as custodial wallets in which they control users’ digital currencies like banks control customer deposits. However, unlike their brick-and-mortar counterparts, when customers’ bitcoin accounts are hacked, there is currently no third party that can step in to deal with the theft. As a result, these underfunded exchanges require nearly perfect security.

Given this it is not surprising that certain governments around the world are exploring the possibility of central bank issued digital currencies using distributed ledger technology which could compete with the private digital currency systems such as bitcoin. Read more on this here.

FinTech in the UK: Regulating Disruption

By Sonia Gioseffi, Shehram Khattak, Jonathan Lawrence and Ronnie Yearwood

Without doubt, FinTech companies are in some ways deconstructing the services offered by larger banks in the UK and elsewhere. However, risks are not resolved because of the technology, as information and financial products are marketed and sold via web-based platforms, social media or other technological applications. Consumers still need to be clearly informed about the firms and the financial products being offered. Firms must still ensure that they adhere to the principle that their communications are “fair, clear and not misleading”. It is, therefore, better for a FinTech firm to apply and take advice on best practice in this regard, which saves money and time in the interim, than to wait either for enforcement from the regulator or for market failure to drive responses. Find our longer article here.

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