CAE Agenda: Your Monthly Audit News Roundup - August 2021
Our team has collected the top internal audit news, insights and resources for financial services organizations to help you and your teams.
Thank you for reading the August edition of the CAE Agenda.
The Protiviti Team
On July 28, The Institute of Internal Auditors called on the international accounting standards IFRS Foundation for enhancements to sustainability reporting. The IIA also offered to play a role on a consultative committee being assembled through the International Organization of Securities Commissions (IOSCO), the international body that brings together the world's securities regulators and is recognized as the global standard-setter for the securities sector.
In this BIS Bulletin published on August 2, the authors argue that a new, more tailored approach to regulation is needed as Big Tech’s rapid growth in financial services poses new challenges for regulators.
Public Responses to Consultation on Targets for Addressing the Four Challenges of Cross-Border Payments
On 31 May 2021, the FSB published Targets for Addressing the Four Challenges of Cross-Border Payments: Consultative document. Interested parties were invited to provide written comments by 6 July 2021. The FSB has now shared the public comments and expects to publish the final targets in October 2021.
Despite all that is at stake, the LIBOR transition has not made headlines this year because regulators and legislators at the state, federal and international level have anticipated issues with the transition and are working swiftly to address them. Banks, consumers and regulators hope that the LIBOR transition remains smooth and uneventful.
On July 29, Credit Suisse Group published the findings of an internal investigation about the bank’s handling of its exposure to Archegos Capital Management, which collapsed in March causing about $10 billion of losses for several banks. Credit Suisse, which was the worst hit among peers, said in response to the findings it was cutting its overall risk appetite, adjusting governance procedures and increasing risk management staff.
On August 3, the chair of the U.S. Securities and Exchange Commission (SEC) called on Congress to give the agency more authority to better police cryptocurrency trading, lending and platforms, a "Wild West" he said is riddled with fraud and investor risk.
On August 3, Acting Comptroller of the Currency Michael J. Hsu testified at a hearing before the U.S. Senate Committee on Banking, Housing and Urban Affairs. The acting comptroller’s testimony discussed the agency’s priorities, review of key regulatory standards, and efforts to promote fairness and inclusion in the federal banking system. Hsu’s testimony also discussed issues unique to community banks.
Recent high-profile hacks and other IT security disasters should remind internal audit to widen its focus away from just the technology to other equally dangerous aspects of cybersecurity risk, such as policy noncompliance among employees or lack of third-party cyber resiliency. They should also be a reminder of vulnerabilities that could appear anywhere in the organization and the importance of collaborative effort. Internal audit can help bind together different parts of the enterprise to form a unified front against cyber threats and help keep the organization protected from would-be attackers.
Following the publication of the results of the EBA’s 2021 stress test, Michael Lever, head of prudential regulation at the Association for Financial Markets in Europe (AFME), said: “AFME is pleased to note that the European banking system remains well capitalised even after taking account of the impact from extremely harsh assumptions which formed the basis of the test.”
FCA Consults on Proposals to Boost Disclosure of Diversity on Listed Company Boards and Executive Committees
The FCA has launched a consultation on proposals to improve transparency for investors on the diversity of listed company boards and their executive management teams. The FCA is consulting for 12 weeks on these proposals, with a closing date of 22 October 2021. Subject to consultation feedback and FCA board approval, it will seek to make relevant rules by late 2021.
A Conversation About Female Empowerment, the Need for an Inclusive Recovery and Transatlantic Cooperation
How can we foster the economic empowerment of women after the coronavirus crisis? And what role does transatlantic cooperation play in shaping a more inclusive recovery? Listen to ECB President Christine Lagarde, EU Commission President Ursula von der Leyen and U.S. Secretary of the Treasury Janet Yellen talk about this and more in the latest episode of the ECB Podcast, hosted by Katie Ranger.
BIS Innovation Hub and Monetary Authority of Singapore publish proposal for enhancing global real-time retail payments network connectivity
On July 28, the Bank for International Settlements Innovation Hub Singapore Centre and the Monetary Authority of Singapore (MAS) published a proposed blueprint for enhancing global payments network connectivity via multilateral linkages of countries’ national retail payment systems.
Japanese banks are working to implement a new shared platform for AML/CFT monitoring and screening to address the issue of false positives in the banking industry. According to Hiroshi Ozaki, director of the AML/CFT Policy Office of Japan’s FSA (Financial Services Agency), the new system has proven to be successful at enhancing the effectiveness and efficiency of AML/CFT monitoring and detection.
Cyber risk is the number one current issue of concern for most ARCs. The purpose of this white paper, published on July 22 by The IIA Australia, is to assist and prompt thinking and questioning by audit and risk committees (ARCs) on emerging issues in cyber risk.
Proposed U.S. Interagency Guidance on Third-Party Relationships: Leveling the Playing Field for Third-Party Risk Management Requirements
Extraterritorial: The AML Act of 2020 Drastically Expands the Give-and-Take of Global Information Sharing
The Anti-Money Laundering (AML) Act of 2020, passed by the United States Congress on January 1, 2021, included two important provisions related to expectations for extraterritorial information sharing, which represent an expansion in policies around movement of AML records into and out of the United States. International organizations should begin to plan for what they will do if they or any of their correspondent banks are issued a subpoena. Additionally, institutions should continue to monitor for updates from the U.S. Treasury regarding the SAR-sharing pilot program.
The scale and frequency of recent disruptive events have exposed the fragility of supply chains. These incidents call for broad implementation of operational resilience practices and detailed and continuous monitoring of suppliers — third, fourth and fifth parties that deliver important business services or processes — as well as concentration risks. In this paper, we summarize eight practical actions companies should consider taking now.
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