Abstract: This brief summary of current developments in community banking explains the importance of having internal controls that identify, monitor and control residential real estate valuation discrimination. In addition, it notes that bank customers are generally skeptical of the use of artificial intelligence (AI) to assist in various banking services. Finally, it warns financial institutions about the increasing use of counterfeit U.S. passport cards to perpetrate identify theft and schemes.
Bank Wire
Steering clear of discrimination in real estate valuation
A recent Federal Financial Institutions Examination Council (FFIEC) statement discusses “Principles Related to Valuation Discrimination and Bias in Residential Lending.” The statement notes that “Deficiencies in real estate valuations, including those due to valuation discrimination or bias, can lead to increased safety and soundness risks, as well as consumer harm.” The statement lists several examples of potential consumer harm, such as:
- Denial of access to credit for which a consumer is otherwise qualified,
- Offering consumers credit at less favorable terms, and
- Steering consumers to a narrower class of loan products.
Banks whose internal controls fail to identify, monitor and control valuation discrimination or bias may be exposed to legal and compliance risks or negative assessments by regulators. To avoid these issues, the FFIEC encourages banks to establish a formal valuation review program consistent with the Interagency Appraisal and Evaluation Guidelines.
Consumers are skeptical of AI
Banks increasingly use artificial intelligence (AI) to streamline and enhance various processes, including customer service, fraud prevention and detection, compliance, underwriting, collections, and marketing. But it’s important to recognize that customers may not be fully on board.
According to a recent survey by J.D. Power, “While banks are investing time and resources to integrating AI into their offerings, customers are simply not convinced that AI is to be trusted. More than half (56%) say they only somewhat trust the quality of the output generated by their bank’s use of AI, with 32% saying they don’t trust it at all.”
Part of the problem, the report theorizes, may be that banking customers “view their institution’s use of AI as less advanced than other industries’ solutions.” To get customers more comfortable with AI, J.D. Power says, banks “need to go the extra mile by making [customers] understand how they’ll personally benefit from it.”
Watch out for counterfeit U.S. passport cards
In a recent notice, the Financial Crimes Enforcement Network (FinCen) warned financial institutions about the use of counterfeit U.S. passport cards to perpetrate identify theft and fraud schemes. Some examples of warning signs include:
- Photos that are in color, have a white, blurry border or have a dark gray square surrounding them,
- Account holder photos on file that don’t match the photo on the card or the individual presenting it, and
- A missing holographic U.S. Department of State seal or a seal from an unrelated agency.
The notice provides an overview of these schemes and highlights 17 selected technical, behavioral and financial red flags to assist banks in identifying and reporting suspicious activity. Contact us for more information.
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