About


Take On Payments, a blog sponsored by the Retail Payments Risk Forum of the Federal Reserve Bank of Atlanta, is intended to foster dialogue on emerging risks in retail payment systems and enhance collaborative efforts to improve risk detection and mitigation. We encourage your active participation in Take on Payments and look forward to collaborating with you.

Take On Payments

« The Simple Consider Three but Four is the Key | Main | Mobile Banking and Payments—What's Changed? »

September 12, 2016


Risk Mitigation Isn't Just for Banks

My summer in Atlanta wouldn't be complete without "shooting the Hooch." Friends and family gather upriver on the Chattahoochee River, bringing rafts, tubes, or kayaks for a chance to beat the pervasive southern heat. This year, towards the end of our two-hour float, we came upon Diving Rock, a crowded swimming hole where people stop to watch cliff jumpers. A jumper can choose either a 20- or a 30-foot freefall into the river below. As the family's "chief risk officer," when my eight-year-old son asked me if he could jump, I quickly assessed the inherent and residual risks of such an activity at this location. I concluded that our family was risk-averse in this situation and there would be no jumping.

Conversely, when my son asked if he could play tackle football, I decided we had an appetite for this type of risk. I don't want to detail all of the risk factors compared to the mitigation controls that went into my assessments and ultimate decisions. But looking at these two personal examples made me wonder: in a business context, who else is faced with important risk decisions? And who, besides banks, should be conducting constant risk assessments for their organization?

A tax preparer faces fines and, in extreme cases, jail time for filing returns with errors. Those who receive return-related penalties can also face suspension or expulsion of themselves or their entire firm, or other enforcement action by the IRS. Can a tax preparer be held liable for filing returns with errors even if unaware that the taxpayer was acting illegally? The tax preparer is held to the reasonable person standard, so if it is something he or she should have known, yes. But if the client omitted pertinent details, the tax preparer might have no way of knowing. Since the consequences are severe, should the tax preparer dig deeper and try to catch fraudulent client activity prior to submitting a return or keep blinders on?

I pay for monthly parking at a city garage. This week I found out that they monitor my activity closely with the access card I use. They know whether or not my car is in or out of the garage. They have triple-factor authentication to prevent parking space fraud. In order to get in or out, you need the weight of a vehicle at the gate with an authorized access card and the correct in and out record on the card in order to be provided pass through.

Doesn't it stand to reason that all organizations—whether they're responsible for tax preparation, parking space provision, or payment network access—in pursuit of success, whatever that is for them, should conduct assessments and implement mitigation controls in order to understand how customers engage in their services, especially if they can be held liable for those activities? Should payment services be any different and if so to what extent?

Photo of Jessica Trundley By Jessica J. Trundley, AAP, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

September 12, 2016 in banks and banking , risk management | Permalink

Comments

Post a comment

Comments are moderated and will not appear until the moderator has approved them.

If you have a TypeKey or TypePad account, please Sign in

Google Search



Recent Posts


Archives


Categories


Powered by TypePad