Authorities by transferring relatively small amounts over time

Can this information help diagnose important problems, or detect trends that might help the car company improve its products?

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Natural language processing (NLP) has become popular in the past two years as more businesses processes implement this technology in different niches. In inviting our guest today, we want to know specifically which industries, businesses or processes NLP could be leveraged to learn from activity logs.

For instance, we aim to understand how car companies can extract insights from the incident reports they receive from individual users or dealerships, whether it is a report related to manufacturing, service or weather.

In the same manner, how can insights be gleaned from the banking or insurance industries based on activity logs? We speak with the University of Texas’s Dr. Bruce Porter to discover the current and future use-cases of NLP in customer feedback.

Expertise: Machine reading, natural language processing

Brief Recognition: As SparkCognition’s Chief Scientist, Dr. Bruce Porter leads the company’s research and development initiatives. He was a two-time chair of the University of Texas, Austin Computer Science department, recently returning to his role as a professor at the university to focus on teaching and research. In 2017, the Austin Chamber of Commerce recognized Dr. Porter, with the Economic Development Volunteer of the Year award for his work in recruiting technology companies to build and innovate throughout the economy across the Austin region.

Big Idea

Many companies and government agencies are deluged with incident reports, customer logs, and information coming in the form of text. To gather insight from these logs, Dr. Porter coined the term “macroreading”, which refers to the detection of patterns in huge masses of unstructured text.

Example 1: Improving Customer Experience in the Auto Industry

In the automobile industry, imagine that a car company receives incident reports on a daily basis car owners or car dealerships. These reports consist of a paragraph or two of text describing a problem that the customer has experienced with a particular car. These incident logs have unstructured information. They come in the form of text, diagrams or pictures. They can also include metadata such as the occasion and other incident details that are structured, Dr. Porter clarifies.

The question is: Can the car company mine the text reports to find patterns at the macrolevel and discover what is happening with the cars in a particular model and year? Can this information help diagnose important problems, or detect trends that might help the car company improve its products?

Data entry might vary widely across different parts of the automotive industry. Car incident reports could be typed if they are received by someone in the office. Technicians in the field could be using audio devices to report a problem. A business with the ability to find patterns and across all of these different data types would be better prepared to find and address problems and opportunities quickly.

Example 2: Preventing Financial Fraud and Money Laundering

Dr. Porter brings us to the financial sector for his second example. He explains that wire transfer reports come with meta information such as the certain amount of money being moved, as well as the source and destination of the wire transfer. The report also contains text information about the nature of the wire transfer and the relationship of the money sender to the bank. In this, a macroreading application has the potential to uncover fraud and money laundering activities.

Dr. Porter further explains that developing a banking application for the government can be challenging, primarily because such an application requires a large quantity of data. That the application could potentially be used as an investigative tool requires it to be a deep, robust system. The application must have the capability to show interrelated actions and participants over time, which when taken together reveal a pattern of suspicious behavior.

Citing money laundering as an example, Dr. Porter explains that one pattern shows a small business such as a car wash or a laundromat collecting cash, and then wire transferring large sums of money through accounts owned by these small businesses (with the intention of “flying under the radar” of authorities by transferring relatively small amounts over time).

Dr. Porter forecasts that industries that would need this kind of insight in the next five to 10 years would be those with significant investments in equipment that is distributed globally. The company would be receiving reports on a regular basis, either hourly or daily, of how that equipment is performing. The challenge for the company is detecting failures early before they get out of hand and meeting the regulatory obligations for large industries.

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Axsesstoday rides the alternative finance boom

The increasing popularity of alternative lenders such as Axsesstoday comes as the Financial Services Royal Commission.

Small business lender Axsesstoday’s half year results showed an increase in its profit after tax to $3.2 million as the alternative lending market grows in popularity.

Axsesstoday focuses on financing in the hospitality and transport sectors and increased its market share with receivables up by 53 per cent over 30 June 2017 to $265 million.

Founded in 2012, the specialist provider of equipment finance listed on the Australian Securities Exchange in 2016 after growing its loan receivables book from zero to over $52 million in four years.

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For businesses in the hospitality sector Axsesstoday typically offers financing for coffee machines, display units, cooking, refrigeration and dishwashing equipment.

For businesses in the transport sector it finances second-hand trucks, trailers, forklifts and other light trade vehicles.

Co-founder and chief executive Peter Ferizis, says Axsesstoday has built its business by offering an alternative for small businesses.

“We are moving away from finance being a commoditised product to offering a unique value proposition and a unique and proprietary IT core system,” he says.

The increasing popularity of alternative lenders such as Axsesstoday comes as the Financial Services Royal Commission (FSRC) began its public hearings on Monday with concerns about the major banks lending to small business on the agenda.

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“It’s very early at this stage to undersand what are the changes which might arise out of that,” Ferizis says. “What the Royal Commission means is that customers want to be heard and at the moment it is hard for SMEs to secure finance from the major lenders.”

Axsesstoday assesses small businesses by using algorithims and modelling specifically developed for the hospitality and transport sectors.

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Brexit: May to meet UK financial services chiefs

We should use the imagination and ingenuity that our two countries and the EU have shown in the past, to craft a bespoke solution.

The Prime Minister is set to meet with business leaders from the UK’s financial services industry as the government attempts to secure a Brexit deal that will include the sector.

Theresa May will talk with Barclays’ chief Jes Staley and Goldman Sachs International boss Richard Gnodde among others on Thursday.

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The Chancellor Philip Hammond will also attend after travelling to Berlin.

He described financial services as pivotal to a “bespoke” trade deal.

In a joint-article for the Frankfurter Allgemeine newspaper on Wednesday, Mr Hammond and Brexit Secretary David Davis said that “the economic partnership should cover the length and breadth of our economies including the service industries — and financial services”.

They said: “We should use the imagination and ingenuity that our two countries and the EU have shown in the past, to craft a bespoke solution.”

Bloomberg reports that Germany is considering a plan that would give UK financial services companies access to Europe in exchange for payments to the EU budget.

Asked in Berlin if the UK would pay in exchange for bank access, Mr Hammond said: “We will talk about all of these things.”

Juncker: Don’t believe Brexit won’t happen

UK’s no-deal Brexit worries ‘surprise’ EU

Reality Check: Breaking down the deal

Senior executives from the London Stock Exchange will attend the regular meeting at 10 Downing Street along with Mark Tucker, chief executive of insurance group Aviva.

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Ways of applying operational risk management in banks

Because of this, operational risk management in banks is the highest priority for banks.

The banking sector should rank foremost among the many sectors of the economy that have undergone drastic changes in the last couple of decades or so. The convergence of two colossal factors – globalization and the development of technology – has made inroads into the banking sector, impacting it with a force that was seldom seen earlier.

The number one area of the banking sector to be affected by these changes is operations. Many factors such as credit, software, etc. need to be regulated for their risks. However, the core of the banking sector is operations. Because of this, operational risk management in banks is the highest priority for banks.

The Basel Accords

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The primacy of operational risk management in banks can be understood from the fact that one of the most important regulations aimed at the banking sector, the Basel Accords, a series of plans to regulate the banking sectors around the world; has operational risk management in banks on top of its agenda. Operational risk management in banks is one of the four areas identified at the second of these conferences, Basel II, the others being regulations concerning capital allocation, disclosure requirements and regulatory arbitrage.

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Operational risk management in banks according to Basel

The Basel Accord takes a very comprehensive view of operational risk. It describes operational risk as loss that can occur from a variety of reasons, all of which are linked to the core banking structure. The Basel Accord sees risk as something that can happen from any of the operations concerning the bank. It requires operational risk management in banks to take all of these factors into consideration before arriving at solutions to prevent loss from these operations.

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From the Basel Accords perspective, operational risk management in banks need to take into consideration the following events and identify all of these in identifying frauds and losses:

Internal fraud

Any fraud from any of the bank’s employees, insider trading, false reporting of profits are among the kinds of activities listed by Basel as being part of internal fraud.

External fraud

External fraud can happen from a number of sources. It could be robbery, burglary, hacking of security systems or check bounce. These are part of operational risk management in banks.

Employee fraud

Employees can be a major source of bank fraud. Steps towards mitigating actions from employees that endanger the functioning of the bank constitute a major step in operational risk management in banks.

Other kinds of frauds

Operational risk management in banks has to also take other sources of fraud. These can be from wrong entry of accounts, improper documentation for credit or loans, etc.

Ways of applying operational risk management in banks

Basel II has suggested methods which banks can take to apply risk management in their sector. These include:

operationalRiskManagementInBanks

HDFC Bank offers virtual accounts to PayZapp users

Fintech lending is the new kid on the block, which has brought a different way of sourcing customers for loans.

HDFC Bank will soon start offering digital savings bank accounts, credit cards and instant loans to users of its PayZapp app. The bank also plans to enrol additional merchants for acceptance of electronic payments to increase its present network of 1.2 million shops to 5 million in 18 months.

PayZapp, which was launched two years ago, has more than 14 million users. Over half of these are young users who do not have a bank account. “We are marrying a lot of our strategies by integrating changes that are happening in the market into our own business activity.

HDFC Bank is already a scale player in cards and loan assets. We will use our digital back-end strengths in these businesses to bring more scale into PayZapp,” said Parag Rao, group head for marketing, credit cards and payments business.

According to Rao, PayZapp has the potential to become a 50-million customer franchise with capability for instantly opening accounts and offering credit cards and loans.

HDFC Bank is already the market leader in credit cards with over 1 crore in circulation. It currently issues 2.5 lakh new cards every month. The PayZapp platform is expected to take this to 5 lakh a month. The offered savings account will be a completely digital product and the credit cards virtual, with an option to receive the plastic version. The instant loans would be powered by fintech (financial technology). “Fintech lending is the new kid on the block, which has brought a different way of  sourcing customers for loans,” said Rao.

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Ukraine Will Pursue Hard Reforms This Fall, Finance Minister Says

Ukraine’s macroeconomic indicators are good, and Danylyuk has become one of the more convincing reform voices within the government—and someone that Ukraine’s formidable civil society actually respects.

After a week of back-to-back meetings in Washington, Oleksandr Danylyuk is tired. He gladly downs a cup of coffee before we turn on our microphones to discuss Ukraine’s economy. The affable forty-two-year old finance minister is one of the few reformers left in Ukraine’s Cabinet of Ministers and has a reputation as a doer. He’s in town for the International Monetary Fund’s and World Bank’s annual meetings.

When Danylyuk took over after Natalie Jaresko stepped down in April 2016, expectations weren’t high, but he has exceeded everyone’s expectations. My colleague Anders Åslund captured it well: Danylyuk has “turned out to be the reform anchor in a government that has been less committed to reform than the previous government, and he has managed to keep the state finances in good order.”

The former investment banker managed to render elusive value-added tax refunds automatic, which pleases many foreign businesses, and has presided over a period of modest economic growth. In September, Ukraine returned to the international finance markets with the introduction of a $3 billion Eurobond, and analysts expect that there may be more offerings. Ukraine’s macroeconomic indicators are good, and Danylyuk has become one of the more convincing reform voices within the government—and someone that Ukraine’s formidable civil society actually respects.

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When SSARS does and does not Apply to Preparation Engagements

This section has been set out by the Clarity Project of the AICPA’s Accounting and Review Services Committee (ARSC).

The Statement on Standards for Accounting and Review Services (SSARS) is a section of the professional standards set out by The American Institute of CPA’s (AICPA), seeking to review earlier standards for reviewing and compiling financial statements and setting out the terms of engagement between the CPA’s and the parties. This section has been set out by the Clarity Project of the AICPA’s Accounting and Review Services Committee (ARSC). The terms of engagement constitute a principal element of Section 21 of the SSARS.

The AICPA’s Section 21 is a significant improvement over the earlier standard, Section 19. Having come into effect in December 2015; AICPA Section 21 overrides the earlier standards. On its part, Section 19 was considered an improvement over the existing standards that had been getting enacted from 1978. It stressed the importance of the independence of the CPA, in that they should not be part of the board or management of the company whose accounts they are auditing. It also required the CPA to obtain an engagement letter before proceeding to prepare and issue financial statements.

 

Supersedes Section 19

Where Section 21 goes beyond Section 19 is in setting out the clear terms for a new service, that of preparing financial statements. Also, it takes changes brought about by technologies such as the cloud into the accounting profession, into consideration. It sets out these requirements in its four sections, sections 60, 70, 80 and 90. Briefly, these are what these sections represent:

Section 60: Describes the General Principles for Engagements performed in accordance with Statements on Standards for Accounting and Review Services

Section 70: Preparation of Financial Statements

Section 80: Compilation Engagements

Section 90: Review of Financial Statements

The highlight of Section 21 of SSARS is that these sections are clearly demarcated. One prescribed action should follow the other, only after the one taken up is completed. It draws a distinction between, for instance, financial statement preparation and a compilation, which is something that CPA’s have to submit for any financial statement submitted to third parties. In this way, Section 21 is a comprehensive set of regulations.

Complete clarity on Section 21

Want to understand how this section relates to your profession? Want to gain clarity and insights into the ways of the workings of this section? A webinar from Compliance4All, a leading provider of professional trainings for all the areas of regulatory compliance, has all the answers relating to the comprehension and implementation of Section 21 of the SSARS.

At this session, Candace Leuck, who owns Athena Finance Group, Inc., which specializes in strategic planning, distressed entity recovery, valuations, and educational programs; will be the speaker. To register for this highly interesting and valuable webinar, please visit Compilation and Review Updates

Understanding of all aspects of Section 21

The aim of this presentation is to familiarize participants with all the sections of SSARS 21. Participants will be able to understand general requirements for SSARS engagements and learn details of new financial statement preparation engagement requirements. Since Section 21 both supersedes Section 19 and differs from it in many ways, Candace will explain the details pertaining to understanding and implementing Section 21, which includes requirements for engagement letters, requirements for understanding of the client, industry and environment, when SSARS does and does not apply to preparation engagements, attest versus non-attest engagements, reporting requirements, and disclosure requirements.

She will cover the following areas at this webinar:

o  Understand general requirements for SSARS engagements

o  Learn details of new financial statement preparation engagement requirements

o  Review compilation and review engagement requirements

o  Discuss the elimination of “management use only” compilations

o  Understand new formats for compilation and review reports

o  Compare and contrast preparation, compilation and review engagements.

This webinar will be of high use to personnel whose work requires them to implement Section 21 of SSARS, such as Public Accountants, Managerial Accountants, and Financial Accountants.

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