In this month's roundup of top tech news:
BofA data breach, AI importance: Top tech news for February 2024
March 1, 2024 1:39 PM
Adobe Stock and Angus Mordant/Bloomberg
Data breach affects 57,000 Bank of America accounts
Article by Carter Pape
A data breach at Infosys McCamish, a financial software provider, compromised the names, addresses, dates of birth, Social Security numbers and other account information of 57,028 deferred compensation customers whose accounts were serviced by Bank of America.
An unauthorized party — apparently a ransomware group known asLockBit — accessed the customers' information through Infosys McCamish's system, not Bank of America's, according to a letter Infosys McCamish sent to affected customers, published by Maine's attorney general. Bank of America provided standard two-year identity theft protection to the affected customers.
The breach occurred Nov. 3, according to the letter, and Infosys McCamish notified Bank of America about the breach on Nov. 24.
Click here to read the full story.
An unauthorized party — apparently a ransomware group known as
The breach occurred Nov. 3, according to the letter, and Infosys McCamish notified Bank of America about the breach on Nov. 24.
Banking-as-a-service banks: 'There is a reckoning'
Article by Miriam Cross
The quickening waves of consent orders slamming into financial institutions engaged in banking as a service is spurring change among banks who want to get it right.
"The number one takeaway for banks has to be that banking as a service is not the silver bullet many of them thought it would be for deposit gathering," said Jason Henrichs, founder and CEO of community bank consortiumAlloy Labs Alliance . "There is a reckoning that it will involve more investment."
Banks areultimately responsible for the deposit, lending and credit activity their partners engage in. There are also growing concerns about the reliability of third parties that connect banks to fintechs and their promises to offload some of the compliance burden.
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"The number one takeaway for banks has to be that banking as a service is not the silver bullet many of them thought it would be for deposit gathering," said Jason Henrichs, founder and CEO of community bank consortium
Banks are
How BMO merged its technology with Bank of the West's
Article by Miriam Cross
The technology teams at BMO Financial Group were in a form of stasis from the date the bank agreed to buy Bank of the West until the date the deal was approved .
"For 13 months prior to regulatory approval, BMO was doing a ton of work with strategy sessions, but we were still competitors with Bank of the West, so we were not allowed to have any discussion about data," said Angela Sim, the chief technology resiliency, experience and operations officer at BMO. "The moment the regulators gave us the go was prime time for us to move very quickly."
When one bank acquires another, efforts to integrate technology must be put on hold until regulators have given the green light. Once that happens,technological challenges arise that must be solved in a short period of time, from decisions about which systems to keep to how to mitigate problems on conversion day. Although bank M&A dipped in 2023 , the trend shows signs of reversing in 2024 — with or without the blockbuster Capital One-Discover deal — meaning more banks will have to make these same decisions.
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"For 13 months prior to regulatory approval, BMO was doing a ton of work with strategy sessions, but we were still competitors with Bank of the West, so we were not allowed to have any discussion about data," said Angela Sim, the chief technology resiliency, experience and operations officer at BMO. "The moment the regulators gave us the go was prime time for us to move very quickly."
When one bank acquires another, efforts to integrate technology must be put on hold until regulators have given the green light. Once that happens,
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Pig butchering: The scam that hastened a bank's failure
Article by Carter Pape
A report from the government watchdog for the Federal Reserve said in February that Shan Hanes, the CEO of Heartland Tri-State Bank, had fallen victim to a type of investment fraud known as pig butchering, which led his bank to fail in July.
American Banker reported previously that the bank's failure had beenhastened by a scam and that the bank had rapidly borrowed $21 million from an unnamed Federal Home Loan bank. Details on the scam that led to the transactions were unclear until that month, when the Office of Inspector General for the Fed and Consumer Financial Protection Bureau released a report reviewing Heartland Tri-State's failure.
"Heartland Tri-State Bank failed because of alleged fraudulent activity conducted by the bank's chief executive officer (CEO), who initiated a series of wire transfers totaling about $47.1 million of Heartland's funds, among other suspicious activities, as part of an apparent cryptocurrency scheme referred to as 'pig butchering,'" the report said.
Click here to read the full story.
American Banker reported previously that the bank's failure had been
"Heartland Tri-State Bank failed because of alleged fraudulent activity conducted by the bank's chief executive officer (CEO), who initiated a series of wire transfers totaling about $47.1 million of Heartland's funds, among other suspicious activities, as part of an apparent cryptocurrency scheme referred to as 'pig butchering,'" the report said.
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This Virginia bank wants to rewrite the rules for banking as a service
Article by John Reosti
MainStreet Bancshares in Fairfax, Virginia, is taking a do-it-yourself approach to technology at a time when partnerships between banks and fintech firms are getting more complicated.
The $2 billion-asset MainStreet has trumpeted Avenu, its banking-as-a-service subsidiary, as a potential game changer since introducing it more than two years ago. At year-end 2023, MainStreet reported $35.3 million of Avenu deposits, $33.5 million of which were non-interest-bearing. MainStreet is forecasting Avenu will reach its projected breakeven point, $225 million of total deposits, this year.
As predictions go, that's bold. If Avenu hits the target, it will have grown deposits more than 530%. The lion's share of those deposits, moreover, would be non-interest-bearing, helping set MainStreet apart from an industry grappling with increased funding costs. It could also establish the 2-year-old subsidiary as an alternative to the way many banks have pursued embedded banking, through so-called middleware.
Click here to read the full story.
The $2 billion-asset MainStreet has trumpeted Avenu, its banking-as-a-service subsidiary, as a potential game changer since introducing it more than two years ago. At year-end 2023, MainStreet reported $35.3 million of Avenu deposits, $33.5 million of which were non-interest-bearing. MainStreet is forecasting Avenu will reach its projected breakeven point, $225 million of total deposits, this year.
As predictions go, that's bold. If Avenu hits the target, it will have grown deposits more than 530%. The lion's share of those deposits, moreover, would be non-interest-bearing, helping set MainStreet apart from an industry grappling with increased funding costs. It could also establish the 2-year-old subsidiary as an alternative to the way many banks have pursued embedded banking, through so-called middleware.
Andrew Harrer/Bloomberg
Green Dot sets aside $20 million after draft AML order from Fed
Article by Penny Crosman
The bank and fintech Green Dot says it has received a proposed consent order from the Federal Reserve tied to its compliance with anti-money-laundering regulations and other risk management matters that could cost it tens of millions of dollars.
Green Dot has set aside $20 million related to the proposed order, Chief Financial Officer Jess Unruh said on its quarterly earnings call on Feb. 27. The enforcement action, which includes civil money penalties, could end up costing as much as $50 million, according to an 8-K report the company filed the same day.
The company continues to invest in its anti-money-laundering program "to remediate the matters addressed in the proposed consent order, ensure we have market-leading compliance programs and to mitigate and reduce our fraud losses over the long term," Unruh said. "Over time, we believe that this will be a competitive advantage."
Click here to read the full story.
Green Dot has set aside $20 million related to the proposed order, Chief Financial Officer Jess Unruh said on its quarterly earnings call on Feb. 27. The enforcement action, which includes civil money penalties, could end up costing as much as $50 million, according to an 8-K report the company filed the same day.
The company continues to invest in its anti-money-laundering program "to remediate the matters addressed in the proposed consent order, ensure we have market-leading compliance programs and to mitigate and reduce our fraud losses over the long term," Unruh said. "Over time, we believe that this will be a competitive advantage."
The budding promise of tokenization in banking
Article by Miriam Cross
Tokenization in banking is slowly taking off .
JPMorgan Chase and Citigroup are two institutions that have put concrete use cases into action. Some experts think of these efforts as where cloud computing stood in financial services a couple of decades ago.
"You don't necessarily need the cloud to run workflows and process data, but it can make them more efficient and you can scale capacity," said Thomas Olsen, who leads the financial market infrastructure practice at consulting firm Bain. "It's still a slow and painful migration."
Click here to read the full story.
JPMorgan Chase and Citigroup are two institutions that have put concrete use cases into action. Some experts think of these efforts as where cloud computing stood in financial services a couple of decades ago.
"You don't necessarily need the cloud to run workflows and process data, but it can make them more efficient and you can scale capacity," said Thomas Olsen, who leads the financial market infrastructure practice at consulting firm Bain. "It's still a slow and painful migration."
Mario Tama/Photographer: Mario Tama/Getty I
Why Citi is rolling out generative AI to all its developers
Article by Penny Crosman
Like most large banks, Citi is evaluating hundreds of use cases for generative AI, assessing the business impact and risks of each. But it is moving forward quickly on a few.
For instance, the bank will have a road map for rolling out GitHub Copilot to all developers – about 40,000 employees – by mid-April, according to Shadman Zafar, CIO of personal banking and wealth management at Citi and lead for its generative AI work. This should save a lot of time, especially where reusable code can be found within the bank's own repository. Citi is also using generative AI to modernize legacy systems and do first drafts of compliance assessments, among other things.
"I do believe it's a technology that will, in a sustainable way, have a long-term impact on how we do work for a couple of decades to come," Zafar said in an interview.
Click here to read the full story.
For instance, the bank will have a road map for rolling out GitHub Copilot to all developers – about 40,000 employees – by mid-April, according to Shadman Zafar, CIO of personal banking and wealth management at Citi and lead for its generative AI work. This should save a lot of time, especially where reusable code can be found within the bank's own repository. Citi is also using generative AI to modernize legacy systems and do first drafts of compliance assessments, among other things.
"I do believe it's a technology that will, in a sustainable way, have a long-term impact on how we do work for a couple of decades to come," Zafar said in an interview.
JPMorgan Chase, TD draw AI talent through research labs
Article by Penny Crosman
JPMorgan Chase's artificial intelligence research team has published more than 400 papers, far more than any other large bank, according to research conducted by Evident. The group produced 45% of all AI research in banking last year.
"Jamie Dimon went out and said, we're going to be an AI-first bank and we're going to actually be a tech company," said Alexandra Mousavizadeh, founder and CEO of Evident, in an interview. Recognizing that one of the things tech companies have is AI research labs, he hired Manuela Veloso, who had been a Carnegie Mellon University professor since 1992 and who is a "leading brain on AI," to run it.
There are two reasons why AI research labs are important, and why the number of banks doing AI research has jumped from 10 to 40 of the top 50 last year, according to Mousavizadeh.
Click here to read the full story.
"Jamie Dimon went out and said, we're going to be an AI-first bank and we're going to actually be a tech company," said Alexandra Mousavizadeh, founder and CEO of Evident, in an interview. Recognizing that one of the things tech companies have is AI research labs, he hired Manuela Veloso, who had been a Carnegie Mellon University professor since 1992 and who is a "leading brain on AI," to run it.
There are two reasons why AI research labs are important, and why the number of banks doing AI research has jumped from 10 to 40 of the top 50 last year, according to Mousavizadeh.
Photo by Brian Birzer
The rise of the bank chief AI officer
Article by Penny Crosman
The escalated interest in artificial intelligence that OpenAI started over a year ago when it made its ChatGPT public has led to a relatively new C-suite role at banks: the chief AI officer.
This isn't always the exact job title, but at the majority of large banks, someone at the top of the organization is being given responsibility for AI projects. According to the Institute of International Finance, 66% of banks worldwide have a C-suite manager overseeing AI or machine learning. In the U.S., 75% of institutions have already appointed a C-suite manager responsible for AI/machine learning ethics and governance.
Examples of top AI executives include Teresa Heitsenrether, chief data and analytics officer of JPMorgan Chase; Chintan Mehta, CIO for digital, innovation and strategy at Wells Fargo; and Dominic Venturo, chief digital officer at U.S. Bank.
Click here to read the full story.
This isn't always the exact job title, but at the majority of large banks, someone at the top of the organization is being given responsibility for AI projects. According to the Institute of International Finance, 66% of banks worldwide have a C-suite manager overseeing AI or machine learning. In the U.S., 75% of institutions have already appointed a C-suite manager responsible for AI/machine learning ethics and governance.
Examples of top AI executives include Teresa Heitsenrether, chief data and analytics officer of JPMorgan Chase; Chintan Mehta, CIO for digital, innovation and strategy at Wells Fargo; and Dominic Venturo, chief digital officer at U.S. Bank.
