Empowering Fraud Prevention
LexAlign Solves Remote Operational Risk Management for Financial Institutions
LexAlign’s solution automates the onsite security-and-compliance audit function for high-risk, highly regulated activities like remote check deposits, ACH and wire originations performed by the business customers of financial institutions.
With LexAlign, FIs can show effective and efficient remote operations risk management at scale, reduce fraud that targets customers as the entry point, and even grow non-cash payments beyond the branch footprint.
OPERATIONAL RISK MANAGEMENT
The business customer is now the bank’s front door, and it’s exposed. As a result, we’ve seen an explosion of fraud.
30 years ago, basic banking operations like check deposits, ACH and wire originations occurred in the secure internal bank environment under the purview of control functions. With the technological revolution in banking, those operations now occur in tens of millions of remote SMB locations. The result is a separation of those high-risk, highly regulated operations and the expertise required for security and compliance. This has created a massive opening for fraudsters who recognize that to get at deposits, they no longer need to penetrate the bank: they can simply penetrate or manipulate the customer.
Banks recognize that customers lack the sophistication and resources needed to master the rules, risks, and responsibilities associated with high-risk, highly regulated activities like remote check deposits, ACH and wire originations. They also face the fact that legacy approaches for managing the risk of such remote operations don’t work at scale. Whether they use onsite audits or form questionnaires, banks are expending hundreds or thousands of hours of highly skilled staff time to gather a small subset of the data needed for risk management. In most cases, there is no time left to act on the data they’ve managed to gather.
What’s needed is a way to automate expertise to make it accessible, relevant, and easily actionable for the customer, and to bring information back to the bank in a way that both shows risk management at scale and enables proactive and targeted interventions where warranted by actual risk.
LexAlign was founded by an attorney who helped banks through multiple financial crises. He saw that contributing factors to each crisis were that (1) SMBs were handling traditional banking operations without the expertise required to achieve and demonstrate security and compliance, and (2) banks had no visibility on those remote operations, for which they were ultimately liable.
LexAlign solved this systemic issue by developing a way to convert any set of rules, regulations, and guidance — no matter how complex — into an online diagnostic interview that any business can use to do a self assessment.
LexAlign created a utility that all banks need. The value of insights from the LexAlign data go well beyond compliance risk management, helping identify signs of customer attrition, costly mistakes, and potential legal actions.
The LexAlign “Diagnostics” take less than 30 minutes on average and enable SMBs to determine where their operations deviate from what is required or recommended under applicable rules, regulations, and guidance. By instantly creating customized action plans, policy documents, and procedures, LexAlign effectively makes hard-to-find and hard-to-understand regulatory guidance and related expertise accessible, relevant, and actionable for the customer. At the same time, the bank gets data and scoring that enable proactive, targeted, and efficient risk management at scale.
What lexalign replaces
Before LexAlign, operational risk management was an onerous manual process without benefit to the customer. With LexAlign, business customers are empowered to take control of their risks and meet their regulatory and security responsibilities.
Manual Compliance Audits
Today, financial institutions perform manual compliance audits for their business customers.
With LexAlign:
The compliance audit process is automated.
Expensive Compliance Audits
Today, the cost of compliance audits is prohibitive, and time-intensive manual efforts divert resources from business development.
With LexAlign:
Costs are reduced by up to 90%, liberating resources to focus on business development.
Incomplete Compliance Audits
Today, financial institutions perform compliance audits on a small fraction of their business customers.
With LexAlign:
It’s possible to support 100% of business customers.
DEVELOPMENTS IN FRAUD REQUIRE INVOLVING THE CUSTOMER
LexAlign automates the onsite audit function, enabling risk management of remote customer banking operations for which the bank is ultimately responsible. It enables the layered risk management that regulators expect.
Even with the latest fraud detection technology, losses from fraud are growing exponentially. Clearly, something is missing. Since the customer is the point of entry in the predominant forms of fraud, we need to recruit and empower the customer to be the first layer in preventing fraud. LexAlign automates the way financial institutions address customer audit, training, and support requirements to meet regulatory expectations, improving upon existing fraud detection solutions by helping prevent fraud before it hits the bank — taking risk management from triage to prevention.
LexAlign’s diagnostic assessments derive directly and transparently from regulatory guidance (in the form of exam manuals, institution letters, bulletins, supervisory highlights, summaries to rule changes, etc.), so that what is measured (and risk rated) is how the customer’s operations deviate from those requirements and expectations. In effect, LexAlign has done what has never been done before: making expertise that is essential for security and compliance accessible, relevant, and actionable to the persons actually conducting the activities.
LexAlign automatically creates records that demonstrate superior oversight and risk management of customer operations.
OPERATIONAL VISIBILITY
By using LexAlign, FIs demonstrate alignment with regulatory expectations for managing remote check deposits, ACH and wire originations.
For financial institutions, LexAlign’s solution provides a compliance dashboard containing the critical data banks need to demonstrate proactive, targeted, and effective risk management at scale. That includes customer assessment data, confidence levels, risk scores, details on operations, relevant history, forecasts and trend analysis for each of their customers.
By using LexAlign, banks can clearly demonstrate alignment with regulatory requirements and determine how to use their precious time for the greatest impact in reducing the risk of fraud, other losses, and adverse regulatory outcomes.
PREVENTING CREDIT-PUSH FRAUD
LexAlign addresses the precise vulnerabilities that the criminal enterprises are exploiting: gaps in the customer’s operations, security, training, and sophistication.
Credit-Push Fraud results when a sophisticated criminal enterprise takes over the customer’s account or deceives them via business email compromise or other social engineering, into sending funds to a fraudulent account.
Nacha has called this the now dominant form of fraud across payment channels and is pushing for a New Risk Management Framework for the Era of Credit-Push Fraud. It says:
“Effective end-user education will require new and innovative ways to reach the end users of the payment system. Working together within and beyond the ACH community, participants in the payment system all have roles to play in combatting fraud.”
Like nothing before it, LexAlign uniquely responds to this call by effectively making the customer part of the risk management framework.
LexAlign does this by recruiting the customer to be the front layer in the layered security approach regulators expect by:
- Sensitizing the customer to their vulnerabilities and responsibilities
- Empowering them with targeted and actionable guidance and
- Educating them about their risks while providing them with the foundation for an effective risk management program.
CLIENT TESTIMONIALS
This is what bankers are saying about LexAlign.
Before LexAlign, monitoring customer adherence to their responsibilities related to a high-risk highly regulated service like remote check deposits was extremely difficult and laborious.
LexAlign automates the essential risk management functions, while educating our customers on their responsibilities, and providing them with actionable insights on their operational gaps and remedial guidance.