But it's not a model!!  This might sound obvious to most of us as BSA/AML transaction monitoring systems have been treated as models for years. But every so often, I still run into pushback questioning whether SR 11-7 really applies to these models. ✋ The common pushback sounds familiar: “It’s not really a model”, "there aren't really any calculations", or “back-testing doesn’t apply here.” But the reality is, based on regulatory guidance, it DOES meet the definition of a mod

We all know the saying as it relates to model data: 🚮 garbage in, garbage out 🚮 .  🚨 But when it comes to AML models, the stakes are obviously much higher... Many institutions invest millions in advanced AML systems, yet the models are only as effective as the data feeding them. 🛑 Inaccurate, inconsistent, or incomplete data can inflate false positives, obscure suspicious activity, and drain compliance resources. And even worse, it can leave real financial crime undetecte

The FDIC published its quarterly banking profile for Q1 2025 yesterday. While the report looks "solid" on the surface, once you dive in a bit, the data is not as encouraging.. The banking industry turned in a “good quarter” by the numbers: Earnings up ROA at 1.16% Deposit growth continues Only one bank failed …but if you’ve spent time around balance sheets and risk models, you know that headlines can be deceiving. Earnings: up, but ..... Q1’s profit boost came mostly from non

If your institution relies on vendor models, this might save you from costly missteps and regulatory headaches. 🛑 Model Certifications ≠ Model Validations! Wanted to clarify something for the banks, credit unions, and fintechs out there navigating model risk: A model certification of a vendor model is important and a valuable starting point. It gives users confidence that the core code and calculations perform as intended, under typical conditions. For vendors, it’s a seal o

Let’s be real - no one really gets too excited about a model validation. For many model owners, it can feel like a frustrating drain on...

Now that I’ve launched my own firm, ValuRisk Partners, I’ve been reflecting on some of the lessons that have shaped how I approach model...

In today’s highly regulated and data-driven financial environment, models are at the heart of decision-making, from credit underwriting...