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 model. A model, per...

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 undetected. That’s why...

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 of quality. For...

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...

For many financial institutions, CECL implementation was a heavy lift - one that checked a regulatory compliance box and moved on. But the most effective institutions see CECL as more than an accounting requirement. They see it as a strategic tool. And the best way to ensure that tool is working as intended? A thorough, independent CECL model validation. In this post, we’ll explore how a robust CECL validation adds value far beyond compliance, enhancing reserve precision, reporting clarity,...

Intricate geometric glass ceiling reflecting the sky, creating a mesmerizing pattern of blue squares. Why Model Integrity and Scenario...

In an era marked by rapid interest rate shifts, evolving depositor behavior, and geopolitical uncertainty, financial institutions can no...

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