BISA Magazine - Quarter 4, 2017 - 26

COMPLIANCE & REGULATORY WATCH

Recommendations
Performing a Model Validation for a
financial institution is clearly not a
simple undertaking. The range of skill
sets needed and the challenges inherent in the process call for a well-organized approach.
Governance
It is highly recommended that the CCO
involve senior management. Final reports should be delivered to the board
of directors or a similar oversight structure, and the firm or internal group
performing the Model Validation must
be clearly independent of the creation
and use of the models.
Regulatory Considerations
The bank's regulators should be consulted periodically concerning plans
for the Model Validation, and the CCO

should develop a network of peers and
consultants that he or she can reach
out to periodically to discuss current
regulatory expectations and findings.
Comprehensive documentation should
be developed to support the Model
Validation and should include: the
statement of work or a document
describing the engagement scope and
specific limitations; bios of the people
participating; a detailed and comprehensive project plan; a written report
with a separate control version documenting the reasons that changes were
made; and work papers.
Qualifications
The qualifications of the firm and the
specific Model Validation team must be
reviewed. The team should be made up
of individuals with the following skills:

* Subject matter expertise in AML and
Sanctions Compliance with strong experience guiding Model Validations.
* Quantitative analysis, ideally with
an appropriate mathematics or statistics degree and a proven record
of experience.
* Technical business analysis,
someone who can evaluate data
from multiple system sources, with
an understanding of the business needs of the AML Compliance Group.
* Project management experience.
Planning
Prior to starting an engagement, the
contract, statement of work or internal
project description must clearly describe that a Model Validation is to be
performed in accordance with OCC and

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26
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Table of Contents for the Digital Edition of BISA Magazine - Quarter 4, 2017