Banking primer pdf

PhD thesis scheduled for publication in December The Seattle University Law Review 36 19 : — Google Scholar. Pellegrina, L. Rahman, A. Journal of Money Laundering Control 16 2 : — Ratha, D.

Simser, J. Journal of Financial Crime 22 2 : — Soudijn, M. Journal of Money Laundering Control 17 2 : — Ana Lucia Coronel. IMF Working Paper. Yeoh, P. Journal of Money Laundering Control 17 3 : — Zdanowicz, J. Review of Law and Economics 5 2 : — The HSBC case study. International Journal of Disclosure and Governance, advance online publication, May 21, ; doi Journal of Financial Regulation and Compliance 23 3 : — Download references. You can also search for this author in PubMed Google Scholar.

Correspondence to Mohammed Ahmad Naheem. This current paper contributes towards a series of banking papers that focus on AML compliance and money laundering within the broader banking and financial services sector. Reprints and Permissions. Money laundering: A primer for banking staff. Community banks need to monitor accounts for cryptocurrency activity.

Engage your risk and compliance officers to establish a process to track and assess crypto asset activities and associated risks. Monitor regulatory and legislative developments. As cryptocurrencies gain wider acceptance, they have caught the attention of regulators and legislators. More guidance and oversight will emerge requiring additional due diligence, ongoing monitoring, or additional controls to appropriately manage and control risk.

For example, the IRS recently released guidance explaining that virtual currency is treated as property for federal income tax purposes. See sidebar for additional developments. Firm up your own long-term digital payments strategy. Cryptocurrencies are part of a larger trend of digital transformation taking place across the financial services industry.

Community banks can be best prepared for the shift by examining their digital strategy, including updating any systems to adapt and handle change. We want to hear from you! Let us know about your experience with cryptocurrencies at your bank.

How are you educating your account holders? Do you have any tips to share? Tell us how ICBA can better equip you to respond to this new dynamic. In , when Facebook announced its plans to introduce a global digital currency, Libra, the move prompted opposition from world leaders and scrutiny from U. As cryptocurrencies become more commonplace, regulatory bodies are now responding with more clarity and rules in a previously legally gray area.

The Office of the Comptroller of the Currency OCC Recognizing that the financial markets are increasingly becoming digitized, the OCC offered guidance in July to national banks and federal savings associations expanding the authority for banks to provide safekeeping services to include custodial services of cryptocurrencies. Banks are very simple, they gather money in the form of deposits then they loan that money back to those same people and collect interest on the loans.

Bank financial statements are a bit strange to look at because we think in terms of ourselves most often. A person's asset might be cash, which deposited at a bank is a liability. A liability to a person such as an auto loan is an asset to a bank. The assets and liabilities are flipped from what you are used to seeing on a normal financial statement. The good news is you only need to learn this once, all banks report in the same manner.

One thing that's interesting about banking is how sticky customers are. For how commodity the bank industry is many banks have what might be considered a moat. Bank switching costs are high, it's very difficult to open and close an account, and most customers don't consider it worth the hassle. I opened an account at a bank a few months back and took my son with me thinking it would be a quick errand.

He's three years old, I could count the time it took to open the account by the number of Dum-Dums he ate while waiting, hint his mother will never know the true tally. I think from start to finish it was about 45 minutes, that time alone is an impediment for customers to switch accounts, not to mention having to switch billpay and auto-draft numbers.

The bank has some issues with bad loans which you'll see in a few minutes, but the valuation is attractive. The bank publishes their annual reports on their website, with the most recent update from the summer. I'm going to use last year's annual report for this example, it's a little outdated, but it doesn't matter much, the principles are universal. The balance sheet Assets Here is the bank's balance sheet as it appears in the annual report:.

The structure of any company's balance sheet is important, small differences on the balance sheet can mean the difference between profit and loss. Starting at the top the first thing you'll notice is cash and cash due from other banks. Banks hold cash and securities against their regulatory capital requirements. An item worth noting with this bank is they have a lot of cash but not many marketable securities. The cash is earning them nothing, where securities might be earning something.

Securities are counted against capital differently than cash, which can drive the composition, all things being equal interest bearing securities are better than cash.

In the notes the bank breaks down their loans into the following categories:. Different investors have different opinions on what the best loan makeup is, but there are a few things to keep in mind. Residential loans have the longest duration meaning a bank is locking in a residential loan rate for a longer term, usually 15 or 30 years.

On the other hand construction and development loans which might have a shorter maturity are much riskier. Commercial loans carry higher rates than residential loans, but have risks as well. Commercial lending is usually in larger amounts, if a commercial loan goes bad one loan could mean a few million dollars in losses, whereas a residential loan might only be a few hundred thousand dollars in losses. The final lines under assets include bank owned real estate, and any assets related to branches they might own or lease.

The number under owned real estate is important to watch, banks are in the business of lending money, not managing properties. A large number here might indicate the bank is a poor lender and underwrote a number of bad loans. I like to scan a bank's liabilities first when initially looking at an investment. A banks funding base is the first indication of profitability. The ideal bank setup is one where the funding base is non-interest bearing deposits that can be re-loaned at much higher rates.

Commercial lending falls under this category, most businesses that borrow from banks are required to keep large deposits in order to secure a credit line. As one walks down the categories of deposits the deposits become more costly. An interest-bearing checking account might pay a small amount of interest whereas a CD pays a might higher interest rate. You'll notice that most of Atlantic's funding comes from interest bearing sources, money market accounts, and CDs. The more interest the bank pays out to depositors the less money available for shareholders.

Finding banks with low cost funding structures is important. The final item to look at on the balance sheet is the capital structure. Atlantic Bancshares has a 7. They did a recent preferred issue in which is seen under the Series AAA heading. If anyone is trying to understand why this bank is a bad investment the capital structure coupled with the losses is the answer. The bank is going to need to undertake costly dilutive preferred or equity offerings in order to meet their regulatory capital requirements.

As the bank continues to lose money the capital ratio will continue to deteriorate, until something changes the outlook is dire. The income statement is where we see the interest mechanics at work. After the bank pays out its depositors, and provisions for losses they are left with their net interest income.

After that is non-interest income, this is where things like overdrafts and one time investment gains are classified. The net interest income plus other income is a sort of gross profit for banks. Out of the remainder the bank pays for operations including salaries, rent, and other costs of doing business. Following those expenses the bank pays taxes if they made a profit and records their profit or loss.

Some investors like to look at what is considered core banking earning power using pre-tax, pre-provision earnings. Striver February 20, at AM. Nate Tobik February 21, at PM. Epa February 20, at AM. Epa February 23, at AM. Anonymous February 24, at AM. Tim Eriksen February 26, at PM. Ted C February 20, at AM. Mikazo February 20, at AM. Wexboy February 20, at PM.

John February 20, at PM. Anonymous February 21, at AM. Anonymous February 22, at AM. Anonymous June 5, at PM. Anonymous February 21, at PM. Thomas Ong February 21, at PM.