Validating a US Bank's Internal Fraud Model for submission to Regulators
Client: Global Financial Service Organization
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Objective
Validate a US Bank's model for detecting employees committing consumer-account and credit-card fraud for CCAR submission.
CRISIL's Solution
The CRISIL team performed a comprehensive validation of the model, a simple formula-based scoring model, to identify anomalies based on data grouping using expert judgment. We used the following process:
Data Validation: Validated data sources for their relevance and timeliness, and assessed the quality checks made by the developer;
Conceptual Soundness Check: The model development team was queried on various tested methodologies and assumptions, and assessed the responses qualitatively;
Analysis of Tables and Results: The CRISIL team validated the tables and results provided in the model development document and performed backward computation to check the model's conceptual soundness assessment.
Client Impact
The model was validated and the Internal Fraud Validation Document was completed within the stringent deadline for CCAR submission.
The model was awarded a patent by the US Patents and Trademark Office.
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