International Training & Assistance (ITA)
for Bank Supervisors

Payments Systems and Risks, Session 1

Federal Reserve System Courses

July 23 - July 27, 2018 (Chicago, IL)

Type of Participant Targeted
The Payments Systems and Risks class is a course designed for both safety-and-soundness examiners and information technology (IT) examiners who will be involved in payment systems exams at financial institutions or payment service providers.

Prerequisites
None

Course Overview
The goal of this five-day Payments Systems and Risks course is to introduce key components and key players in the payment domain, explain various channels, networks and systems in the electronic payment systems, discuss how to conduct risk-focused exams on these payment systems based on exam guidelines, and share insights on the future of payment evolution. It also gives participants hands-on training on the technology of Remote Deposit Capture (RDC) and demonstrates back office operation of money transfer in a simulated bank environment.

The class offers a combination of lectures, case studies, instructor demonstrations, and hands-on labs.

Course Objectives
Upon completion of this course, the participant, at a minimum, will be able to demonstrate the following skills:

• Define key components and key players in the payment industry;
• Describe, at a high level, the various payment channels, networks, and systems;
• Describe the risks, mediations, and controls related to various payment types, payment channels, and systems;
• Identify key principles based on exam guidelines;
• Conduct risk-focused payment system exam.

Post-Course Intervention
To reinforce learning after the class, participants should be assigned to complete at least one payment exam for a bank or a payment service provider.

Learning Objectives
Participants develop a solid understanding of payment systems, conduct payment system risk assessment and exam based on FFIEC's related guidance and work program through the following modules.

By module, the following learning objectives will be accomplished:

Module	Learning Objectives( From Participants' Perspective)
How does Money Flow	Discuss purposes and functions of payment systems Identify key players, key components and key processes in the money transfer Discuss, at a high level, the laws and regulations on various payment systems.
Remote Deposit Capture (RDC) Overview	Name the technology components needed to facilitate RDC Discuss areas of potential security weakness in a network architecture that includes RDC List technological controls that should be in place in a typical RDC implementation
RDC Hands-on Labs	Discuss major components that should be a part of the RDC risk management process Explain the segregation of duties that should be in place at both the merchant and the bank which offers RDC services Discuss the reporting and monitoring practices which bank management should maintain over RDC services
Retail Payment Networks	Explain the card network components Explain card products, such as credit card, debit card, prepaid card, gift card, etc. Discuss operational risks, such as credit risk and possible market risk in the products Elaborate Payment Card Industry Data Security Standard (PCI DSS) risk management guidance for card networks and merchants
Wire Transfer and Automatic Clearing House (ACH) Examination	Review the work program and exam guidance on Wire Transfer exam and ACH exam Conduct exam on Fedwire and ACH
Financial Market Utility and Wholesale Payment Networks	Describe functions of financial market utility (FMU) Illustrate potential operational risks associated with FMU, i.e. credit risk, market risk, liquidity risk, etc. Evaluate the risk management practices to mitigate the risks during the exam Understand the functions of wholesale payment networks Describe main players in wholesale payments
Payment Exam Data Analysis and Exam Scoping (PASS Tool)	Learn to use PASS to gather payment exam data Scope the exam based on data analysis
Payment Service Provider Supervision	Understand functions of payment service provider Describe impacts of payment service providers Explain exam focus on the payment service provider
Payment Supervision among Regulators	Describe common FFIEC guidelines on payment exam Compare and contrast various exam guidelines, Advisory Letters from different regulators on payment exam
Mobile Banking and Mobile Payment	Discover various mobile payment channels and their impact on end users Identify potential risk exposure and challenges Evaluate risk controls to support mobile banking and mobile payment
Vendor Audit Reports	Understand the vendor audit report types Understand how vendor audit reports are leveraged on an examination with respect to vendor management
Vendor Audit Reports Lab	Discuss major components of vendor audit reports that should be evaluated as a part of the vendor risk management process Explain the significance of user controls in the context of vendor audit report reliance
Virtual Currency and Risk Watch	Discover the world of virtual currency Elucidate how the virtual currency interact with real money or real transaction Evaluate potential risks
Virtual Currency Lab	Discuss the potential examination scope impact should a regulated financial institution perform transaction processing in virtual currency Discuss potential examination approaches when dealing with virtual currency in a regulated environment
Payment Fraud	Discuss fraud sources and vectors and understand the potential for impact on financial institutions Discuss potential examination approaches for addressing and dealing with fraud in the course of an examination

Instructors
The Payments Systems and Risk course is conducted and supported by a group of professionals, including seasoned examiners, technology architects, and payment exam analysts. Content for the class was developed and updated by the instructor team based on their latest exam experience and payment research.