CMS Case Study

C loyd Bank and Trust Risk Assessment Summary 2020-2021

Audit Area

Mobile Banking

Risk Factor

Score

Definition (score range)

High (21-30)

Moderate (11-20)

Low (0-10)

Rationale

Mobile Banking is subject to multiple regulations, including the Bank Secrecy Act, the Gramm-Leach-Bliley Act, and various other regulations from the Federal Reserve Board and the FDIC including FFEIC IT requirements. The Bank should also be in compliance with the Electronic Signatures in Global & National Commerce Act (E Sign Act). Additionally, the Bank has to maintain compliance with the FFIEC's FIL-50-2011.

Regulatory requirements are limited to low-profile regulations and law issues that warrant action but have significantly lower levels of risk. Impact on accurate timely financial reporting is minimal. Likelihood of material financial reporting effect is negligible.

Significant regulatory requirements are evident; however, regulatory expectations are clear, seasoned, and considered routine. Violations if any will be technical in nature. Material financial effect is possible; however, activity is routine and noncomplex and errors would be readily evident in normal operations. Seasoned and complex manual or automated systems are important to management decision making or product delivery; however, collaborating or alternative back-up systems exist. There is no basis for control assessment, or they are thought to be weak.

Potential violations of high profile regulations with potential fines, legal liability or costly corrective action are possible. Material financial misstatement is possible due to incorrect handling of infrequent, complex transactions or estimates. Critical management decisions may be based on these financial areas. Complex manual or automated systems are new, critical to management

Compliance

16

Mobile Banking allows a customer to view account balances and transaction histories, transfer money between their accounts, schedule bills, make deposits with the mobile device and view account statements (only if viewed through mobile browser). Currently, cash management functions such as ACH or wires are not allowed through mobile banking. The risk of a material impact on financial reporting is low.

Nature of Transactions

10

Noncomplex systems and operations are seasoned, with well established back up routines.

The Mobile Banking system (First Data/Apiture) is mature and established. Controls are in place to monitor and reduce risk including password security requirements. The Bank implemented P2P in 2020, utilization has been insignificant.

Nature of Operations

16

decision making, or important to product delivery.

Controls are nonexistent or known to be weak.

Controls are strong or adequate.

Mobile Banking is an additional product of Internet Banking. The customer downloads the Mobile Banking application to their phone or other mobile device to access Mobile Banking. The Mobile Banking application requires the customer to enter his/her Internet Banking ID and password each time the customer logs into the application. There were no issues related to Mobile Banking in the last IT audit.

Internal Controls

10

Changes to systems, processes, or procedures

Minor changes since last audit are anticipated this year.

No changes since last audit are planned this year.

Within the last 12 months the Bank implemented P2P service through mobile banking that allows customers to pay other individuals. The Bank has selected a new core platform, FIS D&A, expected implementation is 2Q2022. The migration to the new core will create significant changes to mobile banking.

Major changes since last audit are anticipated this year or not recently reviewed. Management lacks experience or places low priority on internal controls.

14

Management has average experience.

Management is experienced and has high priority on controls.

Members of management have achieved their positions within the Bank because of their level of knowledge, demonstrated skills, and experience within IT and the banking industry. A strong emphasis is placed on maintaining a sound control environment.

Management

10

76

Risk Score

- 16 -