Objective

A US-based financial institution needed to validate its wire payment fraud detection model for strategy purposes and CCAR submission. The objective of the engagement was to validate the bank’s model for two large US portfolios and provide a decision on the model’s use by the bank.

CRISIL’s Solution

CRISIL GR&RS performed validation of the wire payment fraud detection model. This involved:

• Reviewing all documents submitted for validation and assessing whether more information was required from stakeholders;
• Holding regular discussions with stakeholders of the model to ensure that all ambiguities in their reports were removed;
  
• Thoroughly studying the model white paper and other documents and research articles relevant to the understanding of the model;
  
• Reviewing all previous tests done by the developers for evaluating the model’s performance;
  
• Prescribing performance tests other than those done by the model developer and reviewing results.

As a result of our comprehensive analysis, we determined that the existing model was not performing well. The CRISIL team suggested new performance metrics to evaluate the model and gave a variety of suggestions to enhance the quality of the model documentation.

Client Impact

• The model was validated in a very short time and on schedule.
  
• CRISIL GR&RS provided insights for future model use.
  
• The client received a thorough validation document for CCAR submission.
  

Questions

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