The Bottom Line - Banking on Security
Banking On Security
Helping you stay ahead of the curve on fraud and theft.
Fraud in the financial services industry has been growing exponentially, not just globally but also within our own communities, companies, and homes. From debit and credit card fraud to the still prevalent issue of wire or check fraud, the threats have become increasingly sophisticated and require a redoubling of vigilance and resistance.
Fraudsters have widened their arsenal beyond simple password stealing and account hacking. Today, they try to exploit our emails, sometimes appearing as familiar or trusted senders. They make casual requests that seem feasible and natural, and they test it all by tracking what we respond to. Phone calls and text messages have also become subject to phishing and impersonation attacks, making no communication medium entirely safe.
But we’re working hard to fight back and provide protective measures that keep your accounts and assets safe. Some of these measures may be visible to you, while others may not.
For example, we’ve instituted regular training and educational sessions for every department that are mandatory and automatically audited to check timeliness and completion. Continuing education and constant internal communications are also used to keep all Country Club Bank associates aware of the latest trends in fraud and abuse. Multi-factor authentication is the standard and is required for all of our internal banking systems as well.
To help you manage risk in your own business, we have multiple verification methods in place for large checks and wire transfers. We routinely flag suspicious transactions so our service centers and relationship managers can conduct personal callbacks or send direct emails. We also have other automated solutions such as Positive Pay for ACH and Checks, that can match your pre-approved transactions with everyday account-clearing activity and highlight any suspicious or unexpected transactions. Our goal is to make sure we have redundant, multiple layers of people and systems that are always watching and ready to alert or defend.
What can you do to improve your company’s risk management profile?
No one solution or best practice can cover all possible scenarios, so it’s important to implement both low-tech and high-tech preventative measures such as:
- Be diligent about keeping account signatories controlled and up to date, and make sure you understand anything you are signing.
- Educate your employees and team members on current fraud trends and preventative measures.
- Implement automated ACH and check validation services such as Positive Pay for Checks, ACHs, and Payables.
- When sending ACH or wire transactions, always verbally verify new or modifications to payee/recipient information using the known contact information.
- Implement a dual control process for the approval of ACH and wire transactions.
Despite these robust measures, it’s important not to forget the key to preventing fraud often lies “between the chair and the keyboard.” Individual associates – in your company as well as ours – play a pivotal role in this battle against fraud.
Everyone can take steps to fortify their defenses by following policies for regular password changes, using password management software, and ensuring workstations are secure. Training, tests, and education also remind team members to never let their guard down. It’s a team effort, and we all need to adopt a proactive stance of caution and prevention.
The fight against fraud is waged on multiple fronts. From implementing advanced technological safeguards to thorough staff training and awareness, it’s a collective effort. We appreciate the trust you’ve placed in us in this effort and promise to do all we can to continue to merit your confidence and protect what you’ve worked so hard to earn.
— Mark Fortino, Chief Operations Officer, Country Club Bank — Member FDIC
Economic Insights
Interest rates are still relatively high. Is there an investment opportunity in the multifamily housing sector?
As we stand at the convergence of a surging stock market, stabilizing inflation, and persistently high interest rates, investors are keenly searching for opportunities that balance risk with growth potential.
One sector that deserves closer examination under these economic conditions is multifamily housing. Since “owner rents” are typically a significant component of overall inflation calculations, we thought it might be good to take a brief look at the trends in this industry and what they could mean to investors.
The stock market's robust performance, particularly in a period where inflation seems to be held at bay, paints a picture of economic optimism. However, the central bank's strategy of maintaining high interest rates (for now) introduces a layer of complexity and creates a nuanced landscape for investment, especially in the multifamily housing market.
Why multifamily housing? Multifamily housing, characterized by rental properties with dozens, hundreds, or even thousands of units, stands out for several reasons:
- Attractive valuations. Most publicly traded multifamily REITs (Real Estate Investment Trusts) are down 30% or more from their peak (some more than 40%). This has been driven by higher interest rates and new supply of multifamily housing (apartments, etc.)
- Resilience. In the last 25 years, vacancy rates have ranged between 5%-9% across the industry (we are around 6% today). We would expect vacancy rates to remain relatively low today as the spread between the monthly cost to own a home vs to rent is at an all-time high (around $2700/mo to buy vs $1850/mo to rent) even exceeding the 2006 housing bubble ($1500/mo to buy vs $1050/mo to rent). This is likely a favorable backdrop for rental demand.
- Supply growth is peaking. Starts (new construction) peaked in mid-2023 as rates were increasing as well as the cost to build. This peak in starts should lead to a peak in deliveries (i.e., finished product) around the middle of this year (2024), with a significant decline in deliveries expected in 2025. Supply growth in the US is expected to peak at a little under 3% in 2024, fall to less than 2% in 2025, and likely decrease further in 2026 (estimates are calling for sub 1.5% supply growth).
Bottom Line: Investors eyeing the multifamily housing market should consider several factors:
- Location. Areas experiencing less supply growth today or slowing supply growth are key. Another consideration is population growth/migration patterns driving higher rental demand.
- Interest rates. Softer fundamentals and higher borrowing costs have negatively affected property values and created buying opportunities.
- Diversification. Including multifamily housing in an investment portfolio offers diversification benefits, mitigating risk by spreading exposure across an asset class with good underpinnings.
Multifamily housing could be an appealing avenue for investors in a landscape marked by a strong stock market, moderating inflation, and elevated interest rates. But it will likely require a longer-term investment horizon since new building activity needs to continue to slow with the Federal Reserve potentially cutting interest rates as a secondary driver to these bond-like investments.
— Marcus Scott, CFA, CFP®, Chief Investment Officer (CIO) for Country Club Trust Company
CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.
Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it authorizes use of by individuals who successfully complete CFP Board's initial and ongoing certification requirements.
The opinions and views expressed herein are those of the author and do not necessarily reflect those of Country Club Trust Company, a division of Country Club Bank, or any affiliate thereof. Information provided is for illustrative and discussion purposes only; should not be considered a recommendation; and is subject to change. Some information provided above may be obtained from outside sources believed to be reliable, but no representation is made as to its accuracy or completeness. Please note that investments involve risk, and that past performance does not guarantee future results.
Please note that the diversification concepts discussed do not necessarily guarantee a profit or eliminate all risks including the potential for loss of principal.
Fraud Prevention Tips
Wire fraud: how to move from detection to prevention.
Payment fraud is rising, presenting a substantial financial and reputational risk to businesses of all sizes and industries. At Country Club Bank, we're dedicated to taking care of your business banking needs so you can focus on your business.
A key aspect of this commitment is our emphasis on risk management literacy and the importance of being vigilant against fraud. In today's landscape, where digital threats are escalating, it's crucial for your business to adopt more robust strategies that bolster resilience against these threats, thereby minimizing the fallout from any potential security breaches.
Ready to develop a more preventative approach to wire fraud prevention? Check out these 3 Key Actions for Wire Fraud Prevention. If you’d like to learn more about other fraud prevention tools, get in touch with us here.
Banking on KC
The latest on fraud and how to safeguard against it
Check out this recent Banking on KC podcast with our own Stephanie Mallory and Sheila Stratton as they offer a comprehensive overview of the fraud landscape, highlight common scams, and provide advice for businesses and consumers to safeguard against these threats. Listen to this fascinating podcast, now.
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