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311 special measures

On November 13, 2025, the Financial Crimes Enforcement Network (FinCEN) issued a finding and notice of proposed rulemaking (NPRM) that includes the use of 311 special measures against several Mexican casinos, identifying them as foreign financial institutions of primary money laundering concern. According to FinCEN, these casinos are being exploited by organized crime groups to launder drug trafficking proceeds and other illicit funds for the Mexican Sinaloa Cartel, a major supplier of deadly fentanyl in the United States. Although 311 special measures are rarely issued, they are reserved for the most serious money laundering and national security threats and should not be taken lightly.

So, what exactly are 311 special measures? For community banks and credit unions, understanding how 311 special measures work and preparing for their potential impact has never been more critical. Although special measures are not often used by FinCEN, when issued, they can have a significant effect on banking relationships, customer due diligence processes, and your overall AML compliance program.

What are 311 special measures?

Authorized under Section 311 of the USA PATRIOT Act, 311 special measures allow the U.S. Department of the Treasury, through FinCEN, to apply targeted regulatory restrictions to foreign entities or jurisdictions believed to pose significant money laundering risks. Special measures are discussed thoroughly in the Federal Financial Institutions Examination Council (FFIEC) BSA/AML Examination Manual.

These special measures escalate in severity and include:

  1. Requiring additional recordkeeping and reporting on specific transactions.
  2. Obtaining information on beneficial ownership of certain accounts.
  3. Heightened due diligence on payable-through accounts.
  4. Collecting information on foreign financial institutions tied to correspondent accounts.
  5. Prohibiting U.S. financial institutions from opening or maintaining correspondent or payable-through accounts with the designated party.

In the recent case of Mexican casinos, FinCEN proposed the fifth and most severe special measure. If finalized, U.S. banks and credit unions would be prohibited from maintaining any direct or indirect financial relationships with the casinos, including transaction processing. For institutions involved in cross-border transactions, the implications are immediate and significant.

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Why these designations matter to community financial institutions

Even if your institution does not knowingly bank casinos or offer international services, the ripple effects of a 311 special measures designation can reach you. For example, a business customer with ties to Mexico could inadvertently transfer funds through accounts associated with a designated casino. If your AML systems are not configured to detect these linkages, your institution may face exposure.

These risks increase in institutions offering:

  • Wire transfers involving foreign counterparties
  • Correspondent banking relationships
  • High-risk customer types, such as money service businesses or cash-intensive operations

In these cases, failing to monitor transactions against the backdrop of a 311 designation could result in regulatory scrutiny or missed opportunities to file timely suspicious activity reports (SARs).

 

FinCEN’s concerns around the Mexican casinos

FinCEN’s November notice cited evidence that certain casinos and gambling businesses in Mexico were being used to integrate proceeds from drug trafficking, corruption, and human smuggling into the formal financial system. These casinos reportedly allowed third parties to deposit and withdraw funds in others’ names, lacked adequate AML controls, and showed repeated patterns of activity consistent with bulk cash smuggling and value layering.

This behavior highlights a broader trend: bad actors are increasingly utilizing complex, cross-border financial networks to conceal the origins of illicit funds. For AML compliance teams, it’s a stark reminder that your institution’s risk assessment must account for international designations, even if you don’t operate abroad.

Get a free AI readiness checklist and other resources on Abrigo's AI Hub.

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Responding to 311 special measures

Preparing for 311 designations begins with proactive risk management. Institutions should ensure their AML/CFT programs can adapt quickly when FinCEN issues new advisories. Consider the following actions:

  • Update your customer due diligence (CDD) program to flag relationships that may intersect with jurisdictions or industries affected by relevant regulations.
  • Review and revise transaction monitoring scenarios to include geographic risk indicators tied to new 311 designations, such as regions in Mexico with known cartel activity.
  • Train AML and fraud teams on recent designations and the operational impact of the five levels of special measures.
  • Document your institution’s response plan, including internal communication strategies and escalation procedures for potential exposure.

Institutions that demonstrate to regulators their preparedness to respond quickly and effectively to FinCEN’s use of 311 special measures reinforce their commitment to compliance and reduce reputational risk.

Beyond compliance

While 311 designations may seem punitive, they can also be used as a catalyst to evaluate your institution’s overall financial crime risk strategy. FinCEN’s action against the Mexican casinos highlights the need for robust internal controls, not only to comply with regulations, but to protect your institution from being an unwitting conduit for criminal activity.

These designations can also serve as a valuable training opportunity. Use real-world examples, like the Mexican casino case, to conduct tabletop exercises or scenario testing. What would happen if your institution discovered a customer sending wires to one of the named casinos? Would your staff recognize the risk? Would you file a SAR?

By aligning your AML efforts with FinCEN’s enforcement priorities, you build credibility with regulators and position your institution as a stronghold against illicit finance.

Stay vigilant

FinCEN may not use 311 designations often, but when they do, they matter. Financial institutions must closely monitor these actions because they often signal shifting regulatory priorities and geopolitical developments with direct consequences for risk assessments, due diligence, and monitoring programs.

FinCEN’s use of 311 special measures is a reminder that compliance is not static. Financial crime risks shift rapidly, and institutions must be equipped to adjust their policies, systems, and staff training in real-time. By understanding the implications of 311 actions, like those targeting Mexican casinos, and acting accordingly, financial institutions can strengthen their compliance posture and protect their customers and communities.

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Data center equipment finance is the next frontier for equipment lessors 

The rapid expansion of artificial intelligence (AI) is accelerating demand for energy-intensive infrastructure, and data centers are at the heart of it. As workloads grow more complex and computing-intensive, the supporting equipment becomes increasingly expensive and requires financing. Read on to learn how financial institutions can better manage these specialized assets. 

What’s driving the data center equipment boom: AI’s rising energy demands 

It's no secret that the equipment finance sector is picking up steam. A McKinsey analysis shows that by 2030, companies will invest almost $7 trillion in capital expenditures on data center infrastructure globally, and AI is a driving force behind the surge in data center development. From training large language models to running machine learning inference at scale, AI systems require immense computing power. The servers must be kept operational 24/7, which means power infrastructure, cooling systems, and redundant energy sources must be designed into every facility from the start. 

This combination of high costs and specialized equipment makes data center equipment leasing a preferred financing option. It spreads capital outlays over time while enabling operators to scale capacity without compromising liquidity or flexibility. Data center financings in the United States were $30 billion in 2024, and according to S&P Global, data center and AI-related investments accounted for 80% of U.S. private domestic demand growth in the first half of 2025. Equipment lenders have a timely opportunity to support this market through flexible data center equipment lease structures that align with long-term technology needs.  

Learn how to tap into the equipment financing opportunity in during this webinar.

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What can be financed in a data center? 

Data centers are not monolithic. Each facility consists of multiple layers of equipment and infrastructure, much of which qualifies for equipment leasing. Common leased assets include: 

  • Core IT infrastructure: Servers, racks, cabling, and uninterruptible power supplies (UPS) 
  • Cooling and HVAC: Chillers, aisle containment systems, precision cooling, fans 
  • Power and electrical: Switchgear, electrical panels, transformers, and power distribution units (PDUs) 
  • Energy systems: Battery energy storage systems (BESS), backup generators, and solar PV installations 

In short, every layer that keeps a data center running can be part of a data center equipment lease structure, especially in greenfield or retrofit projects. With assets varying widely in useful life and depreciation schedules, tracking and managing these elements becomes a critical need. 

Why managing data center leases requires specialized systems 

As the market for data center equipment lease transactions grows, many leasing institutions face a familiar challenge: legacy systems or spreadsheets can’t scale.

In the equipment leasing field, manual processes can create bottlenecks. These complex deals often involve: 

  • Mixed-term schedules and asset-level detail 
  • Usage-based billing or variable pricing 
  • Complex tax treatment or bonus depreciation 
  • Residual value planning across multiple asset types 

Tracking this data manually introduces risk and inefficiency. Without systematized visibility into asset performance, end-of-term planning, or lease obligations, lessors may struggle to meet internal targets or customer expectations. 

Specialized lease management software built with energy-heavy portfolios in mind can solve this complexity by automating workflows around invoicing, depreciation, and reporting at the asset level. For example, IFS LeaseWorks provides an end-to-end platform for originating, servicing, and reporting on complex leases—particularly in sectors like data centers where assets are high-cost, high-usage, and diverse. The platform’s strength lies in its ability to handle lease portfolios with: 

  • Detailed asset hierarchies (e.g., power, cooling, IT components) 
  • Variable-rate billing and usage tracking 
  • Tax-advantaged lease structures, including FMV and bonus depreciation options 
  • Advanced reporting for investors, tax partners, and regulatory needs 

Whether financing a mobile data center fleet or structuring a lease around custom-built cooling systems, IFS LeaseWorks helps lessors manage every phase of the data center equipment lease lifecycle. 

Where data center leasing is growing fastest 

According to a CBRE report, Texas and Sun Belt states are leading the next wave of data center development. These regions offer favorable conditions, including: 

  • Lower energy costs and access to renewable energy 
  • Available land and favorable permitting environments 
  • Proximity to emerging AI and tech hubs 
  • Growing demand from both hyperscalers and enterprise users 

In states like Texas, modular data centers, edge facilities, and retrofit projects are gaining momentum, and financing plays a central role. For institutions positioned to support these transactions, having the right system to manage the data center equipment lease portfolio is a profitable advantage. 

 

This article was was written with the assistance of ChatGPT, an AI large language model, and was reviewed and revised by Abrigo's subject-matter expert.

See how IFS LeaseWorks streamlines origination, servicing, and reporting for energy-heavy equipment portfolios.

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How financial institutions can help customers avoid seasonal scams

The holidays are a time for celebration, generosity, and connection, but unfortunately, they also create the perfect conditions for fraudsters to strike. With increased spending, travel, and online activity, criminals often exploit distracted consumers and capitalize on seasonal vulnerabilities. Read what financial institutions can do to protect their clients during this high-risk season.

Share these fraud prevention tips with your customers and members

According to a 2025 study by J.D. Power, 61% of consumers are concerned about fraud during the holiday season. Nearly one in three Americans reported financial fraud within the past year, making proactive communication more critical than ever.

Financial institutions have a prime opportunity to help by offering guidance and educating their customers on making safer choices. Here are three holiday fraud prevention tips institutions should share with clients, along with steps to take if fraud occurs.

  1. Choose credit over debit and turn on transaction alerts

One of the easiest ways to reduce fraud risk is to use a credit card instead of a debit card for purchases. Credit cards typically offer stronger consumer protection, and unlike a debit card, they don’t allow fraudsters to access funds from a checking account immediately.

Encourage clients to take it a step further by enabling real-time alerts via text or email. These notifications help account holders identify unfamiliar charges promptly and take action before further damage is incurred.

  1. Shop smart online and stay cautious with Wi-Fi

Online shopping is convenient, but it’s also where many fraud attempts originate. Financial institutions can support holiday fraud prevention efforts by reminding clients about online safety:

  • Shop only on secure websites (look for “https://” and the padlock icon).
  • Avoid entering sensitive data on public Wi-Fi networks.
  • Be skeptical of social media ads or “too good to be true” deals.

This time of year also sees an uptick in phishing messages posing as delivery notices or retailer updates. Advise clients not to click on links in emails or text messages, especially those urging immediate action. Instead, recommend visiting official sites directly or using apps from known retailers.

When purchasing gift cards, it’s best to buy directly from the source. Fraudsters know how to compromise cards on public racks, leaving buyers with a $0 balance.

  1. Watch transactions, secure passwords, and protect physical cards

Remind clients that fraud doesn’t always come in large amounts. Criminals often test stolen data with small charges first. Checking account activity regularly, especially during the holidays, is a powerful line of defense.

Other critical reminders:

  • Use strong, unique passwords for banking and payment apps.
  • Turn on multi-factor authentication (MFA) for added security where available.
  • Shield PINs at checkout and stay alert for skimming devices at ATMs and card readers.
  • Keep wallets and purses secure, especially in crowded stores or public transit, where distractions and tight spaces can make it easier for pickpockets or card scanners to access personal and financial information without detection.

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Don’t let good intentions lead to charity fraud

The holiday season is also a time when many consumers give back to their communities. However, as charitable donations increase, so do scams designed to exploit that generosity.

Help clients avoid charity fraud with these best practices:

  • Verify before donating. Use trusted platforms like Charity Navigator or the IRS’s nonprofit search tool.
  • Watch for high-pressure tactics. Legitimate organizations won’t demand immediate donations or request personal financial information.
  • Avoid donating via gift cards, wire transfers, or cryptocurrency. These are red flags for scams.
  • Go directly to the charity’s website. Phishing emails or fake sites can easily mimic reputable causes.

Providing consumers with simple tools to give wisely not only protects them but also strengthens their trust in their financial institution.

What to do if fraud is suspected

If consumers suspect fraud, quick action is essential. Institutions can help by sharing a simple fraud response checklist:

  1. Contact the financial institution immediately. Cards can be frozen or replaced, and investigations can be initiated quickly.
  2. Check for other unauthorized transactions. Review recent activity for unusual or small charges that may indicate further risk.
  3. Change passwords and enable MFA, especially on accounts tied to banking or payments.
  4. Report the scam. Encourage consumers to report incidents to the FBI's Internet Crime Complaint Center (IC3) and local law enforcement. Keep documentation, such as screenshots and messages, to support your claims.

 

Make holiday fraud prevention a priority

Holiday fraud prevention isn't just about protecting accounts; it’s about preserving trust. By sharing practical and timely information, financial institutions can help consumers make informed decisions while demonstrating that their well-being is a top priority.

This season, proactive education and strong internal controls can help reduce fraud-related losses and reinforce your institution’s role as a trusted advisor and partner.

 

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Understanding the new SAR FAQs

On October 9, 2025, the Financial Crimes Enforcement Network (FinCEN) issued a set of new Suspicious Activity Report (SAR) FAQs designed to reduce confusion surrounding reporting.  As financial crime threats evolve and examiners sharpen their focus, institutions must stay current with guidance that shapes SAR compliance expectations.  

SAR reporting has long been a contentious undertaking for financial institutions, primarily driven by high regulatory expectations. For banks and credit unions seeking to maintain efficient, risk-based programs, the FAQs serve as a welcome resource that can help teams avoid unnecessary filings and enhance SAR quality.

Why new SAR FAQs

The new SAR FAQs reflect FinCEN's intent to prioritize quality over quantity in SARs, ensuring that institutions allocate their resources to efforts that provide law enforcement and national security agencies with critical information. Due to past regulatory expectations, many institutions have taken an overly cautious approach to SAR filing, which can stretch compliance resources and mask truly high-risk activity.

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Key clarifications

The FAQs provide helpful insight into several SAR-related topics. Here are some key takeaways:

  • Structuring determination is not based solely on dollar amounts

Financial institutions are not required to file a SAR solely because a transaction or series of transactions is conducted at or near the $10,000 currency transaction report (CTR) threshold. A SAR is only required when the institution knows or suspects that the activity is intended to structure transactions or otherwise evade BSA reporting requirements. The obligation to detect and report structuring should be guided by a risk-based AML/CFT program tailored to the institution's products, services, and risk exposure, rather than solely by transaction size.

  • Continuing SARs don't always require a review

Financial institutions are not required to conduct a separate review of a customer or account solely to determine whether suspicious activity has continued after a SAR has been filed. Instead, institutions may rely on their risk-based policies and procedures to monitor for continuing suspicious activity. This clarification helps reduce unnecessary workload and supports more efficient use of AML resources.

  • Timeline for continuing activity SARs

Financial institutions may choose to follow the previously suggested timeline of 120 days after prior SAR filing to report continuing suspicious activity, although doing so is not mandatory. Financial institutions may file continuing SARs based on their risk-based policies and applicable timelines, provided they are reasonable and support accurate reporting.

  • No SAR decision documentation

Financial institutions are not required to document the decision not to file a SAR; it is not mandated under the Bank Secrecy Act or its implementing regulations. Institutions that choose to document their decision may tailor the level of detail to the nature and complexity of the activity being reviewed. In most cases, a brief, concise note is sufficient and should align with the institution's risk-based policies and procedures. For more complex investigations, additional context may be appropriate to support the decision.

Reassessing alert thresholds

Not every alert or internal review warrants a SAR. Financial institutions should review their current alert thresholds and rules within transaction monitoring systems. If thresholds are set too low, investigators may spend time reviewing activities that do not present a real risk, ultimately weakening the effectiveness of the compliance program.

By using above-the-line/below-the-line testing and tuning thresholds based on institution-specific risk profiles, compliance teams can focus their time and resources on truly suspicious activity. This adjustment also supports examiners' expectations around having a risk-based, rather than volume-based, AML/CFT program.

 

Improving SAR quality

FinCEN has consistently emphasized that the SAR narrative is the most critical part of a SAR, encouraging institutions to present facts in a clear, chronological, and objective manner. Narratives that are too vague, overly technical, or speculative can impede law enforcement's ability to act effectively.

Institutions should ensure that their SAR drafting process includes peer review, standardized templates, and clear documentation of the facts that support the basis for suspicion. Narrative training and periodic quality control reviews can also raise the overall standard, helping to ensure that SARs tell the whole story and withstand examiner scrutiny.

Enhancing employee training

Frontline staff and internal stakeholders play a crucial role in identifying and escalating suspicious activity, serving as the foundation of an effective AML/CFT program.

Regular training should go beyond compliance checklists to include scenario-based learning that reinforces what constitutes suspicious behavior, how to escalate concerns appropriately, and what documentation is required. Training should also clarify the distinction between activities that warrant a SAR and those that require internal documentation or enhanced due diligence.

AML/CFT Officers should also consider conducting targeted refresher training for staff in high-risk departments, such as those involved in wire transfers, new account openings, or customer service.

Evaluating technology

Effective suspicious activity monitoring depends not only on human judgment but also on the quality of the tools supporting compliance teams. Financial institutions should ask whether their current systems support accurate risk detection, clear case documentation, and flexible reporting. Systems should enable investigators to attach supporting evidence, track disposition decisions, and generate audit-ready documentation.

Questions to assess your institution's readiness

As your team adapts to the new SAR FAQs, these questions can help identify whether your SAR processes are aligned with FinCEN's clarified expectations, and where adjustments may be needed:

Are we filing SARs where no true suspicion exists?

  • Over-filing can be a red flag to regulators and a drain on resources. Institutions should reassess whether their current policies encourage the filing of defensive SARs, rather than relying on a documented, reasonable basis for suspicion. Reviewing recent filings for trends in non-critical SARs can help recalibrate internal thresholds and staff judgment.

Are our narratives consistent, factual, and examiner-ready?

  • A SAR may meet the technical filing requirement but fall short in its usefulness if the narrative is unclear, disorganized, or overly speculative. Ask whether your team has a standard narrative format and whether SARs are consistently reviewed for accuracy, grammar, and logical flow before submission.

Are we clear on the difference between due diligence and suspicious activity?

  • FinCEN's FAQs emphasize that not all investigations result in a SAR. A clear internal distinction between routine enhanced due diligence and activity that truly crosses the suspicion threshold can prevent unnecessary filings while still documenting institutional oversight.

Are we using compliance resources wisely?

  • False positives create alert fatigue and limit your team's ability to focus on higher-risk cases. Consider whether your current rules and thresholds are aligned with your institution's risk appetite, and whether automation or advisory support could help sharpen your focus.

Modernizing AML programs

With staffing resources stretched thin, many institutions are exploring how automation and intelligent alerts can improve SAR program performance. Tools like Abrigo Fraud Detection and BAM+ are designed to reduce false positives and provide better visibility into transaction behavior, enabling institutions to focus on higher-risk activity.

These solutions utilize behavior-based modeling, cross-channel analysis, and configurable thresholds to identify suspicious trends with greater precision. Built-in case management tools support detailed, audit-friendly SAR documentation, while flexible workflows empower investigators to confidently escalate or close alerts.

Reset your SAR program

FinCEN's new SAR FAQs aren't just technical clarifications; they are an opportunity to reset your institution's approach to SAR reporting. By aligning your internal policies, training, and systems with this updated guidance, your institution can reduce regulatory risk, preserve valuable staff time, and ensure that SAR filings deliver the intelligence they're meant to.

 

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Banking technology enablement relies on leadership 

Financial institutions that realize their return on technology investment take steps to operationalize and enable software use. Learn strategies to help banking software users.

How to help staff get the most out of banking technology

Once a financial institution successfully goes live with its banking technology investment, how can leaders help staff fully realize the solution’s potential?

I’ve had the privilege of supporting banking software implementations that drive real change and return on investment. And I’ve realized that often, when platforms don’t live up to expectations, it’s not because the technology failed but because institutions didn’t fully enable users and encourage continuous improvement and ongoing adoption.

Need help with technology adoption at your institution? We can help.

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Managing technology change effectively

Institutions that consistently realize ROI do a few things differently:

  • They manage software enhancements or updates with intent.
  • They build internal champions by finding ways for users to surface their favorite features so peers hear about them.
  • They create space for staff to find ways to optimize their processes and workflows.
  • They communicate change in ways that drive confidence rather than confusion.
  • They recognize and celebrate small improvements

This blog blends change management strategies I’ve seen succeed with enablement insights shared by some of Abrigo’s most experienced users. These professionals are super users of Abrigo loan origination software, and their institutions have demonstrated notable success in adopting and operationalizing technology.

Special thanks to the following leaders for sharing their hard-earned advice and tactical guidance during our annual ThinkBIG conference:

  • Clara Boggs, VP & Sageworks Administrator, OakStar Bank
  • Douglas Turner, Senior Loan Systems Administrator, First Commonwealth Bank
  • Rebecca Russell, Senior Credit Officer, AVP, West Plains Bank and Trust Company

They described change management practices that apply across various banking platforms, including lending and onboarding, as well as treasury, risk, and compliance. And they reinforced the idea that sustainable ROI doesn’t come from the software alone. It comes from leaders like them, process improvement, and a commitment to learning what works.

Here are five strategies to boost software enablement and operationalization:

Treat enhancements like your competitive advantage, not a distraction.

The pace of banking software enhancements is staggering. At Abrigo alone, we could roll out anywhere from a few enhancements to dozens of changes to our solutions in any given month. These enhancements vary from straightforward upgrades of dynamic forms to more complex workflows, and all of these changes are aimed at helping users do their jobs more easily, efficiently, and compliantly.

Are you systematically taking advantage of new capabilities? Understandably, keeping up with and using new features can be tough when staff are extra busy or shorthanded. Some solutions?

  • Have one power user check the product update notices and review them with the admin or leadership.
  • Keep a simple “change tracker” spreadsheet to monitor what’s new and what’s next.
  • Build feedback loops between front‑line users and admins to accelerate adoption.

Pro tip: Group enhancements by quarter to avoid change fatigue, align rollout messaging, and encourage adoption with purpose.

 

Capture and act on user input consistently

Front-line users are your best source of truth about what’s working and what isn’t. If the institution has numerous users, create a feedback loop to regularly understand what features they can’t live without, or which save the most time.

Join any networking and resource portal hosted by your software provider. For example, Abrigo Community, a networking and resource portal for customers, has 95,000 monthly users, product-specific discussion groups, and reams of product resources to help users learn about shortcuts and features initially overlooked.

Pro tip: Interactions with other users can make your job easier. Treat their tips and enhancements not as “more to learn,” but as steps toward improvements in efficiency and satisfaction.

 

Make workflow optimization part of the culture

Every extra click, rekeyed field, or manual workaround adds cost and introduces risk. But it can be challenging to slow down long enough to ask if certain steps are still necessary.

The most successful institutions make time to get a better handle on processes that are chewing up valuable time. One Abrigo team built a step-by-step process map organized by role and time spent, and they linked it to the corresponding hourly wage. The result was a clear “cost to process” view that justified fees, informed staffing, and clarified ROI. Another invited a fresh set of eyes (a new hire) to audit workflows. That outsider lens helped eliminate redundancies without sacrificing quality.

Pro tip: Host a “workflow audit week.” Crowdsource inefficiencies from power users and new users alike, then close the loop with fast fixes.


Activate integrations that eliminate manual work

Often, a software provider will offer integrations with third parties and partners to generate even greater functionality within the original solution. These integrations may mean a better user experience, a faster process, or inefficiencies removed. The gains from reducing “swivel-chair time” can be significant, especially in lending, compliance, and onboarding.

Partner integrations that pull key third-party data into the application and workflow, such as credit data and flood determinations, reduce keystrokes and errors. Document preparation systems also eliminate rekeying, and vehicle/asset valuation data and industry intelligence tools can deepen borrower or customer insight. Sometimes the institution already has access to an integration but hasn’t turned it on.

Inventory the integrations available in your platform and assess usage. Make sure to prioritize connections that can reduce turnaround time or errors.

Pro tip: Talk to your Client Success Manager. You might be one toggle away from unlocking major efficiency.

 

Celebrate small wins that add up

Organizations tend to celebrate the fireworks—shorter cycle times and smoother compliance, but the small wins that compound effort deserve equal fanfare.

Consider the “small wins” that have made a major difference. Some not-so-obvious metrics to consider tracking include:

  • Touches per item/handoffs eliminated
  • Workflows centralized across work areas
  • Feature utilization and login frequency
  • Customer effort score
  • Staff satisfaction with tools

Pro tip: Periodically recognize what you’re doing differently that’s helping management, clients, and teammates, and lock those gains in your playbook. Reporting the wins to the team helps connect the dots between software spend and strategic outcomes. It also reinforces the behaviors that drive ROI.

 

It’s never too late to start small

Technology only becomes transformational when it’s operationalized with care.

The institutions that unlock the full value of their banking software build routines, communication structures, and cultures of improvement around those tools. That’s how they create measurable ROI, quarter after quarter.

If you’re not seeing the return you expected from your technology investments, it’s not too late. Start small. Pick one workflow to improve. Stand up a feedback loop. Communicate the change clearly. Then build from there.

The path from license to value is paved with intention.

Read tips for leading a successful banking software implementation.

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Recognize risks & opportunities  

Banks and credit unions can manage construction lending risks by understanding where today’s risks originate and how to mitigate their impact.

Key topics covered in this post: 

Changing construction lending conditions

In today’s construction market, it can feel like everyone is building on shifting sands.

Rising costs, labor challenges, and economic crosswinds continue to test even well-planned projects. For financial institutions, lending opportunities are growing, but managing construction lending risks requires a firmer footing and sharper tools to adapt before cracks appear.

By understanding where today’s construction lending risks originate and how to mitigate their impact, banks and credit unions can grow safely while strengthening borrower relationships along the way.

Watch the full webinar, "Construction industry trends for lenders."

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What are the current risks to construction lenders?

The construction industry continues to show cautious optimism, but sentiment surveys and lender experiences reveal headwinds that should be on every lender’s radar.

“The beauty of the construction industry is there are always going to be opportunities; there are always going to be projects,” said Brian Kassalen, CPA, CFF, CCIFP, and Construction Industry Practice Leader at Baker Tilly, during a recent webinar hosted by Abrigo. Specifically, Baker Tilly is seeing new projects in civil infrastructure, power generation, data centers, educational and institutional health care facilities.

At the same time, he said, many of the thousands of contractors nationwide are dealing with persistent labor shortages and pressures in material costs.

Industry indexes, such as the CFMA Confindex and the FMI Nonresidential Construction Index, both reflect this cautious optimism, showing improvement in current backlogs but concern about the future pipeline, profit margins, and financing conditions. A poll of lenders attending  Abrigo's webinar found most are cautiously  optimistic about the construction industry outlook.Poll results from construction lenders on their outlook for the construction industry

Among the most pressing risks for lenders, according to Kassalen:

  • Tariff and material price volatility: Shifts in input costs affect contractors’ ability to bid accurately and complete jobs profitably.
  • Cash flow timing: Contractors often pay vendors and crews faster than they receive payment, increasing the likelihood of liquidity challenges.
  • Project cost overruns: Whether due to under-scoped budgets or rising labor costs, these overruns can reduce or eliminate a borrower’s profit margin.
  • Uncertain economic indicators: Although some backlogs are growing, indexes show that confidence in both the U.S. and local economies is mixed, and signs of a slowdown are surfacing.

Abrigo's poll identified concerns related to pricing and project overruns.

Abrigo poll of lenders regarding concerns with construction lending

How can lenders guard against surprises?

Construction loan performance depends on numerous variables that can fluctuate during the course of a project. Lenders can’t control market conditions, but they can put strategies in place to anticipate changes and respond quickly. These steps don’t just manage risk—they demonstrate value to the borrower and build long-term trust.

Here are four ways lenders can proactively manage construction lending risks:

  1. Maintain regular borrower check-ins

When the lending relationship goes quiet between draws, lenders lose visibility into what’s really happening on the project. Frequent touchpoints, such as those tied to inspection or budget review milestones, can reveal concerns early, including subcontractor delays or cost overruns. In addition, Kassalen noted that a lot of construction contractors still appreciate in-person interactions and connections, so leaning into personal contact can solidify the relationship.

  1. Support borrower cash flow visibility

One of the key pain points for contractors is balancing their payables with receivables. Sharing treasury management tools or connecting them with financial advisors who can help them model cash flow projections is a practical way to strengthen the relationship and improve project stability. “What I think is most important is really just bringing solutions to your construction clients,” Kassalen said.

  1. Review contractor experience and project history

While lenders typically vet borrowers during underwriting, it’s worth refreshing that knowledge as new projects are proposed. Contractors operating in unfamiliar markets or taking on unusually complex jobs may face steeper learning curves and hidden risks.

  1. Scrutinize the draw schedule and budget alignment

An imbalanced draw schedule can create financial pressure at the wrong stages of a project. Lenders should ensure that the disbursement timeline aligns with actual construction milestones and that retainage or contingency funds are appropriately accounted for.

These steps can help institutions shift from a reactive to a proactive stance on construction lending. But as portfolios grow, managing this level of oversight manually becomes increasingly tricky.

The hidden cost of manual processes

Many institutions still manage their construction loans with spreadsheets, shared drives, or paper-based checklists. While familiar, these manual systems introduce risk, especially when construction loan volume increases or staff turnover occurs.

Manual construction lending processes can:

  • Delay draw approvals, frustrating borrowers and increasing project risk
  • Introduce errors in budget tracking or inspection documentation
  • Make it difficult to monitor portfolio performance at scale
  • Limit the institution’s ability to spot early warning signs

Even the best lending teams can’t maintain full visibility without tools that surface real-time project data and streamline collaboration.

How construction loan management software reduces risk

Construction loan management software can help manage construction lending safely and efficiently. These platforms replace manual workflows with centralized systems that automate project tracking, draw management, and communication among stakeholders.

Abrigo’s construction loan management software provides:

  • A personalized dashboard that provides a real-time view of each project, including action items, inspection status, draw progress, and budget tracking.
  • Automated workflows that accelerate inspections and draw approvals while maintaining controls, enabling 8% to 12% higher draw income.
  • Mobile access for inspectors, who can submit photos and notes directly from the field
  • Templates for budgets that save time and ensure consistency as the construction portfolio grows.
  • Real-time portfolio reporting and a comparative report showing balances from the core system and Construct, allowing risk managers to identify and fix discrepancies.
  • Audit trails and documentation, ensuring the institution is exam-ready and maintaining transparency

Software designed specifically for construction loan oversight provides financial institutions with the tools they need to manage project overruns and navigate the uncertainties of cash flow timing. Just as importantly, the automation frees up lending teams to focus on building relationships rather than reviewing spreadsheets.

 

Building strength through smarter construction lending

Financial institutions can’t eliminate construction lending risk, but they can and should manage it, especially in an uncertain environment.

With the right strategies in place and the right tools supporting them, financial institutions can continue to grow their construction portfolios while reducing surprises along the way. Lenders who understand the risks in construction, understand the story a contractor’s financial statements tell, and provide contractors with cash management resources and regular check-ins can help contractors better manage their businesses. That’s how lenders set themselves apart and help build businesses in their community that thrive.

Boost efficiency and draw income for construction loans.

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Be prepared for changes to Nacha rules 

The National Automated Clearing House Association (Nacha) 2026 Risk Management amendments are shaping up to be the organization’s most significant rule changes in two decades. For community financial institutions, understanding and implementing the 2026 risk management amendments isn’t just a regulatory necessity—it’s an opportunity to strengthen fraud defenses and demonstrate a proactive, risk-based approach to examiners.

 

Strengthening fraud detection under Nacha 2026

The updated Nacha operating rules and guidelines now require documented, risk-based fraud monitoring programs across all ACH origination and receipt activities—not just WEB debits. These changes broaden the scope to include fraud schemes conducted under false pretenses, such as credit-push fraud and social engineering scams like payroll diversion and vendor impersonation.

For credit unions navigating resource constraints, these requirements raise the bar and may mean combining forces to make the most of staff time and expertise. Monitoring programs must be scalable, documented, and auditable. Institutions must also conduct formal annual reviews to assess the ongoing effectiveness of their fraud controls.

Learn more about Nacha's 2026 fraud monitoring rules

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Timeline for compliance

The phased implementation timeline provides some runway but demands early preparation:

  • Phase 1 (March 20, 2026): Applies to all ODFIs, high-volume originators (≥6M entries in 2023), and RDFIs (≥10M receipts in 2023)
  • Phase 2 (June 22, 2026): Extends requirements to all remaining ODFIs, TPS/TPSPs, and RDFIs

These compliance dates highlight the urgency for credit unions to begin policy updates, software configuration, and staff training today.

Standardized entry descriptions: PURCHASE and PAYROLL

To support more effective monitoring and improve ACH network visibility, new standardized Company Entry Descriptions will take effect in March 2026:

  • PURCHASE for WEB debits tied to e-commerce transactions
  • PAYROLL for PPD credits related to wages and compensation

While originators and their processors must update systems to include these descriptors, RDFIs are not required to act on the data alone. However, the improved clarity enables enhanced anomaly detection and faster interdiction in cases of fraud.

 

Key challenges for credit unions—and how to overcome them

Fraud continues to grow in complexity, and smaller institutions face unique challenges in combating it:

  • Lean staffing makes 24/7 fraud monitoring difficult
  • Vendor dependency can slow compliance efforts
  • Limited budgets may restrict access to real-time analytics

Fraud risks affect community financial institutions regardless of ACH volume. Even modest transaction flows can hide sophisticated schemes, making customer education, risk scenario mapping, and technology investment essential.

How the right software supports Nacha compliance

Automation tools offer financial institutions a path to compliance without overburdening staff. A technology partner that delivers risk-based ACH monitoring, integrated case management, and scenario customization can help make lean AML/CFT teams more efficient. Banks and credit unions may also consider fraud detection software that provides real-time alerts, behavioral analytics, and mule account identification. Most importantly, technology partner systems should support annual reviews and examiner-ready reporting capabilities to help institutions confidently protect customers while demonstrating a commitment to fraud mitigation.

The 2026 Nacha operating rules and guidelines represent a pivotal shift for CFIs, but also a clear roadmap to smarter fraud prevention. By preparing now—adopting risk-based policies, configuring intelligent monitoring, and partnering with the right technology provider—institutions can reduce fraud risk and maintain compliance with confidence.

Get a free AI readiness checklist and other resources on Abrigo's AI Hub.

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New purchased loan accounting update issued

Using the term "purchased seasoned loans," FASB's new accounting standards update identifies certain acquired loans that are eligible to use the gross-up approach in accounting.  

Changes to CECL accounting for acquired loans

If your community bank or credit union buys loans, whether through mergers and acquisitions or portfolio purchases, FASB just made your world a bit simpler.

The Financial Accounting Standards Board (FASB) released ASU 2025-08 (Topic 326)-Purchased Loans, and it brings some welcomed simplification to how financial institutions account for expected losses for acquired loans.

For years under the current expected credit loss method (CECL), the separate accounting approaches for “purchased credit-deteriorated” (PCD) and “non-PCD” loans created a mix of confusion, inconsistency, and unnecessary volatility in Day 1 accounting. The new guidance introduces a fresh category – purchased seasoned loans (PSLs) – and extends the familiar gross-up approach to cover accounting for them.

Learn more about purchased seasoned loans in this webinar on the FASB changes for purchased financial assets.

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What’s changing and why it matters

Since CECL took effect, acquired loans have fallen under two categories for accounting purposes:

  • PCD loans, which use the gross-up method (no Day 1 expense), and 
  • Non-PCD loans, which required a Day 1 provision expense.

That split created confusion, inconsistency, and may have led to “double counting” expected losses already reflected in fair value. It also made comparing acquisitions across institutions harder than it should be.

To address this, FASB introduced a new category called purchased seasoned loans  (PSLs) and expanded the gross-up approach to cover accounting for them at acquisition. The accounting approach for PSLs offers a middle ground between the prior treatment of PCD and non-PCD loans. The goal is to reduce subjectivity and create a more consistent, transparent framework for accounting for acquired loans.

Stakeholders pushed for a simpler, more consistent approach, and FASB listened.

What’s a “purchased seasoned loan”?

According to FASB, a loan (credit cards excluded) is a purchased seasoned loan if it was acquired without credit deterioration and meets one of these criteria:

  1. It was acquired through a business combination (i.e., every non-PCD loan you pick up in an M&A deal is automatically a PSL), or
  2. It was purchased more than 90 days after origination, and the acquirer wasn’t involved in the origination of the loan.

Credit cards, debt securities, and trade receivables remain out of scope.

Key dates and transition for purchased loan accounting

  • Effective date: Fiscal years beginning after December 15, 2026, including interim periods within those years. (That means for most calendar-year financial institutions, the new rules apply starting January 1, 2027)
  • Early adoption: Permitted in any interim or annual period for which financial statements have not yet been issued or made available for issuance.
  • Transition: Adoption is prospective – so you’ll only apply it to loans acquired on or after your adoption date. (No restatements or recalculations of previously acquired portfolios.)

How the FASB update affects purchased loans accounting

  1. Initial recognition
    If a purchased loan meets the definition of a PSL, you record an allowance for credit losses (ACL) at acquisition and add that amount to the purchase price to determine the loan’s initial amortized cost. This creates a balance sheet entry that eliminates the Day 1 provision expense (the entry that many argued led to a double-count effect) that was required in the original guidance for non-PCD loans. Expected credit losses are reflected in the loan’s carrying amount, not run through earnings on Day 1.

    It's the same concept as the “gross-up” approach already used for PCD loans. In practice, the portion of the purchase discount that reflects expected credit losses stays in the allowance and is not recognized as income, while only the non-credit portion of any discount or premium is recognized over time as interest income as the loan pays down.
  2. Easier ongoing measurement
    For PSLs, if your CECL model doesn’t use discounted cash flows (DCF), you can elect, deal by deal, to measure the ACL using the amortized cost basis instead of unpaid principal.

    This option makes it easier to pool PSLs with your originated loans after Day 1 and align ongoing loss estimation with your existing CECL process. The election doesn’t change Day 1 accounting; it only simplifies how you calculate future updates to the ACL.
  3. Updated disclosure
    Your ACL roll-forward now needs to separately show the initial ACL recognized for PSLs, just like it already does for PCD loans. Expect a new line item added to your allowance activity table – alongside beginning balance, provision, write-offs, recoveries, and ending balance.

The bottom line

This change is one of those rare accounting updates that actually makes life easier. It reduces subjectivity, aligns practice with reality, and helps community FIs tell a clearer story about the loans they buy. You’ll spend less time justifying Day 1 allowances and more time focusing on what really matters – evaluating credit quality and strategic growth.

Ongoing analysis and next steps

Abrigo’s team of accounting and risk management experts is actively analyzing this new standard to assess its implications for FIs and Abrigo’s CECL software, Day 1 accounting services, and our income recognition offerings. As interpretations develop, we’ll share additional insights and practical guidance to help institutions navigate implementation confidently. Our product teams are also reviewing the update to identify and address any necessary software enhancements to ensure all our solutions and services remain fully aligned with the new requirements.

If you have any questions or would like to discuss how this update may impact your institution, please reach out to Abrigo’s Advisory Services team. We’re here to help financial institutions interpret the new guidance, plan an adoption strategy, and make the transition as smooth as possible.

Abrigo's team of risk management experts provides CECL help and business combination and valuation services for financial institutions of all sizes.

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Wondering how the FASB changes will affect your CECL approach?

Join Abrigo experts as they unpack the new "purchased seasoned loans" update and share what financial institutions need to know before adoption.

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Shutdown implications for credit unions, banks, and their clients 

Credit unions and community banks have been stepping in to help those affected by the federal government shutdown even as institutions consider risk management implications.

Federal shutdown: Institutions see effects on clients

The government shutdown that began Oct. 1 has now dragged on for more than 40 days – the longest in U.S. history. That’s 40 days of missed paychecks for federal employees and contractors. Forty days of stress for families trying to juggle mortgages, car loans, and credit cards without income.

The good news: there are signs of a deal in motion. However, credit union members and community bank customers facing financial stress from the shutdown don’t yet have clear information about when paychecks and backpay will hit their accounts. Credit unions and community banks have been stepping in, helping even as they consider risk management implications.

Is your CECL model performing as expected? Learn more in this on-demand webinar

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Shutdown impacts on financial institutions and their clients

Some areas of the country feel government shutdowns more acutely than others.

While California, Virginia, and the District of Columbia employ the most federal workers in raw numbers, other states have a higher concentration of their workforce in federal jobs. According to the economics and public policy firm Scioto Analysis, the District of Columbia, Maryland, and Hawaii have the highest number of federal employees per 1,000 workers.

California, Virginia, and Texas host the largest numbers of active-duty military personnel, according to the Defense Manpower Data Center data cited by Visual Capitalist.

Together, these factors mean that entire communities, especially those with military bases, federal facilities, or federally funded tourism, can see significant ripple effects when government paychecks are at risk or stop.

America’s Credit Unions reports that roughly two million federal civilian workers and millions of contractors face uncertainty during a shutdown, with some furloughed and others working without pay until Congress acts. The Government Employee Fair Treatment Act of 2019 guarantees retroactive pay, but workers still face immediate challenges covering daily expenses.

Local economies that depend on federal programs or tourism at national parks and public lands are also affected. In 2013, 401 national parks closed, costing communities $414 million in visitor spending, according to America’s Credit Unions.

In addition, farmers have faced delays in U.S. Department of Agriculture services or support. And lenders offering some government-backed loans have run into processing roadblocks with the shutdown, delaying approvals for applicants of U.S. Small Business Administration loans and some agricultural loans.  

Even when states step in to fund temporary operations, the strain on local businesses and workers is real. And it extends to their credit unions and community banks.

When paychecks stopped, CFIs stepped up

For community financial institutions, the shutdown has presented yet another opportunity to do what they’ve always done best: show up for their customers or members when times get tough. It’s times like these that tend to reaffirm what sets community banks and credit unions apart. And even in uncertain times like the current situation, these institutions can look to balance empathy and action with sound risk management. 

Across the country, community banks and credit unions have been quick to respond, rolling out skip-a-payment options, loan deferrals, fee waivers, and short-term bridge loans for furloughed or unpaid workers. Many are reaching out proactively before members even ask for help.

That’s the power of being local. Decisions get made down the hall, not across the country. Relationship managers know their customers or members by name. And when the community hurts, CFIs don’t wait for permission; they act.

The human side meets the CECL side

Over the last couple of weeks, I’ve had quite a few conversations with our clients, many asking some version of the same question: How will these relief efforts by an institution intersect with CECL (current expected credit loss ) accounting?

It’s a good question. Relief programs like deferrals and extensions, while absolutely the right move, can shift the timing of cash flows and change how loans behave. Under CECL’s forward-looking model, that timing shift can show up, even if only slightly, in lifetime expected loss estimates.

Now’s not the time to overthink it or overhaul allowance models, but it is worth considering. Track how much relief you’re providing, where your exposures lie, and consider how payment pauses could affect cash flow projections. Most of what I’m seeing is immaterial, but good bankers stay aware.

Leading with purpose and discipline

This is the balance we’ve always tried to strike in community banking – leading with purpose while staying grounded in sound credit discipline. You can take care of your people and still manage your risk well. Those two goals aren’t in conflict; in fact, they strengthen each other.

Shutdowns come and go. Relationships and reputations last. The way CFIs are showing up right now – fast, personal, and with genuine care – is exactly what separates this industry from the rest.

And if you’re wondering what the right move is in moments like this? You’re probably already doing it.

CECL software that offers documentation, exam confidence and time savings for key personnel.

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This article covers these key points: 

Why forward-looking lenders are expanding their credit risk data sources

As market dynamics and consumer behaviors continue to shift, financial institutions must remain agile to effectively assess creditworthiness and manage risk. 

This article was was co-authored by Robert Schmidt, Abrigo and Angela Sebestyen, Equifax

Lenders are increasingly adopting new approaches that provide deeper insights and enable more predictive, holistic credit decisioning strategies—for both consumer and commercial lending.

One area gaining momentum is the integration of alternative data sources and advanced analytics into credit risk scoring. These innovations are helping financial institutions broaden access to credit and improve lending outcomes in today’s evolving environment.

Pull credit reports seamlessly, all from one platform

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Unlocking deeper insights into creditworthiness

Modern credit risk scores can now go beyond traditional credit histories. For example, EquifaxⓇ has developed a multi-data score that combines 24 months of trended credit data along with alternative data sources, including telco, pay TV and utilities data reported directly from service providers, as well as the largest specialty finance database covering non-traditional lending history for 120 million borrowers. By incorporating this differentiated, alternative data into Abrigo's Sageworks credit decisioning, financial institutions can now leverage the advanced machine learning and robust data-driven models unique to Equifax, driving more nuanced and profitable lending decisions.

Versatility and key benefits for lenders

Modern, multi-data credit scores can be adapted to a lender's specific needs. Some of the ways institutions are using them include:

  • As a standalone credit score that combines traditional and alternative credit data
  • In conjunction with existing risk scores to enrich insights without duplicating data
  • As an input to custom models to improve predictive accuracy

This adaptability helps expand lending opportunities for underserved populations—including credit-invisible, thin-file, or credit-building consumers—based on proven non-credit payment records. The result is faster, more confident decisions and reduced application friction. These tools are particularly useful for unsecured loan products like credit cards, personal loans, and auto loans.

Proven performance and impact

Lenders using enhanced credit scores that blend traditional and alternative data have reported significant improvements in lending outcomes. For instance, some lenders using OneScore, from Equifax, improved hit rates and performance over traditional scores, with gains such as:

  • Up to 40% higher approval rates
  • Coverage of 97% of the market with expanded borrower visibility
  • Kolmogorov-Smirnov (KS) lift of up to 10% compared to traditional scores
  • 48% KS lift in short-term lending, 66% in lease-to-own, and 45% in subprime fintech lending when combined with traditional data

Although individual results may vary, these examples reflect the real-world advantages of using broader datasets and AI-powered scoring tools to identify risk and opportunity more precisely.

Going beyond the consumer

While consumer lending remains a core offering for many financial institutions, commercial lending has also grown more complex—and competitive. That’s why some institutions are now extending these advanced scoring capabilities to their commercial portfolios as well.

A commercial delinquency score using both financial and non-financial data, such as public records, firmographics, trended credit, and business owner credit history, can provide a more complete view of risk. This helps lenders identify the likelihood of a business becoming delinquent, even if the business is newer or has limited credit history.

Key benefits of commercial risk scoring

 Institutions using commercial credit scores that integrate alternative data and analytics have seen benefits such as:

  • Scoring more applications
  • Improved ability to predict default risk
  • Increased access to credit for small businesses
  • Flexible configurations using industry-specific scorecards based on NAICS or SIC codes

In today’s market, it’s increasingly important for lenders to be able to assess creditworthiness with confidence, speed, and fairness—whether they’re evaluating a first-time borrower or a growing business.

Meeting the moment with modern credit decisioning

Credit risk is evolving, and financial institutions that expand their data sources and leverage predictive scoring tools are better equipped to serve their communities and meet regulatory expectations. By integrating traditional credit data with robust alternative sources, institutions can make more inclusive, accurate, and timely lending decisions.

Whether evaluating consumers or small businesses, today’s forward-thinking lenders are embracing data-driven credit decisioning to stay ahead of risk and unlock opportunities for growth.

Learn more about the partnership between Equifax and Abrigo

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