Answer:
I don't know much about 1031 Exchanges either, but here's how I would approach a risk assessment for that. Presumably, there is someone in your organization that understands these transactions. You'll want to have a detailed conversation (maybe multiple conversations) with them to get a sense of what the objectives of the program are and what types of things could go wrong with the process if certain control activities are not performed. Use the regulators' risk categories (Credit risk, market risk, interest rate risk, compliance risk, etc.) as a guide. I'd also do some Internet research on 1031 Exchange problems to get a better understanding and confidence that we have identified the appropriate risks. I'd also search for any regulatory issuances involving 1031 Exchanges. Once we are confident we have identified the appropriate risks, we can get in with assessing the control environment around those risks.
First published on BankersOnline.com 3/25/13
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