The bank accounts your company uses stores the most liquid of all company assets.  In the wrong hands, these accounts can expose your company to a significant risk of theft, fraud, or non-compliance.

In today’s fast-paced payment environment, many methods and tools have been developed to allow for instantaneous or near-instantaneous transfers of cash into and out of accounts.  The speed of the modern payments arena coupled with the dematerialization of the entire process leaves us in an environment where fraud and theft are rampant.  Every year, tens of billions of dollars are lost by companies through fraud and theft and every penny of that can be attributed to a failure of basic controls.

When you mention bank account management to many treasury professionals, what often comes to mind are the good-old-days of managing check signer cards.  The decades-old practice of gathering manual signatures from individuals who have authority to sign checks on an account and providing these signatures to the banks was and is still a tedious and highly ineffective process to control check fraud risk.  Many times we continue with these same age-old processes more out of habit than actually trying to eliminate real risks facing our modern bank accounts.  The payments world has grown globally and operates at too fast of a pace to continue using the same controls that were developed for a time when stagecoach robberies were the greatest risk.  We have to redefine the parameters of bank account management and we need new tools to manage this risk in the modern times.  In this series of blogs, the team at Redbridge will help uncover the keys to success in eliminating or mitigating the risks we face in the modern payments world.

 

The Modern World of Bank Account Management

If you ask ten treasury professionals to define bank account management (BAM), you will get twelve different answers.  To help to establish definitions and systems for the BAM problem, we offer the following four tenets to develop a holistic solution.

  • Establish a detailed system of record for bank account information
  • Build effective & customized workflows to manage changes
  • Create synchronicity between your records and the bank’s
  • Solve regulatory and compliance issues

 

The System of Record

If we are going to establish effective controls around the inventory of bank accounts that we have, we must have a secure and highly available system of record for storing the details and authorizations of every bank account the company has.  This system must tie the bank accounts that exist at each bank back to the legal structure of the organization and must demonstrate the specific legal authorization of each account.  Each account must be shown to have a specific purpose within the organization and must be monitored closely to ensure that the appropriate, modern fraud prevention controls are in place at all times.  Account controls must be in place to ensure that the appropriate services are being used, fee exposure is controlled, and efficient funding and concentration methods are in place.  Transaction controls, such as debit blocks or filters, IT controls, UPIC, etc. must be in place and monitored to ensure the account remains locked down.   The relationships between accounts must be established, monitored, and consistently rationalized.   Every account in your company’s inventory exposes the company to a variety of fraud and theft risks as well as increased cost.

In addition to detailed and automated controls around the bank accounts themselves, you must thoroughly consider controls around the employees of the company that has the authority to authorize transactions or other actions on the company’s accounts.  There are a number of strategies that have been used in different organizations to greatly reduce the risk posed by individuals with access to corporate accounts, especially when they leave the company or transfer roles.  The modern BAM system must not only maintain hyper-accurate records of the employees that are related to bank accounts, but it must also eliminate the reliance on other people to monitor them.  Robotic process automation and basic AI must be in place to quickly recognize changes in the company’s accounts or employees with entitlements over accounts and trigger control responses in real time whenever a change occurs.

 

Effective & Customized Workflows

Establishing an accurate system of record of each bank account and entitled employees will solve the BAM problem for a single day at best.  In many treasury organizations, both the inventory of bank accounts and the entitled employees are ever-changing targets.  If a company doesn’t develop and enforce customized and effective change workflows, the perfect system of record will soon be inaccurate and ineffective.  The ideal BAM system needs to allow each company to build its own business processes that must be followed in order to effect changes in the system of record.  These processes can be as simple as requiring two people to approve certain things too complex approval and notification changes that ensure important changes are properly executed.

 

Synchronicity with Banks

Even with the most perfect bank account records and flawless workflows controlling changes, the problem is unsolved unless the inventory of bank accounts and entitled employees within treasury is synchronized with the records held by the bank.  At the end of the day, if the bank believes an account to be open, it is open no matter how vehemently you may insist that it was closed. From our experiences, in more than 80% of corporate treasury audits, accounts were found to be open at banks that treasury thought to be closed. Additionally, employees were found with entitlements to accounts even when they had not been with the company for years.  A true BAM solution must establish a real-time or near real-time communication method with all of a company’s banks to ensure that the inventory records remain in-sync at all times, and changes are communicated and effected immediately.

 

Regulatory & Compliance Issues

Various legal and regulatory enforcement actions have been put in place to account for the improper use of banking and finance systems since the payments world has become more complex and criminals have become more advanced. Many of these enforcement actions directly affect the controls that must be in place around a company’s inventory of bank accounts and entitled employees.  Banks around the globe have been mandated to know your customers (KYC). The various interpretations of these mandates have added greatly to the complexity of managing corporate bank accounts.  A number of regulations to eliminate money laundering and the funding of terrorism are also now in place which requires companies to be diligent keepers of accurate records of bank accounts.  In the US, every person that has authority over a corporate bank account that is outside the US is required to file an annual FBAR report.  Stir in various other regulations like Sarbanes-Oxley, OFAC, and GDPR the compliance alone will quickly overwhelm the spreadsheets that many companies are still using to track this information.

What do all of these compliance issues have to do with bank account management?  They all involve demonstrating accurate record keeping around the inventory of bank accounts, entitled employees, and communicating that information with banks or enforcement agencies.  The modern BAM system must manage and streamline compliance with all of these regulatory requirements.

 

 

This is the first in a series of articles discussing how to solve the problem of bank account management in the modern world.  In coming articles, we will perform a deep dive on each of the four tenets of modern bank account management.

Redbridge Analytics is the software arm of the world-renowned Redbridge Debt & Treasury Advisory.  After developing and delivering the next generation of bank fee monitoring software, HawkeyeBSB to the global treasury world, we have embarked on building and delivering the next generation of bank account management software.  This SaaS-based solution called HawkeyeBAM will not only meet all four tenets of the bank account management process, but it does so using advanced robotic process automation to eliminate both the time and toil of trying to manage bank accounts the old-fashioned-way.  We build software with active input from our customers. Contact us to share your greatest challenges in managing bank accounts and for us to show you the first version of HawkeyeBAM today!

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