For Financial Services firms, reconciliations are an essential tool used to ensure that the firm and its partners are fulfilling their obligations to their clients and complying with the relevant regulations - such as CASS 6 and 7 and the Electronic Money Regulations.
Without effective reconciliations, process (and technology) issues can be overlooked and risk damage to a firm's reputation, financial penalties, and in extreme situations, can result in a loss of licence.
Such reconciliations can include, but are not limited to:
- • Bank Reconciliation: Validating deposits and withdrawals recorded on a firm's internal system match their bank account
- • Order Execution Reconciliation: Validating orders recorded in a firm's internal system match the orders recorded and/or processed by their Broker
- • Order Lifecycle Reconciliation: Validating each order has been paid for and/or paid out (can be units or money)
- • Client Money and Asset Reconciliations: Validating client money and/or asset balances are consistent across internal and external records. This can be performed at several different levels such as per customer, account, asset, etc
The nature of a firm's business will dictate the specific reconciliations that they must carry out, yet regardless, reconciliations in the financial sector generally follow a standard order of events:
- 1) Obtain the reports needed to perform the reconciliation
- 2) Formatting of each report to arrive at the inputs used for the reconciliation (This could be a single balance, series of balances or a list of transactions)
- 3) Compare the inputs across the different sources to ensure they reconcile
- 4) Report on the results
- 5) Investigate and resolve any differences within the specified timeframe
With many parties involved, obtaining the various reports needed to perform a reconciliation can be complicated and time-consuming. Once the reports have been obtained, they are rarely in a consistent format, so then begins the task of formatting them to allow for comparison and for the reconciliation to be performed. By the time these steps have been completed, hours have often passed, leaving little time to report and resolve discrepancies. As transaction volumes increase, this becomes a growing issue, and so does the chances of a breach.
Beyond the reconciliation itself, evidencing that a firm has met its obligations can be a complex and time-consuming exercise.
Reconciliations performed with general tools such as Excel are prone to manual error and files being lost or corrupted. They offer minimal control over access and can be retrospectively edited. Separate files are often used separating the reconciliation by day, week, or month, making it difficult to report on and demonstrate a robust reconciliation process as well as how discrepancies spanning a longer timeframe have been resolved.
Benefits of an automated system to the financial services
Aurum is a dedicated reconciliation and exception management software. It has been created specially to streamline the entire process, providing the following benefits:
- • Automating the collection and transformation of reports used in a reconciliation
- • Displaying this information in a single consolidated system with a full audit history
- • Automatically performing the reconciliation/matching process
- • End to end exception management tracking
- • Improved control, oversight, and security
- • Fully customisable reporting
Through automation, high volume reconciliations can be completed within minutes without human intervention. The software can be run overnight, saving time, and instantly presenting the reconciler with any discrepancies for them to be investigated immediately.
The highly accurate software Aurum is built on works alongside any finance team to strengthen compliance and mitigate the risk of human error, which can often occur through manual reconciliation processes. Features such as automation, permission and access control further reduce the chances of manual errors and data falling into the wrong hands. Bespoke reporting and an entire audit history provide complete visibility to streamline audits and can be used to automate monthly and annual returns.
Integration with CASS and EMR Reconciliations makes the Aurum platform an optimised tool for Financial Services. Aurum's team of trained consultants work hand in hand with firms to adapt the software to comply with any future CASS regulations making the software scalable and future-proof.
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Project and Delivery Manager / Business Analyst @ Aurum Solutions
27th April 2022