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Management of bank mandates – eBAM – a lot of challenges

| 19-4-2017 | François de Witte |

In the past, a bank mandate for a company was a fairly simple affair. There were panels of signatories (paper-based) and payments were controlled by the banks based upon the DOA (delegation of authority).

However there remained a lot of risks:

Many individuals at different levels could engage the firm with purchase orders. This implies that the control should be at that level, rather than the payment authorization.
Dealing mandates were not used frequently for financial market operations. The business was done based upon a personal relationship and many transactions were initiated verbally.
There was no overall database of who could engage the company, nor a check if these persons were still working in the company.

Over time, dealing mandates have become more common. The concept of limits, which was already in use for payments, was also introduced for the financial market operation. Corporates used the bank to police these different limits, essentially expecting banks to verify each signature against the mandate and to check limits for each dealer.

With the growing complexity of the business, and the increased use of electronic banking channels, for several corporates, the management of the bank mandates is now a real challenge. If you have a complex business with a very large number of accounts, it is very difficult to have an overview of who has the power to sign transactions, what is the delegation of authorities and which is the link with the legal database of the company.

In addition, most of the banks have their own set of documents and the bank account management communication with the banks is still largely paper-based.

In order to streamline these processes, SWIFT developed some years ago its e-BAM initiative, aiming at streamlining these processes. Also vendors have started to bring new solutions in the market.

The current article aims to make a status on the question and to highlight some opportunities to rationalize the process.

Main pain points and requirement of the corporates

When discussing with corporates, I usually identify the following pain points in the management of the bank mandates:

No linkage between the DOA (delegation of authority) and the BAM (Bank Account Management)
Lack of consistency between legal and finance databases: linked to the organization updates, restructurings, people turnover, etc.
Internal Control issues:
- Safety and operational risks (access rights, lost or forgotten accounts)
- Management & control: rules of compliance & segregation of powers
- A lack of audit trails, logging control and traceability
No global oversight : Multiple data sources: decentralization and update issues
No automation, resulting in daily time-consuming, manual tasks (turnover, reorganizational changes, dormant/ inactive accounts…) both often non-auditable and non-compliant
Lack of standardized and transparent processes scattered across the corporation, especially regarding bank accounts, signatures, authorizations and/or limits
Signatory information in e-Banking tools often differing from internal data of the corporate, e.g. after an employee has left the company
Exchange of information via fax, mail or courier
Costly archiving, printing and posting to internal systems (ERP, TMS, electronic banking interface, etc.)
Compliance issues linked to the lack of segregation of duties : this can possible lead to audit points
Multiple stakeholders and systems (ERP, TMS, electronic banking, …)
Heavy compliance requirements such as the KYC
Operational and fraud risks

Typically, the main requirements of corporates are to:

Have at the central treasury department the visibility and control over all the bank accounts maintained globally, including the authorizations, limits and signatories per bank account
Be able to effectively store bank account related information and documentation, as well as centrally managing the processes on the lifecycle of this information in one central database
Be able to use a standardized and transparent workflow for bank account management (opening and closing, access rights monitoring, authorization and limit setting, etc.)
Have an automated system that corporates can use for electronic opening, closing and maintenance of bank accounts, including generation of audit reports
Build one central repository with digitized electronic documentation (a single version of truth), with auto-generation of documents and correspondence
Keep an audit trail on who had ad every moment mandate over the bank accounts
Be able to quickly revoke mandates of persons who are no longer in their position, or who left the company
Have the banks accepting an increased use of an electronic exchange of bank account management information

Initiatives taken by SWIFT

Some years ago, SWIFT launched the e-BAM initiative. eBAM is based on the exchange of ISO 20022 XML messages, developed by SWIFT, which mainly cover the processes of opening, closing and changing bank accounts and mandates.

The SWIFT eBAM message formats provide both the standardized format, necessary to communicate account management information between companies and their banks. SWIFT eBAM messaging consists of specifically designed XML based file formats that allow companies and banks to conduct five common bank account management conversations. These types of conversation allow you to perform virtually all bank account management tasks electronically as outlined below:
Source: SWIFT Presentation on E-BAM

The key advantages and acknowledged benefits in adopting an eBAM solution are:

Complete overview, control and management of all bank relationships, including bank accounts and their legally binding documents
Compliance fulfillment through automated approval workflows for requests to open, close and change bank accounts and the respective mandates
Secure processes for exchanging messages with banking partners, including a complete audit trail
Complete integration with existing back-office infrastructures: ERP, TMS, HR, etc.
Improved efficiency and cost reduction through automating manual processes and monitoring their performance
Easy access to real-time information for strategically supporting all involved departments

There is a recognition in the market, especially with large corporations of the necessity for eBAM. Standards have evolved, solution provider came up with solutions and mono-bank platforms are being developed. But still, the standards need to be perfected. In addition, whilst several banks have developed e-BAM in their own platform, only very few banks have developed a fully-fledged e-BAM multibank solution.

BNP Paribas came up with solutions in this area and more recently Société Générale. The lack of adoption by other banks of this multi-bank solution is an obstacle for the further adoption of e-BAM.

How to start such a project:

Streamlining the bank account management is a complex project, requiring a number of steps:

First one needs to convince internal stakeholders that account management responsibility should be migrated to a single department, such as treasury
The next step is to put in place the BAM : inventory of all the bank accounts and mandates
I recommend to also examine your bank database and to consider a clean-up of your bank accounts. It is likely that quite a number of bank accounts are hardly used, and that it would be more cost efficient to close them.
It is essential to ensure the link between your legal administration (delegation of authority) and your bank mandates.
Ensure to have a central a repository for account information, which is integrated with all your systems, including treasury management systems (TMS); bank systems; enterprise resource planning (ERP) and accounting systems, the legal and HR database, etc.
In order to be successful, one should also improve the transparency and efficiency, by harmonizing and streamlining processes, and by ensuring that they are fully digitalized.
Some banks already embedded eBAM in their electronic banking application. You can already start to use it, but be aware that each bank will have its own systems.
It is important include in the project the implementation of the group internal controls and the reduction of the operational risks
One should also examine possible restrictions for e-BAM in the local legislation of the affiliates.
I recommend to standardize as much as possible the documentation with the different banks. Try to impose whenever possible your own documentation.

For smaller corporates, standardizes process and an Excel database can be a good solution. However for more complex organizations, managing over 100 bank accounts with over 5 to 10 banks, there can be a business case to combine the streamlining of the processes with a specialized solution, e.g. a web based “Software as a Service” (SaaS) BAM solution to automate and streamline internal processes and to digitize them. This includes a centralized document management internally and externally, towards the banks, as well as a central repository and shared directories for document storing, spread across the enterprise. This also encompasses the automation of the correspondence to the banks and the auditors. I also recommend to have a link with the legal database of the company.

There are a number of solutions in the market, such as middleware providers (e.g. TIS and PowertoPay), the offering of TMS providers and the Visual Sign solution of Equity. According to my information, Equity is the only European vendor providing an integrated link with the legal database, ensuring a close link with the Delegation of Authority, which is the source of the bank mandate.

When working on such a project, do not underestimate time needed to gather & validate information. It is a complex project which needs to be phased. Split & prioritize the different phases of the project, and keep it simple!

Conclusion

The management of bank mandates is a complex process, which in many companies is still managed manually with paper-based processes, without a central database. There is a real opportunity to automate and to digitize these processes in one central repository.

SWIFT launched some years ago e-BAM, an interesting initiative to standardize and automate these processes, including the customer to bank communication. However the adoption of e-BAM is a slow process and only very few banks are offering through multi-bank solutions.

There exist solutions in the market to develop standardized automated processes. If you have the require critical mass, it can be useful to consider them. Be aware that this is a complex exercise, as you need to ensure that the system is connected to your applications, including the legal database. But in the end, it is worth the exercise.

François de Witte

Founder & Senior Consultant at FDW Consult

More articles from this author:

Working capital management : Some practical advice on the optimization of the order to cash cycle

PSD 2: A lot of opportunities but also big challenges (Part I)

PSD 2: The implementation of PSD2: A lot of opportunities but also big challenges (Part II)

Treasury : Proposed “to do” list for 2017

Best Practices in Bank Account Management

| 29-09-2016 | TIS (Treasury Intelligence Solutions) | sponsored content |

This article aims to describe the current “eBAM Market Best Practice” that can be achieved by using the TIS (Treasury Intelligence Solutions GmbH) cloud-based electronic Bank Account Management (eBAM) platform.

Corporates and the eBAM project

Many corporates are in need of a comprehensive tool for managing banks and bank account related information and processes. Typically, the main requirements are to have visibility and control over the bank accounts maintained globally and the ability to effectively store bank account related information and documentation, as well as centrally managing the processes on the lifecycle of this information. Furthermore, a typical requirement is for a system that corporates can use for electronic opening, closing and maintenance of bank accounts, including generation of audit reports. In the chapters to follow, TIS provides detailed information about the eBAM Market Best Practice and how the TIS Bank Account Management SaaS (Software as a Service) can fully cover the requirements as well as provide further added-value services to our customers.

The Market

Corporations worldwide face tremendous challenges to cope with an ever increasing volume of information. As more and more internal governance and compliance regulations receive high-level attention, it is essential to have this information at hand, quickly and at the push of a button. Managing bank accounts is one of the main drivers that encourage CFO and Treasurers alike to minimise risks and adopt automated processes. In addition, the accounting teams that manage this data on a daily basis are often under pressure to optimise their own processes as well.

Effective and structured Bank Account Management is understood to be one of the main steps Treasury Departments should take to fulfill governance and compliance regulations. In addition, by implementing a central bank account repository, both data and processes can be optimised and the performance can be measured and monitored. We are also seeing an increasing demand for banks to make use of an electronic exchange of Bank Account Management (eBAM) information.

eBAM is based on the exchange of 15 standardised ISO 20022 XML messages, developed by SWIFT, which mainly cover the processes of opening, closing and changing bank accounts and mandates.

The key advantages and acknowledged benefits in adopting an eBAM solution are:

Complete overview, control and management of all bank relationships, including bank accounts and their legally binding documents
Compliance fulfillment through automated approval workflows for requests to open, close and change bank accounts and the respective mandates
Secure processes for exchanging messages with banking partners, including a complete audit trail
Complete integration with existing back-office infrastructures: ERP, TMS, HR, etc.
Improved efficiency and cost reduction through automating manual processes and monitoring their performance
Easy access to real-time information for strategically supporting all involved departments Recognition of the necessity for eBAM has recently picked up speed in the market, especially within large corporations. The business case is now becoming fundamental at a growing number of companies across all sectors in resolving governance and compliance issues as well as minimising risk.

The Challenge

So what is the main problem? What are the biggest challenges corporates are facing? The most painful issues can be summarised as follows:

No single source of truth for all bank-related data across the entire group
Non-standardised, non-transparent processes scattered across the corporation, especially regarding bank accounts, signature authorisations or limits
Signatory information in e-Banking tools often differs from internal data (e.g. after an employee has left the company)
Risks of legally binding (paper-based) bank account documentation being stored locally at subsidiary or branch level, no central access and control over such documentation
No guarantee of a strict four-eye-principle, central governance is impossible
Information about a segregation of duties within each entity or across the whole organisation cannot be easily obtained globally
Decentralised manual and time-consuming processes, both often non-auditable and non-compliant
Exchange of information via fax, mail or courier
Costly archiving, printing and posting to internal (ERP etc.) systems
Different processes in many countries, based on local customs or even bank specifics
No central overview of the conditions agreed upon with a bank and the actual costs that are being billed
Bank account related information and documentation needs to be published in various back-end systems, usually the information is manually maintained with high effort
No central governance and control over of the information distributed in the company group, including IT systems

Together with the financial crisis of the recent years, this has encouraged many organisations to steer towards a professional – and ideally electronic – Bank Account Management strategy. (e)BAM adoption often accompanies the fundamental new approach corporates must adopt in assessing financial risk today

The “Status Quo” graphic in Figure 1 (page 4) represents these challenges.

Bam Evolution

The evolution of a Bank Account Management can be divided into three main phases:

PHASE 1 (Status Quo for majority of corporates):
Manual, paper-based and non-transparent processes for managing bank accounts and mandates

PHASE 2 (Bank Account Management):
Implementation of a web based “Software as a Service” (SaaS) BAM solution to automate and streamline internal processes and make them transparent. This includes a centralised document management internally and externally, towards the banks

PHASE 3 (eBAM):
Evolving towards an extensive eBAM solution where electronic and automated workflows also used for the external communication with banks.

The manual and paper-based workflows used to communicate with the partner banks regarding bank accounts and mandates have a long and familiar history. One of the main disadvantages is that these are critically slow and error-prone processes, often leading to governance issues. They do not support today’s auditing, compliance and regulatory requirements and include the use of:

Microsoft Excel as a database for bank account information
Inventory processes via e-mail and Excel, if existing
Shared directories for document storing, spread across the enterprise
E-mail/fax messages adopted as workflows for opening and closing bank accounts On top of that, these processes create enormous amounts of paper that are stored physically (and often locally). A central overview of signatory powers and bank account processes is hardly achievable (also see Chapter 4 “The Challenge”)

Phase 2 – Bank Account Management

Introducing a web-based SaaS Bank Account Management (BAM) solution provides a clear approach to obtaining the required overview of all banks and bank accounts. Globally, this is a centralised and audit-proof solution, including accurate master data management and electronic workflow based processes for requests to open/close/change bank account activities. The main aspects are as follows:

Master data and inventory – ensuring an up-to-date data base with real-time access as well as the integration of bank and account related information into various backend (ERP) systems
Workflow and four-eye-principle – gaining control over streamlined internal processes and authorizations
Insights into the process landscape – allow a tight monitoring and performance analysis
Reporting and audit trails – adhering to internal compliance and regulatory guidelines
Document Management – clear overview and workflow of legally binding and account specific documentation
Extensibility – the solution can be extended to a full “Partner Management” as well as enhanced by a Bank Fee Management solution to monitor costs and processes.

Phase 3 – Electronic Bank Account Management

By moving towards an eBAM solution, additional benefits can be achieved.
The main added-value is a straight-through-process (STP) with participating banks. A set of 15 standardized ISO XML messages can be exchanged on an eBAM platform to cover all main bank account and mandate workflow (opening, changing, closing, confirming).

In addition to the advantages of phase 2 this enables corporates to also streamline and automate the external communication with their banks. The painful and laborintensive paper-based workflow is substituted by electronic communication. Currently, this only works for existing corporate-to-bank relations. The Know-Your-Customer (KYC) process at the beginning of a relationship cannot be accomplished electronically yet. The key eBAM benefits are described in chapter 6 “Best Practice Processes”.

Best practice processes

In our view and based on customer feedback, the new TIS eBAM solution (as shown below in figure 2) currently represents the best practice in the market.

Our model

The TIS model is based on key elements that are part of efficient, low-risk business workflows also embedding current regulatory requirements. Bank accounts can be managed globally, regionally or on division/entity level, with a clear segregation of duties and a customisable notification/alerting functionality:

Best Practice Governance Processes – Master Data & Inventory
Electronic business workflows provide an overview of group-wide requests for opening, changing or closing bank accounts, keeping all master data up to date in a central repository. This also enables real-time access to any related information at the push of a button. All information is made centrally available and integrated with various back-end (ERP) system which require information, such as account data, authorisation rights and daily limits.
While workflows can be automated and delegated to the responsible employees, the solution provides a constant overview of the master data and user permissions on a central level. With the electronic and customisable inventory process local or entity managers can be obligated to confirm the accuracy of the relevant data.

Centrally Managed Authorisations – Workflow & Authorisation
All relevant bank account processes, including authorised signatory details, can be confirmed and monitored in an audit-proof, compliant and customisable way, including a four-eye principle. By guiding and enforcing the approval and change management processes for bank-and account data, internal audit requirements are also met.
Levels of restrictions, signature cards, digitalised signatures and credentials, legally binding country- and bank-specific documentation are all managed and securely stored in a central repository.

Integration
Centralisation of information, documents and processes delivers great benefits; however, eBAM reaches its full potential if all the information can be integrated with the various business systems used in the company, such as ERP or treasury systems. These systems usually depend on – or even are the source of – the information, which is centrally managed. The integration also facilitates the decentralised maintenance and usage of information and at the same, enables complete central governance. Integration scenarios include central approval of accounts which are created within the ERP systems, distribution of signature authorisations or limits as well as account data.
Certified integration capabilities, such as offered by TIS (e.g. SAP certification), ensure that the functionality meets the quality requirements of the vendors and compatibility of the integration scenarios with new releases.

Benefits

The eBAM advantages meet all challenges outlined in chapter 4. This best practice approach can be summarised as follows: Automated, flexible and consistent STP processes for opening, maintenance and closure of bank accounts, providing clear global visibility, accurate accountability

Audit-proof and highly secure, ISO 20022 compliant and ISO 27001 certified processes, providing a real-time alerting functionality allowing for timely responses to any issues
Rapid access to up-to-date master data bank (account) information – including mandates – globally and group- wide, enabling efficient workflows across the entire organisation
Exchange of standardised ISO XML message with the relevant banks
Complete integration with existing back-office infrastructures is possible
Fulfillment of both internal and external audit and regulatory requirements
Enabling the Treasury Department to delegate processes in an audit-proof manner and monitor them centrally. This also frees up time to focus on more strategic topics
Reduced complexity and increased process automation on all levels lead to significant cost savings across the group

Requirements

Regarding an eBAM implementation strategy, we recommend that some key elements are taken into consideration in order to realise a flexible and customisable multi-bank and multichannel integration:

Define eBAM in the context of a group-wide bank and bank account strategy, taking advantage of trusted expertise on best practice project implementation.
Ensure a strong partnership between the involved parties: corporate, banks and solution provider.
Project management and subject matter expertise: having the right level of expertise at the table in aiding the management of the eBAM Project

TIS (Treasury Intelligence Solutions)

Foreign bank accounts, blessing or burden?

04-08-2016 | Jan Meulendijks |

SEPA reduced the necessity to maintain foreign bank accounts in Euro-countries to a great extent, but there can still be substantial advantages to operating such accounts; an overview.

There is a basic difference between handling your money flows and transactions in Euro and other currencies.

Handling money flows and transactions in Euros

SEPA has created a huge improvement in efficiency and cost reduction in standard (non-priority) transactions between Euro-countries. If your company has this type of standard receivables or payables there is no longer a need to have bank accounts in the countries involved. There is one exception: cross border priority payments. These are still subjected to substantial bank charges, so if you have a a lot of priority payables/receivables in an Euro-country it can still be a cost-saver to process these through a local bank account.

Handling money flows and transactions in USD, GBP and other currencies

Especially the Anglo-saxon countries still operate their local and international payments by using cheques. Your first goal should be to try to migrate this to transfers, but this will not always be feasible. If you process cheques through your Dutch bank account you will experience that this is a time-consuming and costly business. Charges of EUR 50 per item or more are very common, and the value date of a cheque credit will be approximately one week after it has been processed so there will always be an interest disadvantage. Local bank accounts can facilitate domestic cheque-collection and clearing systems resulting in much better time lines and local costs instead of cross border fees. As I explained in my previous article, foreign bank accounts these days can easily be managed information-wise and cash management-wise.

The advantage of a foreign bank account

To illustrate the difference in handling money flows and transactions with or without a foreign bank account an example:

Your company exports to USA, you receive 500 cheques per year that you process through your Dutch bank. Costs are app. EUR 25.000 + interest disadvantage over the turnover involved.
Processing through an US bank account: processing costs app. US 2.000,00, account maintenance fees US 1.000,00, cashpool costs EUR 1.000,00.
Result: cost reduction of app. EUR 21.000,00 + reduction of interest disadvantage.

Please consult your bank’s cash management consultant about your specific situation and how to proceed on opening foreign accounts and documentation required.

Jan Meulendijks – Cash management, transaction banking and trade professional

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