Both the European Central Bank (ECB) and Pricewaterhouse Coopers (PwC) have recently released warnings that firms are taking too long to make the necessary preparations for the Feb 1st 2014 SEPA deadline. In their Jan 2013 SEPA Readiness Thermometer report PwC found that many banks and corporations underestimate what being SEPA-ready entails, and that more than half of organisations are at risk of missing the February 2014 deadline. Similarly, the ECB has warned that leaving migration until the last minute is “highly undesirable” and could result in payment order handling disruption.
Andy Mellor, Portfolio Manager Financial Control Solutions, Risk and Compliance at Fiserv
Andy Mellor, Portfolio Manager Financial Control Solutions, Risk and Compliance at Fiserv
It is understandable that some firms may be taking a wait and see approach, hoping that the longer they wait to migrate, the process may become easier. But, it may be wiser for firms, instead of playing a game of compliance-chicken, to have back office preparations front of mind and begin to act on migration. Otherwise, waiting may not leave enough time to make all the necessary modifications to the internal processes and applications to meet the deadline.
Following are some of the key considerations that organisations faced with SEPA migration need to consider:
Payment processes
Having identified the affected payment processes, a firm will need to review the process flow and associated compliance and risk management controls, such as reconciliations. Data flows in and out of the process are likely to be impacted, either from the use of new ISO20022 standard XML message formats, or through the replacement of domestic account numbering schemes with the International Bank Account Number (IBAN).
Migration to the ISO20022 XML message formats for payment instructions and cash management reporting will force changes to extraction, transformation and load (ETL) processes and, in some cases, may require an upgrade of underlying software programs.
Peeling the IBAN onion is more interesting. Account numbers are widely used to:
control automated processes;
detect compliance exceptions in sanctions or AML controls;
enforce segregation of duties and access controls;
structure review, approval and audit activities; and,
monitor the efficacy of compliance controls, such as reconciliation.
Firms will need to assess how account numbers are currently being used within these processes, and then design adaptations to cater for the new IBAN identifier.
A fracture in time?
The switch to IBAN will also impact any compliance and risk management activities that take a temporal view of activity in an account. Reconciliation key control indicators, r such as the value at risk, are tracked at the account level. Similarly, account activity will be monitored to support behavioral profiling and detection of potential fraud incidents. Preserving this crucial historic intelligence is essential to maintaining these defenses and control monitors. Firms must therefore evaluate how existing fraud systems and data stores should be “IBANised” to avoid fracturing history.
Financial organisation consolidation
Due to the elimination of the concept of domestic and cross-border Euro payments, organisations may no longer need a payments partner in each country. This will enable them to consolidate banking relationships, centralize operations, and realise efficiency improvements and cost savings associated with back office processes across the SEPA zone. Firms should review existing payment provider relationships and plan for how they can capitalise on the consolidation opportunities SEPA offers.
With the February 2014 deadline for SEPA compliance looming, all organisations should already be well underway with their preparations – identifying which processes will be affected and implementing the necessary changes. It is time to embark on SEPA migration. Act now to assure the continued operation of your back office processes.
Publication date: 22 May 2013
Author: Andy Mellor, Portfolio Manager Financial Control Solutions, Risk & Compliance at Fiserv
Tagged with: Andy Mellor, Fiserv, IBAN, SEPA compliance, SEPA Credit Transfer, SEPA Direct Debit schemes, Single Euro Payments Area (SEPA)
Source
Andy Mellor, Portfolio Manager Financial Control Solutions, Risk and Compliance at Fiserv
Andy Mellor, Portfolio Manager Financial Control Solutions, Risk and Compliance at Fiserv
It is understandable that some firms may be taking a wait and see approach, hoping that the longer they wait to migrate, the process may become easier. But, it may be wiser for firms, instead of playing a game of compliance-chicken, to have back office preparations front of mind and begin to act on migration. Otherwise, waiting may not leave enough time to make all the necessary modifications to the internal processes and applications to meet the deadline.
Following are some of the key considerations that organisations faced with SEPA migration need to consider:
Payment processes
Having identified the affected payment processes, a firm will need to review the process flow and associated compliance and risk management controls, such as reconciliations. Data flows in and out of the process are likely to be impacted, either from the use of new ISO20022 standard XML message formats, or through the replacement of domestic account numbering schemes with the International Bank Account Number (IBAN).
Migration to the ISO20022 XML message formats for payment instructions and cash management reporting will force changes to extraction, transformation and load (ETL) processes and, in some cases, may require an upgrade of underlying software programs.
Peeling the IBAN onion is more interesting. Account numbers are widely used to:
control automated processes;
detect compliance exceptions in sanctions or AML controls;
enforce segregation of duties and access controls;
structure review, approval and audit activities; and,
monitor the efficacy of compliance controls, such as reconciliation.
Firms will need to assess how account numbers are currently being used within these processes, and then design adaptations to cater for the new IBAN identifier.
A fracture in time?
The switch to IBAN will also impact any compliance and risk management activities that take a temporal view of activity in an account. Reconciliation key control indicators, r such as the value at risk, are tracked at the account level. Similarly, account activity will be monitored to support behavioral profiling and detection of potential fraud incidents. Preserving this crucial historic intelligence is essential to maintaining these defenses and control monitors. Firms must therefore evaluate how existing fraud systems and data stores should be “IBANised” to avoid fracturing history.
Financial organisation consolidation
Due to the elimination of the concept of domestic and cross-border Euro payments, organisations may no longer need a payments partner in each country. This will enable them to consolidate banking relationships, centralize operations, and realise efficiency improvements and cost savings associated with back office processes across the SEPA zone. Firms should review existing payment provider relationships and plan for how they can capitalise on the consolidation opportunities SEPA offers.
With the February 2014 deadline for SEPA compliance looming, all organisations should already be well underway with their preparations – identifying which processes will be affected and implementing the necessary changes. It is time to embark on SEPA migration. Act now to assure the continued operation of your back office processes.
Publication date: 22 May 2013
Author: Andy Mellor, Portfolio Manager Financial Control Solutions, Risk & Compliance at Fiserv
Tagged with: Andy Mellor, Fiserv, IBAN, SEPA compliance, SEPA Credit Transfer, SEPA Direct Debit schemes, Single Euro Payments Area (SEPA)
Source
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