It is not uncommon for companies to have hundreds, if not thousands, of bank accounts. Plenty enough to set up traps along the way for corporate treasurers. Still, there’s reason to be amazed by the lack of internal controls.
As The World Bank explains in their Fraud and Corruption Awareness Handbook, loss of funds through fraud and corruption is quite a « normal » occurrence. A study by the European Anti-Fraud Office has shown a direct loss of 18% in European funds. No need for any number crunching to understand that it is quite a large number. Even so, when auditors are assigned to do check-ups, they’re amazed by the lack of internal controls.
Thus, Bank Account Management (BAM) is nothing to take lightly. It should be a priority amongst treasurers to know how the « delegation of power »-chain is set up and run. Furthermore, focus should be held on how to protect business from fraudsters and corruptors.
What are fraud and corruption?
Fraud & corruption are two broad words with plenty of descriptions being attached to them. It can mean anything from an employee manipulating the system and creating false payment instructions, a manager inflating the balance sheet asset values to cover up poor performance or a supplier providing false invoices resulting in the payment not received.
In some instances, businesses can be a source of corruption. In others, the business is simply a victim. Regardless of which, poor bank account management is what bears fraud. What these scenarios all have in common is that they normally affect the end of the line of directors when it’s time for someone to get charged.
Some might argue it is only fair as an executive knows the responsibility that comes with the job and should oversee all that is going on. Others see the human factor and agree that no one should be accountable for other people’s criminal errors. Regardless, there are solutions in order to be prepared and hold the responsible person accountable.
The two enemies to fight
The two complex words are also the reason to fight a slow and fatigued BAM. They are the two reasons to keep complete control over a corporations bank account management.
A person can commit fraud if they request a guarantee, ask the bank to credit any bank account and then withdraw the money. Easy peasy. Without a strong anti-fraud component within the BAM, who’s to say that a signer won’t take advantage of uncontrolled account access. It can become reality…
Neither should one stay on the downlow around corruption. What if a supplier and a senior official agrees that first named should pay the second « kickbacks » through an agent without any deliverables? That too has, unfortunately, been known to happen…
If these two do occur, which they hopefully won’t, there are ways to minimise the fall. With a simple and easy way to prevent an executive from being hanged if an employee has gone in the wrong direction. Know who is accountable, and stay strong with a centralised BAM. Complete control of all banking relationships at a group level, real-time visibility and control of all functions related to opening, closing, managing and tracking bank accounts and signatories should be a main focus.
There’s no stopping it
Unofficial or hidden accounts, ghost employees or false invoices… They are all tricks for getting fraud to work. According to The World Bank, financial management and contract management are, undoubtedly, most vulnerable.
There are broad oversights trying to fight corruption, there amongst the UN Convention against corruption. Companies are also under pressure to follow the anti-corruption rules of their countries such as the U.K. Bribery Act or the U.S. Foreign Corrupt Practices Act. Though people will be people, and some of them breaking the law is something that occurs on a daily basis.
How to get ahead (and win…!)
Whenever dealing with traceability and preventing fraud one can never be secure enough. In a report by Deloitte, it shows that investors are willing to pay an extra premium for well governed companies. These amounts of course vary from different parts of the world, but it rises as high as 30% extra.
A key to addressing corruption issues is through a strong corporate governance with an effective anti-corruption tool such as a centralised BAM. Fraud Magazine has described one of the best practices in anti-fraud prevention as to have a centralised BAM and be on top of supervision. The same goes for the team at Treasury Today. When they listed their top ways to stay in control, their key factors for setting up a good practice BAM included:
- Centralise bank account management.
- Create an authorisation matrix.
- Review bank connections
- View cash and risk positions in real time.
- Analyse cash flows.
Though there is no way to ever being 100% secure and prevented from experiencing fraud or corruption within a corporation, there are ways to secure the delegation of power. With a secure and centralised electronic bank account management, there is backed up data tracing back to responsible person.
No one can argue anti-fraud & corruption policies are simple tasks. And it shouldn’t be. But it can be facilitated. Outsourcing updates of the chain of delegations can help treasurers focus on other vital tasks, while having security of a certain and regular update.
electronic bank account management to fit your needs
At DiliTrust, we are here to help and ease a transition from manual audits and bank account management to a digital, centralised solution that will benefit all the different teams working with it.
DiliTrust eBAM simplifies tasks that are usually long and complex to implement. It is a complete management tool of the chain of delegations of powers and will help the internal control, preventing risks related to criminal responsibility.
The digital solution we offer will store and link the actions together, creating an electronic bank account management to fit your requests. It ensures complete control of all banking relationships at a group level, and offers real-time visibility and control of all functions related to opening, closing, managing and tracking bank accounts and signatories.
Get in contact with our experts to set up a demo. Our competent consultants will walk you through every step of how we can help fulfil your needs.
Adjust your curiosity and read “Reporting to the board: where cisos and the board are missing the mark. »