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59% of accountants make several financial errors a month - Industry roundup: 23 February

Capacity constraints see 59% of accountants make several financial errors a month 

Some 18% of accountants make financial errors at least daily, with a third making at least a few financial errors every week and over half (59%) making several monthly errors, according to a recent survey by Gartner, Inc. The survey of 497 individuals working in the controllership function, conducted in July 2023, revealed that these errors were closely linked to concerns about low capacity.

“While capacity issues aren’t new to accounting, demands on accounting staff capacity continue to rise,” said Mallory Barg Bulman, senior director, research in the Gartner Finance practice. “In the past three years, 73% of accountants report that their workload has increased because of new regulations, and 82% say economic volatility has increased demands for their work. If these financial and regulatory pressures continue to increase, as history suggests it will, the already-limited capacity accountants will be stretched further and increase error rates.”

The survey asked accountants how often they or their peers made common errors such as those due to manual work, automation, those made by other internal business partners, insufficient review, reopening books, misinterpretation, or volume/complexity overload.

“Financial errors can have tangible business consequences. When accountants make errors — and those errors make their way into the monthly or quarterly close — the enterprise may make business decisions based on incorrect data or, worse, issue inaccurate financial statements,” said Bulman.

Efforts to increase capacity through finance technology have not yielded the expected gains. Given technology’s importance to the accounting team’s ability to reduce errors, Gartner experts tested what improved technology outcomes.

“It stood out that when users displayed acceptance of the technology they were using in accounting, they used it much more effectively, realised capacity improvements, and made significantly fewer errors,” said Bulman. “It’s better to have less technology with a workforce that accepts it than to have the cutting edge of technology and resistant employees.”

Four elements define technology acceptance in this context. Users must find it easy to use, easy to learn, easy to customise for their own needs, and it must have all the information the user needs in one view. Companies that digitise with high technology acceptance for their technology environments see a 75% reduction in financial errors.

“In this survey, 73% of accountants felt that the technology available to them is missing one or more of the four elements of acceptance,” said Bulman. “The accounting functions that are managing to build technology acceptance don’t necessarily have different technology: building acceptance is more to do with putting in place practices that allow staff to perceive technology as easy to use and helpful.”

Gartner experts recommend three best practices to build technology acceptance:

  1. Incorporate structured staff feedback into vendor testing and prioritising technology enhancements.
  2. Replace old behaviours with new ones and lean on tenured staff to guide the way.
  3. Provide transparency into errors and the resolution of errors.


SWIFT promotes ISO 20022 adoption

In a News post on its website, SWIFT has again been banging the drum for why financial institutions should adopt the ISO 20022 payment message standard. The post uses reasoning from various banking partners of SWIFT as to why FIs and their clients will benefit from the transition, boiling down the advantages into five critical reasons for action. 

Coming in at number 4 on the list, but possibly of most interest to CTMfile readers, is “strengthen corporate treasury activities”. Ross Jones, Head of Payments, at Barclays Global Transaction Banking, highlighted how ISO 20022’s enhanced data element improves reconciliation. “This means from a corporate treasurer's perspective, especially a large corporate and multinational with complex businesses, complex payment corridors, and operating in some challenging markets, they are able to reconcile their payments much more quickly.

“With instant and accurate information on their real-time liquidity positions, corporates can automate models and tools to make better-informed, instantaneous decisions on an intra-day basis.”

Jones added, “What does this mean for customers? While no customer explicitly asks for ISO 20022 by name, they do demand reduced friction, enhanced straight-through processing (STP), and better reconciliation. These advancements in banking infrastructure are not just about compliance or back-end efficiency. They are crucial enablers that allow customers to streamline their operations and focus on what they do best.”

The other key reasons listed are to streamline financial crime compliance, enhance customer insights, improve payment exceptions and investigations, and offer new value propositions.

“[ISO 20022 is] a fundamental building block of our payment ecosystem and infrastructure,” noted Dougal Middleton, Vice President, Enterprise Payments at Scotiabank. “Structured data now underpins everything we’re doing, whether domestic or cross-border, to achieve better reconciliation, better service offerings, and more efficiency for our customers.”


Hong Kong should use fiscal reserves to boost regional HQ status - KPMG

KPMG believes the Hong Kong government should introduce measures in its upcoming budget to not only ensure a stable economy with sustainable growth but also to prepare for potential challenges that may arise from various factors, such as high interest rates, as it is anticipated that Hong Kong will continue to record a fiscal deficit for 2023-2024. 

The Hong Kong government will record a HKD130bn deficit for the fiscal year 2023/24, according to KPMG forecasts, driven by reduced land-related and stamp duty revenue. KPMG estimates the city's fiscal reserve will stand at HKD705bn by the end of March 2024. The government should strategically utilise its fiscal reserves to bolster Hong Kong’s competitiveness and seize the emerging opportunities that lie ahead.

The presence of regional headquarters in a city is an essential factor in its role as an international financial centre to attract and grow local businesses. KPMG proposes adopting 50% of the standard tax rate for qualified profits derived from regional headquarters in Hong Kong to help attract more global companies to set up here. It also suggests introducing special tax loss relief to encourage taxpayers to invest in start-ups and R&D. 

As a part of the Greater Bay Area (GBA) initiative, KPMG suggests the government could provide an accelerated tax depreciation allowance for fixed assets for set-ups in the Northern Metropolis. To boost R&D activities and the interchange of ideas within the GBA and maintain the competitive edge of Hong Kong’s tax system, the government could revisit the enhanced tax deduction for R&D expenses and extend it to cover R&D activities carried out in the GBA.

Regarding the measures to support local business and livelihood, KPMG recommends providing tax deductions for childcare and eligible families with domestic helpers. Working parents with children aged 16 or below or disabled dependents who are cared for by their grandparents can be provided with an allowance of HK$50,000. Additionally, KPMG suggests increasing the child allowance and implementing a 100% tax rebate, capped at HK$6,000, for Profits Tax, Salaries Tax, and tax under Personal Assessment.


EU Parliament votes through changes to payment services regulation

Economic and Monetary Affairs MEPs have voted for more open and competitive payment services sector in the EU, with strong defences against fraud and data breaches. MEPs’ changes to the Payment services regulation were adopted with 39 votes to 1 and 3 abstentions. The regulation should provide more harmonisation in the EU for payment and electronic money services. It applies to banks, post office giro institutions and payment institutions.

MEPs agreed that the unique identifier (a combination of letters, numbers or symbols specified by a PSP or a user, such as IBAN) should be verified free of charge for credit transfers. Moreover, PSPs should ensure strong customer authentication based on using two or more elements categorised as knowledge, possession or inherence and on a risk assessment.

Where a PSP fails to have in place the appropriate fraud-preventing mechanisms, it will be responsible for covering the customer’s losses resulting from fraud. Technical service and IT solution providers could also be held accountable for damages (up to the transaction amount) caused by a failure within the remit of their contract. Finally, online platforms would be liable if they were informed about fraudulent content on their platform and did not remove it.

The new text expands the right to refund to cases of “spoofing”, where fraudsters pretend to be from a customer’s bank. MEPs extended that right to cases where fraudsters pretend to be from other types of organisation. MEPs also called for Member States to invest substantial means in education on payment-related fraud through a media campaign or school lessons.

Along with provisions for data security, transparent charges, and better access to cash, MEPs also agreed that new players should be able to enter the EU payment services sector, subject to authorisation based on strict and comprehensive conditions. The same conditions should apply Union-wide to providing payment services, including electronic money services, and the legislation should remain technology-neutral.

Considering the rapid evolution of the retail payment market and the constant new offering of payment services and solutions, it was appropriate to adapt and clarify some definitions, including the definition of “payment account”, which is now defined as an account used for both sending and receiving funds to and from third parties.

All undertakings intending to provide payment services or electronic money services will have to apply for an authorisation. Such an application should, among others, contain a business plan and set out the type of payment services envisaged, as well as security, data protection and governance arrangements and a winding-up plan in case of failure. To cover the risks posed by their activities, PSPs will need to hold a minimum initial capital between €50,000 and €350,000, depending on the type of services they provide. MEPs agreed that existing payment and e-money institutions will not have to seek a new authorisation under the directive, but would follow a simplified process with their competent authority.


Qatar Central Bank to launch FAWRAN instant payment service

In line with the Third Financial Sector Strategy and based on Qatar Central Bank's efforts to develop the payment systems infrastructure and keep pace with the latest developments in payment systems and electronic funds transfer, Qatar Central Bank will launch the instant payment service FAWRAN in March this year. 

Issued by the Qatar Central Bank in 2023, the Third Financial Sector Strategic Plan aims to create a financial and capital market that leads the region in innovation, efficiency and investor protection and positions Qatar to unlock its full economic potential in line with the 2030 National Vision.

The Strategy is founded on four pillars of banking, insurance, digital financial ecosystem, and capital markets. There are five cross-cutting themes to support the strategic pillars to ensure the foundations for successful implementation and delivery: governance and regulatory oversight, Islamic finance, digital innovation and advanced technologies, ESG and sustainability, and talent and capabilities. FAWRAN falls within the initiatives in digital payments and transfers in Qatar.

According to a statement by the central bank, FAWRAN can be used to instantly send and receive funds and simplify transactions by using alternative identifiers, such as a mobile phone number, in place of an IBAN. Access to the service will be available 24/7.


Bottomline unveils enhanced internal threat management solution

Bottomline has launched enhancements to its technology to help banks and non-banking financial institutions monitor, detect, and prevent fraud from happening inside the business. The solution is designed to help organisations better use data visualisations, threat profiles and advanced case management strategies in fighting insider fraud.

The solution builds on its “record and replay” screen capture technology for non-invasive insider monitoring by creating dashboards that illustrate critical data and core financial system access attempts and tracks them back to unauthorised users. It also provides information technology and security professionals with more than 100 potential threat profiles based on Bottomline’s experience in detecting and defending against the scope of insider fraud.

Data violation and theft by employees, consultants, and those with access to insider credentials is on the rise. A 2023 report by the Ponemon Institute suggests that companies admitted to underfunding their insider risk programmes and spending more money on remediation than prevention.

Bottomline’s internal threat technology offers financial institutions on-premise and SaaS-based solutions to tackle fraud. Instead of relying on log files for post-fact manual audits, risk teams can use screen-by-screen record and replay technology along with hundreds of analytical scenario rules. By combining data from different systems, risk experts should be able to investigate, triage, and report potential frauds within an expansive ecosystem rather than in isolated cases.

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