The financial services sector is vast and covers various financial accounting. Hence, the core objective of anti-money laundering (AML) regimes is protecting the financial system’s integrity.
The AML plays a well-established role in protecting and facilitating functional financial systems.
In this AML regime, banks remained the initial focus for a long time as money transactions occurred mostly via banks. Apart from the banking services, the AML regime eventually went beyond to cover other financial and non-financial institutions.
This article presents five effective steps that will help in safeguarding financial integrity.
Read on to discover a few ways to secure your financial accounting system.
Financial Accounting Meaning
Financial accounting is a segment of accounting that deals with a variety of activities, such as recording, analysing, and reporting transactions.
These procedures are the outcome of company activities that occur over time. Financial statements such as the cash flow statement, balance sheet, and income statement are generated to provide an overview of these operations.
These statements record the performance of a company’s operations over a time period.
Financial accounting may be carried out under two methods— the accrual method, wherein recording is done for expenses of items that have not been paid yet, and the cash method, where recordings are done only for cash transactions.
5 Ways to Effectively Secure Financial Integrity
The steps below ensure the process of keeping financial integrity intact in financial accounting:
1. Authentication of transactions
This step entails confirming the identity of the person initiating the transaction. This security mode applies to digital payment customers, customers who visit the banks in person, customers who use credit/debit cards at either POS terminals or ATMs, and all customers who have access to banks’ data.
Initially, the authentication was simpler as it required only an ID with a password or a PIN. However, of late many banks have implemented two-factor authentication and multi-factor authentication. This authentication process reaffirms the person’s identity in better terms.
Another technique of authentication implemented by banks is biometric authentication. In this technique, the customer's identity is verified through behavioural biometrics, i.e., their interaction with banking systems like IVR.
2. Maintaining audit trails
Passbooks always carry the history of banking transactions as a statement. In addition, banking systems support an audit trail whenever a customer interacts with the systems. This applies to both online and offline customers. Every time a customer interacts, the details of the interaction get recorded.
The data extracted from audit trails is backed up daily and archived at specific intervals without being completely dismissed.
3. Securing infrastructure
A secure infrastructure stores the database systems and servers with certain boundary establishments that secure the data. Any core banking system generally encodes production data. Important data such as customer name, bank account number, and address are mandatorily concealed if testing is required. Access to production systems, under any circumstances, is deprived.
Vendors dealing with infrastructure generally differ from the ones dealing with applications. Special equipment is usually given to bank employees that prohibits access to personal emails, USB ports, etc. They can only retrieve the banks’ network using public Wi-Fi over a VPN.
4. Securing processes
There have been several security implementations by the banks. These implementations include different modes of security for different categories of people. For instance, KYC (Know Your Customer) updates are for customers, NDA (Non-disclosure agreement) is for vendors and employees, etc.
DLP or Data Loss Prevention solutions enable banks to diminish insider threats. These solutions are also helpful in meeting the requirements of GDPR, a data protection regulation.
Implementations of processes are also performed at local and global regulations levels to ensure that the processes are aligned with the requirements.
5. Communicating regularly
Banks communicate with their customers regarding authentication procedures, system upgrades, generating account statements, etc. If any unforeseen activity occurs in the accounts, customers can set alerts to get notifications.
There are various modes of communication at customers’ disposal, and they are kept flexible for convenience. Hence, customers can opt for at least one of the modes to keep track of their accounts.
Safeguarding financial integrity is one of the core responsibilities of financial accounting. With the various implementations of security processes, it can be said that financial integrity is in safer hands.
The ways mentioned above are efficient in protecting financial integrity against data breaches.
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