Chapter 7: Reconciliation 

1. An illustrative form of a bank reconciliation is included at Appendix I of this Guidance.
2. A fund service provider should reconcile third party collection accounts on a currency-by- currency basis.
3. A fund service provider should establish policies and procedures in relation to:
   • The frequency and method of the reconciliations;
   • The monitoring of transactions through its third party collection accounts;
   • The investigation, identification and resolution of reconciliation differences; an
   • Its record keeping obligations under Regulation 91 of the Investor Money Requirements (IMR).
4. Where a fund service provider outsources the performance of reconciliations, it should have appropriate oversight to ensure that the third party has suitable processes, systems and controls for the performance of this activity. This applies where the outsourced activity is outsourced either intra-group or to an external third party. A fund service provider should also ensure that the output from the reconciliation is subject to thorough review and oversight. The fund service provider should maintain a record to evidence the oversight of the process.

   What a fund service provider must reconcile

5. A fund service provider should reconcile each third party collection account in the currency of denomination; dormant accounts should also be included.
6. The balance on each third party collection account as recorded by the fund service provider should be reconciled with the balance on that account as set out in the statement, or similar document, issued by the relevant third party with which those third party collection accounts are held. The statement or other form of confirmation from the third party may be provided in an electronic format, on condition that the fund service provider retains a copy, either in electronic or hard copy format, and can be reproduced without delay. A fund service provider should ensure that the reconciliation is performed from investor money records that are accurate and that the reconciliation itself is performed accurately.
7. A fund service provider should to be in a position to demonstrate, upon request, the date on which a reconciliation was prepared. This evidence can be in electronic form.
8. A fund service provider should ensure each reconciliation has relevant supporting backup material to facilitate the verification of figures in the reconciliation; the backup material should include statements received from third parties.
9. The manner in which the fund service provider exercises oversight should be documented in the fund service provider’s Investor Money Management Plan (IMMP). The fund service provider should maintain a record to evidence the on-going oversight of the process.

   Material reconciliation differences for the purposes of reporting to the Central Bank

10. When considering whether a reconciliation difference is material, the Central Bank expects the following considerations to be taken into account:
    • The monetary value of the reconciliation difference;
    • The number of reconciliation differences appearing within reconciliations over time;
    • The length of time that a reconciliation difference remains outstanding; and
    • The nature of the reconciliation difference.
11. Taking the quantum of the reconciliation difference into account alone when seeking to establish whether an amount is material may result in a number of low value reconciliation differences being ignored, when in aggregate these issues may prove to be material to a fund service provider. Low value items by virtue of their nature, age or number of occurrences may be indicative of significant underlying issues within a fund service provider, which should be reported to the Central Bank. While not an exhaustive list, in general, reconciliation differences may arise as a result of:
    1. Timing differences: The Central Bank expects any reconciliation timing difference that has not cleared within ten working days to be reported as a material reconciliation difference.
    2. Errors on the part of a third party: It is a fund service provider’s responsibility to contact the third party in order to resolve any errors which it identifies. The Central Bank expects errors which remain un-reconciled in excess of fifteen working days to be reported as material reconciliation differences.
    3. Errors on the part of the fund service provider: The Central Bank expects errors which remain un-reconciled in excess of 15 working days to be reported as material reconciliation differences. However, errors identified in the fund service provider’s records which result in the fund service provider having to lodge own firm money into the third party collection account should be reported to the Central Bank without delay, regardless of materiality.
12. The Central Bank may engage with a fund service provider to discuss how its material reconciliation differences have been determined and to assess if other factors need to be considered.

APPENDIX I

1. Illustrative Format for a Reconciliation

Issued: 4 July 2023

Last revision: 4 July 2023