Corporate treasury teams at multinationals with hundreds if not thousands of bank accounts need to control the opening and closing of accounts, know the identities of account signatories and have visibility to the cash in them. At the same time, managing every operational account from headquarters on a day-to-day basis in every part of the world is not likely to be feasible or efficient.
- The balancing act necessary in bank account management (BAM) requires drawing lines as finance and treasury organizations work to further centralize as they automate operations, standardize processes and manage risk. Centralization can take many forms and often involves regional treasury centers that report to corporate treasury leaders in the U.S. Here’s some more context for the NeuGroup member question below:
How it works at one multinational. An assistant treasurer and NeuGroup member at a mega-cap multinational offered this perspective: “For a highly scaled organization like ours, a majority of payments happen through regional/centralized banking service centers and via our global banking partners with strong controls in place.
- “However, there are certain local tax payments that need to be done only via approved banks (which are typically nationalized and local). In those cases, we have given the country CEO/CFO/legal counsel the signing authority and we ask our regional banking centers to oversee these transactions.
- “All new bank account opening is centrally managed/approved by our regional banking team and regional treasurer.”
- A cash management expert at a global bank noted a trend that “local subs are not allowed to open accounts without approval from central treasury; this is being done to limit the number of bank accounts and reduce opening accounts with non-core banks.”
Member question: “What is the best practice for overseeing foreign subsidiary bank accounts? Should corporate treasury control all such accounts or have the treasurer or AT as a signatory or on the incumbency certificate? - “Our treasurer must approve new bank accounts; all accounts are tracked in Kyriba, and we manage access to online banking. However, a legacy of our highly decentralized operating model is that the majority of our accounts do not have corporate signatories.
- “For those of you requiring a corporate signatory, such as the CFO, treasurer or AT, are there operational difficulties with doing so, such as FBAR reporting?”
Peer answer 1: “It depends on several factors. Consider the number of foreign banks and whether you have the resources in corporate treasury to manage the accounts. Do you have treasury members overseas to be able to manage the accounts or would it be done from the U.S.?
- “Two-thirds of our accounts are overseas, predominately in Europe and they are managed by the finance team (no full-time treasury resource). Per our policy, to open or close a bank account, permission from either the treasurer or CFO is required; also, the treasurer and CFO and one other person from corporate are signatories on the accounts.
- “We also maintain a global bank list of accounts and signers, which is reviewed quarterly.
- “In addition to having corporate signatories, we also have administrator rights on all the electronic platforms. There may be a few countries where it is difficult to add a corporate signer because the person may need to appear at the bank in person.
- “The other issue is KYC: more signers, more gathering of documents!”
Peer answer 2: “We strive for 100% of bank accounts and treasury functions being managed by one corporate treasury team. This gives us the benefit of establishing standardization and best practices as much as possible. We have found a lot of internal financial control risk when accounts are managed one-off by non-corporate treasury members.
- “We do have regional teams dedicated to managing accounts in their respective regions, which gives them comparative advantage from a local rules and regulations knowledge and time zone standpoint. I can see where this would be challenging if you are not staffed globally.
- “Last, we centralize all our information in Kyriba (TMS), which is where all our bank accounts, cash flows, balances and signers are managed. Kyriba has been extremely helpful in centralizing all our critical treasury information and standardizing/establishing best practices.”
- This member further clarified her group’s responsibilities: “My team does not mange any ERP postings or reconciliation. We don’t even have access to the ERPs for the businesses. But we do oversee the daily inflows and outflows for forecasting and funding purposes.
- “It would be extremely hard to optimize our cash (invest, etc.) without us being involved in the daily cash management. We definitely don’t reconcile each one individually; it’s more high level—how much are we receiving and how much are we paying out?”
Peer answer 3: “We manage the opening of foreign bank accounts; no bank accounts can be opened without treasury approval; we manage access to online banking centrally. We do, however, use local signers on the account and on the incumbency certificate. We will typically have someone in the U.S. added as well, but it typically makes it a lot easier to have our local finance directors sign.”
Peer answer 4: “Corporate treasury manages the opening of all bank accounts. We have treasurer/AT, assistant controller and director of our procure-to-pay team as standard signatories for all our bank accounts.
- “FBAR isn’t a blocker but it is an operational lift. Treasury supports the FBAR reporting (tax leads it) for all these individuals. We don’t currently have a TMS so we rely on bank reports for the FBAR reporting. You may need to check your bank’s data retention policy to ensure you are able to pull the required data to support FBAR reporting. I am told this will become easier as we implement a TMS.
- “One operational hurdle we do face though is having to get all the KYC documents notarized frequently while opening international bank accounts. And in some cases, we need to post the notarized documents to the banks before the account can be opened. Tricky in our case as all our signatories are remote and dispersed.
- “And as you consider modifying new signatories, be mindful of the bank mandate requirements in various geographies. In Spain, for example, bank mandates (or banking power of attorney docs) need to be registered with a regulatory body and that process takes months before we can modify the signatories. The length of my response reflects some of my frustration with this entire process!”
