bank of albania

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BANK OF ALBANIA

AECH PROJECT

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Introduction

• What is AECH?• ACH System Components• AECH Project Implementation Plan• AECH Activities & Responsibilities• AECH Operational Security &

Resilience• AECH Project Communications• Questions & Answers

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What is the AECH?

• An ACH system for the clearing of low value and bulk payments;

• The ACH is owned and operated by the Bank of Albania

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What is an ACH ?

An ACH is:

“an electronic clearing system in which files of bulk (high volume) low value payment instructions (both credit transfers and direct debits) are exchanged among Banks and other credit institutions after the net positions have been settled through RTGS”

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AECH System Components

• AECH Central System

• AECH Workstation

• SWIFTNet or VPN

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AECH Main Components

AECHAECHCentral System Central System

at BOAat BOA

WorkstationWorkstation

BOA AECH SystemBOA AECH System

SWIFT CBT

Webstation

Participant SystemParticipant System Delivery Delivery SystemSystem

Interfaces

Interfaces

oror

VirtualPrivate

Network

VirtualPrivate

Network

SWIFTFileAct

SWIFTFileAct

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AECH Architecture

ParticipantsBackOffice

SystemsELECTRONIC

DELIVERYSERVICE

BillingModule

Access&

Routing

Statistics,Data Storage

andReportingModules

Database

ACH System

COMMON

SSL

INTERFACE

NettingModule

AccountingSpace

DataManagement

Module

AccountTransfersModule

PaymentsModule

ACH Architecture

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AECH Central System

The Central System performs three main roles:

1. Enables files of payment instructions to be exchanged among financial institutions;

2. Calculates the multilateral net positions;

3. Submits a net settlement instruction to AIPS to perform the settlement.

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AECH Central System

Resides with the AIPS application– at both the primary processing site and the

backup site– Uses common facilities:

• Communications control• Secure Email • Oracle reporting from database• Billing• VPN

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AECH Central System

• BOA Users access Central AECH System to:– Carry out system management functions– Monitor the clearing

• Participants use Central AECH System for:– Processing files of payment instructions– Enquiry purposes to track their AECH activity at

any time:• financial data • status of all messages and transactions

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AECH Participant System

• The ACH Participant System: – Operates on workstations at Participant Head Office site– Provides branch data entry facilities– Linked to Central ACH System via the VPN or SWIFT

• The Participant System software:– Web based technology– Dynamically loaded, without User intervention:

First time Whenever a new version is available

– So, can be used on many workstations at once

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• Runs at each Participant Head Office site enabling Participants to:

• Prepare files for the Central ACH System• Send and receive payment instructions (manual and STP), acknowledgements and messages• Inquire about and monitor the status of AECH technical accounts, file processing activity, settlement sessions and multilateral positions • Monitor AECH Central System operational status

• Runs at branches to provide data entry and some enquiry facilities

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Branch data entry and information

• Branches enter payment item data and create secured batches for transmission to Head Office

AECH

Bank’s internal network

Head OfficeBranch

• AECH processes batches and forwards batches and messages to receiving banks via SWIFTNet or VPN

• Head Offices enter or import payment instructions, pass data from internal systems (STP) and transmit batches to AECH via SWIFTNet or VPN

Bank’s internal systems

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• Components–The AECH Participant System consists of two distinct components:

• File Transfer Module (FTM); and• File Preparation Module (FPM)

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• FTM:– Transmits fully prepared and digitally signed files:

From FPM Direct from local storage, or Imported via Straight-Through Processing interfaces

– Handles all interfaces between the AECH Participant System and Central AECH System

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AECH Participant System• FPM

– Provides facility for User-controlled data entry, import and preparation of files – Enables branch or Head Office Users to:

Enter payment instructions at the screen Group instructions into batches and digitally sign them

– Enables Head Office Users to Identify, select and validate files (created by branches or

other internal systems) ready to be imported into AECH Prepare files by:

Formatting / conversion from FIN to xml Sorting into batches for a single receiver and value date Digital signing

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Batches and Files

• Transmitted entities are “files”• Entities processed within AECH are “batches”• Each transmitted file contains only one batch –

single receiver, single date• Each batch has a batch ID

Files

Batches

Central AECH System

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ACH Technical Accounts

• Each payment order file accepted for settlement updates the Net position in the Participant's “technical account” with AECH

– Net position is updated for each file processed for Paying Participant and Collecting Participant

Collecting Participant

Paying Participant

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Types of Payment Instructions

• Small Value Payment Order (SVPO)– A small value payment order (SVPO) is a

credit transfer payment instruction:• initiated by a payer to debit its own account

and• credit the account of a beneficiary

– An SVPO maximum value can be set in the AECH System Rules

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Types of Payment Instructions

• Direct Debit– A Direct Debit (DD) is a debit transfer

instruction:• initiated by a beneficiary to debit the account of

a customer of a Participant and • credit its own account

– An upper limit on the value of a DD can be set in the System Rules

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Daily Cycle

1. Hardware Start

2. AECH system start

3. Housekeeping

4. Open for Business

5. Clearing Sessions – 1, 2, 3 etc..

6. Direct Debit Cut-off

7. End-of-Day

8. Backup & Close Down

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SVPO Clearing Sessions

• For SVPO’s the Clearing Session is divided into periods:– File acceptance – files of payments can be

approved and hence submitted to AECH Clearing– Net settlement set-up– Session conclusion

• Files can be submitted from “Open for Business” until cut-off , but must be approved during a file acceptance period

• Files not Approved by cut-off are rejected

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Participants’ files are:

imported, validated and transmitted to the Central AECH system by FTM

technically validated and received by the Central AECH system pending approval

approved (or rejected) by a second User, via the Central AECH system

approved files are submitted to the Central AECH system.

File Acceptance

Central AECH System:

• technically validates• Central AECH System:

• advises AECH Participant System of rejection or acceptance

• stores accepted files• After Approval and Clearing, Central

AECH System updates net positions

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Net Settlement Set-Up

Central ACH System:• Prepares Net Settlement Instruction (NSI) for submission• Submits NSI to AIPS

AIPS:• Settles NSI• Informs Central ACH System

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Session Conclusion

Central AECH System:• Produces Net settlement report• Produces end-of-session reports• Sends settled SVPO files to collecting Participants

Participants:• Action received files• Review reports and statements• Conduct internal procedures

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DD Clearing Process

• Submission of Direct Debit (DD) files is a separate process from clearing and settlement

• DD files can be submitted during the ACH business day irrespective of SVPO clearing sessions:– Starting from “Open for Business”– Until Direct Debit Cut-off

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DD Clearing Process

• DD files are submitted some days before value date, as specified in the System Rules:– Maximum submission period– Minimum submission period– Waiting period

• Clearing of DD batches is carried out on value date – residual value (net of refusals) is settled

• DD Refusals files can be submitted by Paying Participant up to the end of the Waiting Period

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DD Clearing Process

• DD clearing parameters:

Maximum submission period

Minimum submission period

Waiting period

Value date

eg 5 days

eg 2 days

Actual submission time

eg until DD cut-off on value date - 1

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DD Clearing Process

• DD clearing parameters - example:

Maximum submission period

Minimum submission period

Waiting period

Value date Monday

eg 5 days

eg 2 days

Actual submission time

eg until DD cut-off on value date - 1

Wed Thu FriTueMon Sat Sun

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DD Clearing Process

• DD Clearing is conducted at any time up to Start of SVPO file acceptance:

File Acceptance (SVPO)

Net Settlement Set-up

Start of session

Start of file acceptance

End of file acceptance

Net Settlement submission

End of sessionSession conclusion

DD Clearing

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DD Clearing Process

• Central ACH System uses the residual value of a batch (ie net of refusals) for clearing

• Once entered into the Direct Debit clearing process on value date, the batch is accepted for settlement and becomes “CLEARED”

• When the NSI for the clearing session has been settled in AIPS, the batch is marked as “SETTLED”

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Irrevocable Payment Instructions

• Once “technically accepted” by AECH and Approved by the Participant, batches cannot be cancelled or withdrawn

• But payment instructions are “irrevocable” only after AIPS settles the NSI

• Incorrect SVPO instructions must be returned as new items by the Collecting Participant, quoting original reference

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Reports & Charts

• ACH produces comprehensive End-of-session and End-of-day reports

• You can request intraday reports and a variety of Charts during a Clearing Session to review current activity

• The Audit Report and some charts used in the management of the AECH are only available to BOA

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Report Delivery

• Reports displayed on the screen can be printed, and/or saved on the Participant's workstation

• Official, signed copies of regular reports:– Can be downloaded and saved on the Participant’s

external system – Constitute the formal record of ACH Participant

activities

• Report data can be downloaded in spreadsheet form for analysis

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Report Delivery

• Customised reports can be requested from BOA, delivered and signed by secure email to Participants

• There may be a charge for customised reports

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Types of Reports

• Reports Related to Clearing Sessions – Net settlement instruction set-up report – ACH Net settlement report– End-of-session report – Position report

• Reports Related to End-of-Day – End-of-day report – Recap report – Direct Debit report– Audit report (BOA only)

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Types of Charts

• Various charts showing activity in the Clearing are available to Participants – own data only

• Comparative charts, showing data for all Participants, are available to BOA only

• These charts help the BOA manage the Clearing Sessions and analyse the activity of Participants

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Accounting and Transaction Audit Trails

• AECH automatically creates accounting and transaction audit trails of all business operations entered into the system:– time message, transaction or data update received– ID of the person (or system) entering the transaction– ID of the person (or system) modifying or approving

the transaction– time and change of status of any transaction held in

the system

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Accounting and Transaction Audit Trails

• Each system entity which is displayed on a screen has audit information beneath it, showing the history of changes, eg:– Timetables and calendars– Groups, Participants, Users and Profiles– Messages and transactions

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System and Event Audit Trails

• AECH system and event audit trails (System Logs) encompass enquiries as well as business operations

• System-initiated events are also recorded

• The System log can be viewed from the menu, with a wide range of filters and selections

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AECH Project Implementation Plan

MAJOR PROJECT TASKS

START

FINISH

Initial Study and Initial Report 20/10/04 03/12/04

Hardware Procurement, installation, testing &

acceptance 08/11/04 28/01/05

Software customisation, delivery, integration

testing & acceptance 06/12/05 21/02/05

AECH Rules & Procedures and both BOA & Banks

Internal Procedures 06/12/04 11/02/05

User & Technical Documentation 17/01/05 18/02/05

Training 28/02/05 18/03/05

User Acceptance Testing (UAT) 21/03/05 29/04/05

Trial Runs 09/05/05 20/05/05

Live Preparation 23/05/04 26/05/05

LIVE DATE 27/05/05 27/05/05

Live Operation 27/05/05 ONWARDS

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AECH Activities & ResponsibilitiesAUTOMATED ELECTRONIC CLEARING SYSTEM (AECH)

High Level Project Responsibilities Matrix

Site

Preparation

PROJECT TASKS

PROJECT

TEAMS Par

tici

pan

t C

oord

inat

ors

Mee

tin

gs

Pri

mar

y

Fal

lbac

k

AE

CH

Sof

twar

e

Har

dw

are

Com

mu

nic

atio

ns

Net

wor

ks

(Pri

mar

y &

Fal

lbac

k Si

tes)

SW

IFT

Net

In

fras

tru

ctur

e

Bac

k O

ffic

e

Inte

rfac

es

Hum

an R

esou

rces

(U

sers

& O

pera

tion

s S

taff

)

Ru

les

of O

per

atio

n

& P

roce

du

res

Tra

inin

g

Acc

epta

nce

Tes

tin

g

Rea

din

ess

to g

o li

ve

Liv

e O

per

atio

ns

Montran Team Attend

Rev

iew

Rev

iew

Supply & install at

BOA

Support Tender,

integration & Test

Support Procurem

ent & Test

Liaison with SWIFTo

Support

identification Support

drafting and review

Supply Support Support Support

SWIFT

(If applicable)

Test

Fallback Site

Supply all necessary facilities

Supply (If

applicable)

Off-site Support

Off-site Support

Support

Hardware & Comms Suppliers

Supply, install &

Test

Supply, install &

Test

Supply (If

applicable)

Support Support Support

BOA Arrange &

Attend

Pre

pare

Pre

pare

Tender,

Order, Test & Accept

Test & Accept

Upgrade Interfaces if

required

Identify people

Produce Rules & Regulations,

Internal Procedures,

legal framework &

Contract

Coordinate & Undergo Primary

Role Trial run

Participants Attend

Pre

pare

Pre

pare

Order & install (If

necessary)

Order & assist

with test

BOTH

Check licence banding and order necessary facilities

Upgrade Interfaces

(If required)

Iden

tify

pe

ople

Produce Internal

Procedures. Sign AECH

Contract

Undergo Secondary

Role Trial run

27th

MA

Y, 2

005

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AECH Operational Security & Resilience

Communication Environment – PKI, encrypted VPN and/or SWIFT

Access Security Authentication Smart Card Logon Fallback Site and Installations Remote Logging VPN Fallback

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AECH Project Communications

• AECH Participant Coordinators Meetings

• AECH Project Documentation and communications

• AECH Support Email Address

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Questions & Answers

• Over To You

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