Bank Statement Analysis in Wealth Management: Streamlining Your Financial Data

Anti-money laundering (AML) compliance has become a critical concern for wealth management firms worldwide.  Estimates suggest that around $2 trillion is laundered globally each year, highlighting this financial crime challenge's significant scale and complexity.

This is why verifying bank statements is crucial, as it helps to spot risks and ensure secure finances for their clients. 

What is bank statement verification?

Bank statement verification is a crucial process that ensures the integrity and validity of a bank statement. This process verifies the accuracy and authenticity of the statement. Confirming its reliability and aligning it with other financial records is crucial.

They are crucial in monitoring cash flow, detecting fraud, reconciling accounts, and preparing taxes. Bank statement analysis is often required for financial planning and compliance with audit regulations. This also ensures that transactions are secure and legitimate. They are reliable records of financial transactions, providing valuable information to verify, analyze, and decide on their finances.

Why do wealth management firms need to verify bank statements?

A survey by FinTech Plaid found that document fraud was the most prevalent type, with 61% of organizations reporting incidents. Wealth management firms need to verify bank statements for several reasons:

1. Client Due Diligence

Verifying bank statements is crucial to the client onboarding process. It helps wealth management firms assess prospective clients' financial health and credibility.

2. Risk Management

By scrutinizing bank statements, wealth management firms can identify any irregularities or discrepancies that may indicate potential risks, such as fraudulent activity or money laundering.

3. Compliance Requirements

Financial regulations require wealth management firms to conduct thorough due diligence on their clients, including verifying their financial assets and sources of income. Bank statement verification helps ensure compliance with regulatory standards.

4. Investment Planning

Accurate bank statement verification provides wealth managers with valuable insights into clients' financial situations, allowing them to tailor investment strategies and recommendations accordingly.

What wealth management companies typically look for in a company’s bank statements?

Wealth management firms look for the following financial details:

1. Fund check: They check bank records to confirm if money is available. Doing this lets them understand if the company can cover its investments and bills.

2. Address: Bank records usually have the company's address. They cross-check this with other papers for correctness. This helps show the company's identity and location.

3. Balance: Wealth management companies use bank records to see the company's cash situation. This is important for making investment choices and checking the company's financial security.

4. Identity check: Bank records show the account holder's identity. Wealth management companies use a process to verify that a company's identity matches other documents. 

5. Transaction history: Bank records show financial transactions made by the company. The list provides valuable insights into the financial trends. This helps management companies assess risks and make informed decisions.

6. Debts and liabilities: Financial documents, like bank statements, can show any company's debts. These include loans, credit card debt, or bank account overdrafts. Wealth management companies use this data to recognize a firm's financial responsibilities. It helps them understand the company's overall financial condition.

7. Compliance with Regulations: Wealth management companies also check if the company follows rules, like anti-money laundering (AML) and customer identification (KYC) protocols. Reviewing these confirms companies are adhering to the law and reducing the risk of fraud.

How wealth management firms can stay compliant with bank statement verification?

A recent document fraud report reveals that in 2022, 79% of financial institutions experienced a surge in document fraud (7.65%), doubling in 2023 (13.7%), indicating a concerning trend. This calls for a stricter verification process, especially for wealth management firms.  Improve or poor verification of bank statements could lead to the following:

• Financial losses
• Legal consequences
• Reputational damage
• Regulatory non-compliance
• Loss of investor trust

Wealth management firms must focus on minimizing risks and adhering to the rules. To achieve this, it's essential to implement stringent measures to identify and prevent fraudulent activities. Vigilant questioning and comprehensive fraud detection checks are good practices. 

Harnessing the latest technologies to help prevent fraud is also crucial. Hence, firms must stay abreast of laws and ensure crystal-clear communication. Additionally, they must consistently monitor and check their processes.

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How do wealth management firms verify bank statements?

There are various methods available to verify the details of an account. Some may use codes to match the account number pattern with the specific rules of a bank or country. Others may make small deposits to check if a bank account is active or use multiple security measures to confirm a customer's identity.

No matter the chosen verification method, the prime aim is to check if an account is real and lower the chance of financial risks or possible fraud. There are two main methods for verification: manual and automation using technology. Let's have a look at them.

Manual extraction

In this method, professionals manually review bank statements provided by clients. They identify important information like account details, transaction history, and balances. Then, they manually enter this data into the firm's systems or databases. To ensure accuracy and completeness, the entered data is checked twice by comparing it with the original bank statements. 

They speak with customers to fix the problems and ensure accurate verification of any differences or missing details. Let's have a look at the steps involved in manual extraction.

Automation using technology

This method uses cutting-edge technologies. It automates and refines the bank statement verification process. It detects subtle signs of fraud, including:

• Errors in amounts, dates, or payees
• Issues with fonts, alignment, logos, or layout
• Duplicate entries or numbers
• Unusual spending patterns

This technological advancement enables lenders, financial institutions, and accountants to verify bank statements. It also helps them detect fraudulent activities.

Banking statement extraction using automation saves millions of dollars. Moreover, they are vital in combating the rise of financial crime. 51% of organizations report experiencing fraud in the past two years. Thus detecting fraudulent documents has become vital.

Below are some of the modern technologies used to verify bank statements:

Optical Character Recognition (OCR)

OCR extracts critical text and data from both scanned and digital bank statements. This includes identifiers, transaction details, dates, amounts, and account numbers. This includes conducting consistency checks, recognizing patterns, and comparing against official records. This ensures accuracy and reliability.

Artificial Intelligence (AI) and Machine Learning (ML)

AI and ML models enhance verification by identifying outlier transactions. They distinguish legitimate statements from fraudulent ones and learn to detect manipulated elements. Combining these techniques with human intelligence enables investigators to analyze larger volumes of bank statements. They also escalate higher-risk documents for further review. Processing more bank statements leads to smarter algorithms. It eventually expands its database to handle more types of financial documents. Additionally, with continued use, the technology's accuracy improves over time.

Application Programming Interfaces (API)

APIs help systems interact, share data, and help wealth management firms boost efficiency by automating verifications.

This integration allows easy access to current data from the bank. It cuts out manual input and lowers the chances of inaccuracies. Firms can use APIs to get and check banking records and ensure the authenticity of the documents.

If you have to choose between manual vs automated verification, it's a no-brainer. Automation using technology is the best way to verify bank statements. This is further supported by the manual extraction method being time-consuming and tedious. 

Automating data verification with technology like Docsumo offers many benefits. It is better than manual methods and offers improved efficiency, accuracy, and scalability. Docsumo's intelligent document processing capabilities, including OCR and NLP-based classification, enable seamless data extraction from various documents. 

This was demonstrated in a case study where PayU, a multinational fintech company, leveraged Docsumo's automation to enhance customer onboarding processes and ensure data accuracy. This shows how well Docsumo automates data extraction and improves business operations.  

How to Automate Bank Statement Verification for Wealth Management Compliance & Efficiency?

Here’s how you can use Docsumo to collect financial information from bank statements automatically.

• Docsumo employs OCR technology to analyze digital or scanned bank records
• Extracts transaction details, account numbers, and amounts spent or deposited
• Simplifies budget management, expense tracking, and bookkeeping
• Converts paper financial records to digital format
• Facilitates easy access, analysis, and organization of records

In the article, we have explored the benefits of bank statement verification automation. We examined its role in wealth management. We discussed how automation streamlines the process, reduces errors, and saves time.

When considering the route, it becomes clear that automation is a no-brainer. It eliminates manual data entry and human errors. It also provides real-time access to accurate and reliable information. This supports effective decision-making. With automation, wealth managers can focus on strategic tasks. They can deliver exceptional services to their clients.

Docsumo has advanced technology and intelligent data extraction capabilities. It ensures seamless bank statement verification. It simplifies the entire process, delivering accurate results. This enables wealth managers to make informed decisions with ease.

Start using Docsumo's automated bank verification today for seamless wealth management operations.

FAQs: Bank Statement Verification Automation in Wealth Management

a. What is the purpose of a bank statement for a business organization?

A bank statement provides a business with a summary of its monthly transactions. It includes account numbers, deposits, withdrawals, and a detailed list of transactions.

b. What is the difference between a bank statement and an account statement?

A bank statement is a summary of transactions in a specific bank account. It covers a certain period, a month. It includes details like deposits, withdrawals, and balances.

An account statement provides a comprehensive summary of all financial transactions. It also includes account balances, accrued interest, and fees. It includes savings, credit card, and brokerage accounts.