1 BANK OF ALBANIA AECH PROJECT

2 Introduction What is AECH? ACH System Components AECH Project Implementation Plan AECH Activities & Responsibilities AECH Operational Security & Resilience AECH Project Communications Questions & Answers

3 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

4 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”

5 AECH System Components AECH Central System AECH Workstation SWIFTNet or VPN

6 AECH Main Components AECH Central System at BOA Workstation BOA AECH System SWIFT CBT Webstation Participant System Delivery System Interfaces or Virtual Private Networ k Virtual Private Networ k SWIFT FileAct SWIFT FileAct

7 AECH Architecture

8 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.

9 AECH Central System Resides with the AIPS application –at both the primary processing site and the backup site –Uses common facilities: Communications control Secure Oracle reporting from database Billing VPN

10 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

11 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

12 AECH Participant System 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

13 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

14 AECH Participant System Components –The AECH Participant System consists of two distinct components: File Transfer Module (FTM); and File Preparation Module (FPM)

15 AECH Participant System 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

16 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

17 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

18 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

19 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 Reference: User Manuals – System Overview

20 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 Reference: User Manuals – System Overview

21 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

22 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

23 SVPO Clearing Sessions 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

24 SVPO Clearing Sessions 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

25 SVPO Clearing Sessions 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

26 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

27 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

28 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

29 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 WedThuFriTueMonSatSun

30 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 session Session conclusion DD Clearing

31 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”

32 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

33 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

34 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

35 Report Delivery Customised reports can be requested from BOA, delivered and signed by secure to Participants There may be a charge for customised reports

36 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)

37 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

38 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

39 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

40 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

41 AECH Project Implementation Plan

42 AECH Activities & Responsibilities

43 AECH Operational Security & Resilience l Communication Environment – PKI, encrypted VPN and/or SWIFT l Access Security l Authentication l Smart Card Logon l Fallback Site and Installations l Remote Logging l VPN Fallback

44 AECH Project Communications AECH Participant Coordinators Meetings AECH Project Documentation and communications AECH Support Address

45 Questions & Answers Over To You