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Accounting System Role

The Crucial Role Your Accounting System Plays in Protecting Client Data

In today's data-driven world, the importance of maintaining the utmost security for sensitive financial data cannot be overstated. This is particularly true for multi-family offices (MFOs), that serve high-net-worth individuals and families, managing their wealth and financial affairs.

MFOs handle a variety of financial data, from investment portfolios to estate planning, and the preservation of client privacy and security is paramount. These clients are often targeted because of their wealth and notoriety, by both external and internal sources. Beyond financial data, breaches can also lead to the embarrassing exposure of private information for your high-profile clients. And they can ruin your reputation as a trusted business partner. One well-publicized breach could cost you multiple clients.

One key tool in safeguarding this data is a robust accounting system. In this blog post, we'll explore the vital role accounting systems play in ensuring the security of client financial data at multi-family offices.


Adopt a Multi-Layered Approach to Security

As you search for ways to better protect client information, look for an accounting solution that offers a multi-layered approach to security including:

Role-based permissions:

Your accounting solution should help you retain tight control over account access. You need ways to define which of your employees, and which members of your clients’ staff or family, can access which accounts. You might allow one of your employees to access the credit card account for your client’s charitable foundation, but not the client’s personal checking account.

You should also be able to set policies for what users can do if they have access to an account. For example, you might give your client’s personal assistant the ability to view bank account information but allow only your client to approve payments to vendors.

Two-factor authentication:

In addition to using role-based permissions, your accounting solution should employ two-factor authentication to help ensure that users really are who they say they are. An additional authentication layer for the payment process can help prevent unauthorized people from making fraudulent payments.

Environmental security:

If you choose a cloud-based accounting solution, ensure the cloud service provider can demonstrate the highest level of data and systems security where your clients’ financial data is stored. That cloud environment should comply with rigorous Service Organization Control (SOC) regulations. In addition, data centers where the cloud solution is hosted should be hardened, resilient, and rigorously enforced controls for physical access.

The accounting solution should also have sufficient business continuity and disaster recovery strategies in place. You need to be sure your clients can continue to conduct business transactions such as paying vendors even if a server fails or a data center floods. In most cases, opting for a cloud-based accounting service will enable you to protect mission-critical data more cost-effectively than implementing business continuity and disaster recovery solutions on your own.

Fast reconciliation plus auditing capabilities:

You need to spot any problems fast. The sooner you can identify fraudulent charges or unauthorized payments, the sooner you can alert fraud experts and reclaim lost funds. An accounting solution that is integrated with a banking system can accelerate reconciliation and enable you to pinpoint issues right away.

Audit trails can help you figure out what went wrong and who is responsible. Your accounting solution should track every action—from scanning the new invoice to authorizing payments. Audit trail capabilities not only help with post-incident investigations, but also serve as a deterrent against insider fraud.

Best practices:

Tightening security often requires more than deploying a new solution. You might need to educate your staff about the best ways to safeguard sensitive information. Some businesses will need to redesign their workflows to make sure staff members aren’t inadvertently creating security risks. Your accounting solution vendor should be able to help you implement best practices to strengthen security. Outside consulting firms with security and compliance specialists can also be helpful when you require a thorough assessment of your processes.

When you’re responsible for securing your clients’ highly sensitive personal and financial data, your accounting solution can play a vital role in keeping data safe. Selecting a solution that employs a multi-layered approach to security helps minimize risks for your clients and your business.

This article and the information contained herein is for general information and education only. It is provided as a courtesy to the clients and friends of AgilLink. AgilLink, as a matter of policy, does not give tax, accounting, regulatory or legal advice, and any information provided should not be construed as such. Rules in the areas of law, tax, and accounting are subject to change and open to varying interpretations.  You should consult with your other advisors on the tax, accounting and legal implications of actions you may take based on any strategies presented, taking into account your own particular circumstances.

AgilLink is an RBC company and an affiliate of City National Bank Member FDIC.

City National Bank is a subsidiary of Royal Bank of Canada. Deposit products and services are provided by City National Bank.