Reconciliation

Overview

Reconciliation in payments is the process of matching internal payment records against external confirmations (bank statements, network confirmations, settlement reports) to ensure every transaction is correctly accounted for, with no gaps, duplicates, or errors.

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Why Reconciliation Matters

Risk if not reconciled	Impact
Undetected failed payments	Customer funds lost or not delivered
Duplicate payments	Double payment to supplier
Settlement shortfall	Bank exposed to overnight liquidity risk
Unidentified credits	Funds sitting in suspense, not applied
Regulatory breach	Failure to report or account for transactions

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Reconciliation Types

1. Payment Reconciliation (Transaction Level)

Match each internal payment order against network/bank confirmation:

Internal Payment Order  ←→  pacs.002 / pain.002 confirmation
     EndToEndId                  OrgnlEndToEndId
     TxId                        OrgnlTxId
     Amount                      IntrBkSttlmAmt
     Status                      TxSts

2. Account/Ledger Reconciliation

Match posted ledger entries against camt.053 bank statement:

Internal Ledger Entry  ←→  camt.053 Ntry
     LedgerEntryId            AcctSvcrRef
     Amount                   Amt
     BookingDate              BookgDt
     CdtDbtInd                CdtDbtInd

3. Nostro Reconciliation

Match FI's own ledger of a correspondent account against the correspondent bank's statement:

Our Nostro Ledger  ←→  MT940 / camt.053 from correspondent

4. Settlement Reconciliation

Verify actual settlement movements at the central bank (ESA):

Expected net settlement position  ←→  RBA FSS settlement confirmation

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Reconciliation Data Sources

Source	Message	Content
Internal payment system	N/A	Payment orders, statuses
NPP Network	pacs.002	Per-transaction confirmation
SWIFT	pacs.002 / MT199	Status per payment
Bank statement (own)	camt.053 / MT940	All entries for period
Intraday notification	camt.054	Real-time transaction alerts
Settlement confirmation	RBA FSS report	Net position settled

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Reconciliation Process

End of Business Day
        │
        ▼
Collect all internal payment records for the day
        │
        ▼
Receive camt.053 from correspondent/internal bank
        │
        ▼
For each internal record:
  Search for matching camt.053 entry
        │
        ├── MATCHED  → Check amount, date, currency
        │               └── All match → RECONCILED ✅
        │               └── Mismatch  → FLAG for investigation
        │
        └── UNMATCHED → Check pacs.002 status
                          ├── RJCT → Reverse and reconcile
                          ├── PDNG → Carry forward
                          └── No response → Escalate
        │
        ▼
Balance check:
  Statement opening + credits − debits = closing?
        │
        ├── YES → Reconciliation complete ✅
        └── NO  → Investigate discrepancy

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Match Keys (IDs Used for Reconciliation)

ID	Set By	Carried In	Used For
EndToEndId	Originating customer	pain.001, pacs.008, camt.054	E2E payment tracking
TxId	Debtor bank	pacs.008, pacs.002	Interbank transaction matching
InstrId	Sending bank	pacs.008	Instruction-level matching
AcctSvcrRef	Creditor bank	camt.053, camt.054	Statement entry matching
UETR	Debtor bank	All SWIFT messages	SWIFT payment tracking
MsgId	Sender	All messages	Message-level dedup

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Suspense Account

The suspense account is a holding account for transactions that cannot be immediately matched or applied:

Reasons for suspense:
- Inbound payment — creditor account not found
- Credit or debit with no matching payment order
- Amount mismatch
- Pending investigation (fraud, sanctions)

Suspense management:
- All suspense items must be aged and reviewed daily
- SLA: resolve within 5 business days
- Unresolved items escalated to operations management
- Regulatory obligation: cannot hold funds indefinitely

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Reconciliation Statuses

Status	Meaning
MATCHED	Internal record matched to external confirmation
RECONCILED	Matched and verified (amount, date, status correct)
UNMATCHED	No corresponding external record found
DISPUTED	Match found but data doesn't agree
PENDING	Awaiting confirmation (e.g., T+1 settlement)
WRITTEN_OFF	Unrecoverable difference; actioned by finance
IN_SUSPENSE	Held pending investigation

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Java Spring Reconciliation Service

@Service
public class ReconciliationService {

    @Scheduled(cron = "0 0 22 * * MON-FRI")  // 10 PM weekdays
    public void runDailyReconciliation() {
        LocalDate today = LocalDate.now();
        
        // 1. Get all internal payment orders for today
        List<PaymentOrder> orders = paymentRepository.findByDate(today);
        
        // 2. Get camt.053 statement entries
        List<StatementEntry> entries = statementRepository.findByDate(today);
        
        // 3. Match
        ReconciliationReport report = matcher.match(orders, entries);
        
        // 4. Handle unmatched
        report.getUnmatched().forEach(unmatched -> {
            suspenseService.createItem(unmatched);
            alertService.notifyOpsTeam(unmatched);
        });
        
        // 5. Handle mismatches
        report.getMismatches().forEach(mismatch -> {
            investigationService.raise(mismatch);
        });
        
        // 6. Publish report
        reportingService.publish(report);
    }
}

@Component
public class PaymentMatcher {

    public ReconciliationReport match(
            List<PaymentOrder> orders,
            List<StatementEntry> entries) {
        
        Map<String, StatementEntry> entryByRef = entries.stream()
            .collect(Collectors.toMap(
                StatementEntry::getAcctSvcrRef,
                Function.identity()
            ));
        
        var report = new ReconciliationReport();
        
        for (PaymentOrder order : orders) {
            // Try matching by EndToEndId first, then TxId
            Optional<StatementEntry> match = findMatch(order, entryByRef);
            
            if (match.isEmpty()) {
                report.addUnmatched(order);
            } else if (!amountsMatch(order, match.get())) {
                report.addMismatch(order, match.get());
            } else {
                report.addReconciled(order, match.get());
            }
        }
        
        return report;
    }
}

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Reconciliation SLAs

Type	SLA	Escalation
NPP real-time	Intraday	Within 4 hours if unmatched
DE/BECS	Next business day	Within 24 hours
SWIFT	T+1 to T+2	Within 3 business days
Suspense items	5 business days	Finance director sign-off
Nostro breaks	End of day	Treasury escalation

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Related Concepts

• camt053.md — Primary reconciliation source
• camt054.md — Intraday reconciliation triggers
• pacs002.md — Transaction status confirmation
• debit_post.md — Ledger entries to reconcile
• credit_post.md — Ledger entries to reconcile
• payment_return.md — Returned payments affect reconciliation