Unlocking the Value of ISAE 3402 Type 2 Certification: Insights from Albert Cilia

In 2023, our Malta Funds team proudly raised the flag of achievement when they received the prestigious ISAE 3402 Type II certification. Now, in 2024, we are delighted to confirm our successful recertification at this operational gold standard.

But why do we strive for this accreditation and how does it benefit our Alternative Investment Fund Manager (AIFM) clients?  

Understanding ISAE 3402 

ISAE 3402, the International Standard on Assurance Engagements No. 3402, is a global benchmark set by the International Auditing and Assurance Standards Board (IAASB). It guides service organizations through an independent examination of their controls relating to financial reporting, offering clients assurance on the effectiveness of these controls. 

Types of ISAE 3402 Reports 

• Type I Report: A snapshot evaluation of control design at a specific point in time. 
• Type II Report: A comprehensive analysis of control design and operating effectiveness over a designated period, providing a holistic view of the control environment. 

The Power of ISAE 3402 Certification 

Achieving ISAE 3402 certification, particularly the more in-depth Type II certification, signals to clients and stakeholders that an organisation has rigorous internal controls that ensure accuracy and reliability in financial reporting, providing independent assurance of the quality of services being provided. 

Albert Cilia, Managing Director of our Malta office and Head of Fund Services Europe, shares some insights on why ISAE 3402 Type 2 certification is sought after by AIFMs 

“We see more and more Alternative Investment Fund Managers requesting ISAE 3402 Type 2 certification from their service providers, including fund administrators, driven by several factors: 

• Regulatory Compliance: AIFMs are subject to increasing regulatory scrutiny and must demonstrate compliance with various regulations and standards. ISAE 3402 Type 2 certification ensures compliance with industry standards, signifying adherence to specific criteria for security, confidentiality, and integrity. 
• Investor Expectations: Institutional investors, including pension funds and endowments, require AIFMs to engage service providers with robust controls and processes. Certification enhances trust and credibility among clients, investors, and regulatory bodies. 
• Risk Management: AIFMs focus on managing operational risks effectively. ISAE 3402 Type 2 certification helps mitigate risks associated with fund administration operations by implementing effective controls and processes, validated through the certification process. 
• Competitive Advantage: AIFMs working with ISAE 3402 Type 2 certified service providers differentiate themselves by offering an additional layer of assurance to investors and stakeholders. This demonstrates a commitment to excellence in service delivery and operational reliability, enhancing reputation and competitiveness within the industry. 

In a landscape where trust is paramount, ISAE 3402 certification serves as a hallmark of an organisation’s commitment to delivering the very highest standards.