Streamlining for efficient Identity Management
Aiming for cost effective and safe customer operational on-boarding
Regulatory data standards have been established for compliance requirements such as Know Your Customer (KYC), Anti-Money Laundering (AML), Office of Financial Asset Control (OFAC) checking, Counter-Terrorism Financing (CFT), Politically Exposed Persons (PEP), and certain recommendations of the Financial Actions Task Force ( FATF). The development of the Common Reporting Standard (CRS) by the Organization of Economic Cooperation and Development (OECD) has helped to streamline the due diligence process for client on-boarding. These customer-to-financial firm documentation and sanction list checking procedures have been relatively harmonized by most organizations. The challenge lies in the way the data is stored across disparate systems within an institution. Many large global financial firms have developed customer data file silos by product and region. A single client may exist across several of these customer data silos. With varying file formats and data models, how can a firm avoid, or at least reduce, duplication of effort when it comes to client on-boarding?
Keeping up with regulation the expedient and “obvious” way - a Trojan Horse?
The need for ongoing customer on-boarding and maintenance in a complex data landscape, in addition to the need to comply with the increasing number and complexity of global regulations, is forcing some financial firms to increase staff in compliance and regulatory operations departments. According to an article in the Financial Times, in 2015, JP Morgan added 4,000 staff to its regulatory and compliance group, as well as spending an additional $1 billion on new controls. According to the same report, UBS grew its global compliance staff from 2,000 to 7,000 over 3 years.
Timely compliance with regulations to avoid penalties encourages firms to seek the more immediate – and seemingly more direct – solution of employing staff to address regulatory processing. However, not only is this approach becoming prohibitively expensive, it also introduces the additional operational risk of manual processing. Increasing operational overhead, coupled with higher levels of risk, is neither efficient nor sustainable.
Considering technology-based solutions
Choosing a technology- based solution rather than a manually-intensive one is clearly more economical, reliable, consistent and faster if implemented correctly. However, this approach can also pose challenges. Any process that requires the consolidation of data across disparate sources necessitates integration technology. Many integration and mapping engines are designed as a one-to-one, and not a many-to-one, solution. To normalize data across multiple sources, several instances of the application would need to be deployed. Other integration applications are based on published Application Program Interfaces (APIs), which can often prove inflexible. Further, agility in implementing modifications to the mapping criteria is essential as changes in data formats and regulations change over time. If a potential integration solution lacks a rules-based engine for intelligent “what-if” processing and targeted routing, then hard-coding of distinct routing routines and data requirements would be required. This would be a significant disadvantage in enabling agility in regulatory compliance and business operations.
Volante’s approach to the operational on-boarding challenge
Volante has been involved in several operational on-boarding projects, including an engagement for one of the world’s largest hedge funds. Core to the solution was Volante Designer for accelerated financial message and data integration. Designer is a database- and financial message-independent development platform solution that provides a comprehensive financial message and data integration and processing framework across the enterprise. As well as its powerful integration capabilities, Designer offers a rules-based solution with the flexibility needed to fully address both external and internal data requirements. Data and financial messages from any source, and from multiple sources, can be transformed into any format for any destination. Using the rules-based functionality of Designer, Volante clients are able to map and extract the required data elements across several disparate client files into a single format. The flexibility of Designer allows for dynamic changes to the data model as and when required. The implemented solution significantly accelerates the operational on-boarding process, increases efficiency and consistency while eliminating the fundamental risks associated with manual processing.
Illustration of initial client on-boarding identity management and the subsequent processing of client payments processing also in the context of ongoing identity management activities.