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New York Data Management Summit: The Challenges and Opportunities of Client Onboarding

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The data management challenges of Know Your Customer (KYC) and client onboarding have been discussed for a couple of years, but as hefty fines are imposed for non-compliance and the struggle to reduce operational costs continues, financial institutions are reconsidering their approach and beginning to implement managed and shared service solutions.

The challenges and opportunities of KYC and client onboarding were considered during a session at A-Team Group’s recent New York Data Management Summit. A-Team chief content officer Andrew Delaney moderated the session and was joined by experts Jon Ambos, an independent consultant and former director and global product manager, middle office, at Citi; Tim Baker, head of content strategy and innovation at Thomson Reuters; Joe Dunphy, head of product management at Fenergo; and Matthew Stauffer, CEO at Clarient Global.

Answering a question from Delaney about why firms are putting so much effort into client onboarding, Dunphy explained: “It has become a commercial imperative for firms to get client onboarding right. Existing regulations, such as the Patriot Act, which firms should have complied with, are now being enforced and we are seeing exponential fines. Firms have got to get this right as it has an impact on time to revenue, winning customer business and, ultimately, the bottom line. Quick and successful client onboarding goes beyond compliance to deliver competitive advantage.”

Taking a different view, Stauffer said: “Client onboarding is no longer a differentiator or a strategy, which is why there is market interest in utilities that can drive down operational costs and reduce risk.”

Addressing the question of why KYC and client onboarding have become a data management issue, Baker said: “Client onboarding is about content and data. Previously, it was possible not to connect KYC to a firm’s data structure. Now it must be connected so that the whole firm is hooked into one set of master entity data and can keep up with regulations.”

Drilling down into the required data, Dunphy said: “You need to look at data involved in KYC on a number of levels. First, you need to scope the jurisdictions you are in and the regulations you must comply with. Once the required data is understood, it is possible to drive low level data requirements. Regulatory scoping and bringing regulatory requirements together shows that 80% to 90% of data is common across regulations such as KYC, Anti-Money Laundering, the Patriot Act and the Foreign Account Tax Compliance Act. Having identified common data, the need is for a rules-based approach to define and capture other required data.”

Ambos added: “The focus has traditionally been on security data, but it is now moving to client or entity data. Firms need to be smart about building relational databases as more incoming regulation means they need an agile environment to which pieces of data can be added.”

Turning to practical solutions for client onboarding, Stauffer said firms are taking a good look at their operations and how they are approaching client onboarding. He explained: “In the past, firms would have thrown more money and people at the problem, but now there is pressure on margins, client onboarding has become a

business issue. We are seeing firms creating internal utilities or shared services with access to common data stores. We are also seeing firms looking at commercial solutions from companies like Clarient, which change the way data is collected, validated and distributed.”

While the concept of managed services is powerful in mid-sized organisations, Baker noted that large organisations working in many jurisdictions still consider building and managing their own solutions, but he added: “We will see this evolve as firms distinguish what they will do internally and what they will source externally.”

Dunphy concurred on the value of managed or shared services and, going back to his point on common data across regulations, said point solutions for particular regulations are no longer workable. Instead, he concluded: “The need is to get ahead of regulations and invest in a single platform that will meet today’s and future regulatory requirements.”

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