About a-team Marketing Services
The knowledge platform for the financial technology industry
The knowledge platform for the financial technology industry

A-Team Insight Blogs

Opinion: Why the Client On-Boarding Conundrum Will Fuel Master Data Management (MDM) in Capital Markets

Subscribe to our newsletter

Neill Vanlint, Managing Director of EMEA and Asia for GoldenSource, explains how MDM can provide answers to the client on-boarding challenge facing financial institutions.

Taking one step forward and two steps back – that’s what it must feel like for financial institutions at the moment. You could be forgiven for thinking that finding a solution to manage all reference, counterparty, client and customer data in one place ticks all the compliance boxes. But regulators show no sign of taking their foot off the accelerator. When a new client signs up, institutions immediately have to define exactly what product they are selling and to whom.

This is no easy task and as more counterparties and clients sign up, the challenge facing banks is around keeping track of who’s who and what’s what. These days, it is simply too risky not to verify each stage of the client on-boarding process.

Take the initial handling of a new customer, or on-boarding as it’s better known. This involves those all-important KYC checks for sanctions and conflicts of interest. All well and good, but what if the institution in question is doing business with a firm in Luxembourg, whose parent company is based in Libya, for example? This is all about understanding how an organisation’s corporate hierarchy operates – vital in light of controversies around offshore havens. An institution then needs to look at what products have been authorised to trade. The scenario could arise where someone only trades Fixed Income derivatives, for example. Or it may well be that an institution only authorises select people to trade a certain product or volume of currencies or bonds. As if that wasn’t enough, there is the small matter of deciding which clearing house to use and who to settle trades with. Relying on manual intervention only to manage these events will trigger errors and attract the gaze of the regulator.

What’s needed is a workflow that fits around the entity master to validate each stage and also the ability to map products to customers and counterparties. This is what the corporate world calls master data management (MDM) – which fully automates and strings together these critical processes and establishes relationships. By definition, MDM involves the processes, governance, architecture and standards required to source, cleanse and centralise data to provide a single view of the business – including new customers. However, capital markets has unique relationships, such as that of counterparty. This challenges the corporate world’s approach to MDM and it’s these idiosyncrasies that require a different solution for capital markets – one which needs to be future proofed for flexibility.

No financial institution in its right mind wants to keep re-tooling their existing solution as soon as a new regulation comes into play or, more importantly, as new KYC services become available. Flexibility to on-board new KYC services or utilities is also important and having a system that can fully leverage these capabilities to handle the regulatory obligations of the future has never been more important. By integrating the on-boarding process with MDM-style data management, firms can conduct efficient compliance refreshes based on customer data changing over time and reap huge business benefits. With this in place, financial institutions can confidently take a step forward and look for upsell and cross-sell opportunities, instead of taking another step back to evaluate a new customer’s compliance credentials.

Subscribe to our newsletter

Related content

WEBINAR

Recorded Webinar: How to harness the power and potential of ownership data

The importance of ownership data has escalated over the past few years as financial institutions have acknowledged its potential. Key use cases include integrated risk assessment, which uses ownership data to help financial institutions gain a clear understanding of supplier and customer networks, and identify and mitigate risk. Equally significant is the use of ownership...

BLOG

RegTech Can Help Solve ESG Data Management and Trust Challenges

As demand for data grows with the acceptance of ESG as a critical part of financial institutions’ business and regulatory activities, focus will intensify on the quality of that information. Asset managers and owners will want the cleanest, most relevant and most comprehensive datasets to identify investment opportunities and risks and to comply with the...

EVENT

A-Team Briefing: Cloud Innovation for Data Ops

This Innovation Briefing will explore approaches to data infrastructure transformation, technologies required and how to make sure processes are optimised to support real time data management. Hear from leading practitioners and innovative technology solution providers who will share insight into how to set up and leverage your data infrastructure to provide user access to consistent data and analytics, and companies the ability to monetise their data.

GUIDE

Regulatory Data Handbook 2022/2023 – Tenth Edition

Welcome to the tenth edition of A-Team Group’s Regulatory Data Handbook, a publication that has tracked new regulations, amendments, implementation and data management requirements as regulatory change has impacted global capital markets participants over the past 10 years. This edition of the handbook includes new regulations and highlights some of the major regulatory interventions challenging...