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Expert Advice on Integrating Entity Data Hierarchies, Sanctions and KYC Processes

Integrating entity data hierarchies with sanctions and Know Your Customer (KYC) requirements can be problematic, but getting it right can deliver significant business and operational benefits.

The challenges and opportunities of managing entity data hierarchies and keeping track of sanctions, watch lists and politically exposed persons (PEPs) across KYC processes were discussed during a recent A-Team Group webinar. The challenges identified included sourcing validated entity and hierarchy data, managing integration in a timely way, working with siloed KYC processes and keeping up with changes to sanctions. The opportunities were business and operational benefits.

The webinar was moderated by A-Team editor Sarah Underwood and joined by Clare Rowley, head of business operations at the Global Legal Entity Identifier Foundation (GLEIF); Alan Samuels, business manager of entity intelligence at Bloomberg; and Kelvin Dickenson, vice president of compliance solutions at Alacra.

The speakers started with a description of entity data ownership hierarchies, noting that previous requirements to identify entities with 51% or more ownership of other entities are in some regulatory cases being reduced to 25% ownership or control of another entity. Rowley reviewed the hierarchy data provided by the Legal Entity Identifier (LEI) system, including Level 1 data covering who is who and who owns whom, and soon Level 2 data covering who owns what.

Moving on to the challenge of sourcing, validating and managing entity hierarchy data, an audience poll showed 48% of respondents saying their organisation needs to improve how this is done, 21% saying they do it very well, 17% saying they have yet to address the task, and 14% saying they do it quite well.

The webinar speakers agreed that sourcing and validating hierarchy data is difficult, but important. Samuels said the process can be complex, challenging and expensive, and suggested best practice approaches to ease the burden including codifying business rules and using automation and machine learning tools to support the process and trigger alerts when additional research is required to make an entity ownership hierarchy as complete as possible.

Looking at why entity hierarchy data, sanctions and KYC must be integrated, Dickenson explained that all these elements must be linked to gain a true understanding of a company’s customers. Best practice approaches include building a scalable system to request, receive and manage entity data as part of the integration, and taking a holistic approach to entity data and risk management that includes data associated with entities and delivers a timely and ongoing process with a full audit trail.

Final advice for data management practitioners working in the entity data, sanctions and KYC space included extracting every ounce of value out of entity data that is collected; making processes flexible and future proof; and evaluating the benefits of the LEI for your organisation.

Listen to the webinar to find out about:

  • Sourcing entity and hierarchy data
  • Integrating entity data, sanctions and KYC
  • Solving data management challenges
  • Technology and automation solutions
  • Business and operational benefits

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