Markit’s agreement to acquire tax compliance and reporting services specialist Compliance Technologies International (CTI) will add a tax component to the company’s managed regulatory reporting services that already include the Counterparty Manager platform and the recently introduced Markit | Genpact Know-Your-Customer (KYC) Services.
Financial details of the acquisition have not been disclosed and the transaction is subject to regulatory approval before an expected close in July, but Michele Trogni, managing director and global head of managed services at Markit, suggests CTI will not be the company’s last acquisition in this space.
She explains: “We were looking for acquisitions in the space around regulatory compliance generally. Our KYC services solution is a foundation on which we want to build other client-related managed services. Tax is a core requirement and will be fulfilled by CTI. Markit’s regulatory compliance services business started in 2012 with Counterparty Manager and we want to become one source for customers to access multiple services. We are looking for other acquisitions in the area where we do best, essentially providing high quality reporting services where there is a standard regulatory reporting requirement across large numbers of institutions.”
While Trogni declines to disclose the specifics of any target acquisitions in the quiet period ahead of the company’s IPO, she did describe the role CTI is expected to play within Markit, saying: “There is growing harmonisation among tax regimes worldwide, which creates opportunities for service providers to standardise and digitise tax processes. CTI’s unique technology and tax expertise will enhance Markit’s KYC offerings and further enable us to help customers adapt to changing regulation.”
CTI’s software automates the certification of tax domicile, validation of withholding tax status and the calculation of withholding tax to help firms comply with anti-money laundering and KYC regulation. The software will not be integrated with Markit’s KYC services and CTI will be run as an independent company under the Markit umbrella in the short term, although it will be integrated into Markit over time. Based just outside Boston, CTI will continue to be run by CEO and cofounder Cyrus Daftary, and its 70-plus employees will join the Markit staff roster.
Commenting on the acquisition, Daftary says: “Markit’s global reach will be invaluable as we grow the CTI business and expand our product platform. We will continue to offer our customers best-in-class tax compliance tools and innovate to address evolving regulatory requirements.”
CTI has about 150 clients, many of which are banks, asset managers and hedge funds already using Markit services, but others from the corporate and private equity sectors will open new ground for Markit.
Trogni expects clients to subscribe to Markit’s individual regulatory compliance services depending on need, but does not rule out, over the longer term, the development of interfaces or common data formats designed to make the managed services easier to use both for those inputting data and for customers using the services for regulatory compliance purposes.