Markit has teamed up with business process specialist Genpact to develop a shared service dedicated to the management of client on-boarding and other know-your-customer (KYC) requirements. To ensure the service meets the on boarding needs of large financial institutions, the companies will be joined by HSBC and Morgan Stanley in an initial six-month design and development project. The end game is a joint venture owned by Markit and Genpact that plans to roll out a shared service for dealers in the second half of 2014.
The service is aimed at cutting out duplication of effort by dealers in client on boarding and KYC activities, delivering streamlined operations, reducing costs and enhancing compliance through better data management and quality. By centralising non-proprietary processes for on boarding clients, managing client reference data and remediating existing client accounts to new standards, the service will provide an industry-wide golden copy of client reference data, faster initiation of trading relationships with new clients and a move towards a variable cost model.
Jeff Gooch, managing director and global head of processing at Markit, explains: “We started talking internally about a shared service about a year ago and at the end of the first quarter of this year set up a design group. We realised we needed a wide variety of skills, so looked at companies we could work with across the technology, outsourcing, accounting and legal markets. We chose Genpact for its track record of pulling together staff and controlling processes in financial services, and because it already works in client on boarding and KYC.”
The partnership will bring together Markit’s Counterparty Manager service, which provides a hosted document management system for client on boarding as well as support for compliance with Dodd-Frank, European Market Infrastructure Regulation and Foreign Account Tax Compliance Act (FATCA) regulation, with Genpact’s knowledge of outsourcing KYC, its expertise in process control and its Six Sigma skills. Genpact, a 2005 spin-out from General Electric, will bring global reach to the companies’ joint venture with people on the ground to administer initial document collection.
Gooch says: “We will collect the documents necessary for client on boarding and KYC, check them, extract information, complete any third-party checks and present a dealer with a potential customer. The dealer can then decide whether to accept the customer.
“Centralising the collection and management of KYC documentation creates massive efficiencies for the industry and could save large firms millions of dollars a year. Through technology and the standardisation of processes, we can increase data quality, speed operations and improve compliance.”
David Burnett, chief operating officer at HSBC Global Banking and Markets, adds: “We are pleased to be involved in the design of this service. An industry solution for client on boarding and KYC has the potential to deliver benefits for our clients and help drive higher standards, consistency and best practice.”
Gooch says the shared service will initially be offered in the US, Europe and Asia Pacific, with other countries being added over time. He also suggests Markit’s joint venture with Genpact, details of which have yet to be finalised, will be first to market with a centralised utility for client on boarding and KYC, although he acknowledges that other market suppliers such as DTCC, Broadridge and Swift are considering similar solutions.