The UK’s Northern Rock has entered into a three-year agreement to take legal entity data from CounterpartyLink. The deal includes additional data from CounterpartyLink’s new version, 1.4, enhanced to support clients in complying with the Third EU Money Laundering Directive and MiFID (Reference Data Review, March 2007). The data will initially be used in the Group Treasury department, but will be made available to other departments across Northern Rock. The project will kick off on May 1, according to Steffan Davies, business development manager at CounterpartyLink.
Commenting on its decision to work with CounterpartyLink, Northern Rock’s assistant director of treasury control and compliance David Morrison says: “As regulatory requirements become more onerous and Northern Rock treasury’s counterparty base continues to expand, both geographically and by business type, CounterpartyLink will play a key role in helping to provide legal entity data.”
The two companies have been in discussions for around a year, Davies says. “Northern Rock is taking a very proactive approach to ensuring its due diligence obligations are met properly, and that has been very refreshing,” he adds. “They have always known this has to be done and done accurately, and we are now in a position to move forward and support their counterparty data file.” CounterpartyLink takes a two-step approach, Davies continues. “The first phase involves uploading the data, checking its accuracy and delivering the current version of the data the customer needs. The second phase – the production phase – involves ensuring the ongoing maintenance, ie sourcing and applying any relevant corporate actions with a fully maintained audit trail behind, while processing new accounts on an ad hoc basis.”
Christoph Lammersdorf, managing director of CounterpartyLink, says the company’s experience is that “what works well is to start with the data that the client has relatively easily available”. “There are usually some data silos that the firms have kept well and from which data can be easily extracted,” he says. “Then there is other data that is more difficult to extract from the client’s environment, because it is in other applications, or is maintained by other people. Our approach is to suggest grabbing the low hanging fruit immediately and then enter into an ongoing process to resolve remaining issues.” It is usually possible to address 50-60 per cent of the data right away based on what’s in the CounterpartyLink database, Lammersdorf continues. “Then a process begins of going back and forth to handle the rest of the data, where usually there is some ambiguity concerning the exact definition on who the entity really is.” There is no definite end to these projects, he says. “The more clients get used to our processes, the more data they tend to want us to put through those processes.”
While the initial phase of Northern Rock’s use of the CounterpartyLink service is in its treasury department, the compliance department is also involved, and there are various other departments that could make use of the data in different ways going forward, says Davies, including sales and marketing and credit risk operations. “It is too early to say yet how Northern Rock’s usage might extend in the future,” he says, adding: “One of the key factors of the product is that when we provide a client with data, its use is not limited to one department. It can be used without additional charge in different business applications and downstream operations, in several different locations and jurisdictions.”
Lammersdorf adds that “extension into other areas is an inevitable result of the processes that have to be kicked off by the bank”. “They tend to believe they have good data, but when it is matched against a database that has been researched like ours, they start to find deficiencies,” he says. “They find that internal maintenance processes have not been set up thoroughly enough in the past, and then they have to find out who within different departments is responsible for the data. There is always an originator that leads the relationship, but ends up reaching out to many people within the firm. What has happened with other clients such as Nomura is that we have ended up with a much bigger file to work on than we started with.”