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AITE Research - Keeping Calm and Under Control: Legal Entity Data Support in a Regulatory Age

October 2013

New research undertaken by analyst firm Aite Group and Fenergo finds that capital market firms are actively moving toward a more centralized client onboarding and legal entity data management framework to provide a single point of access to client data and a consolidated view of a client across the enterprise.

The research, which is based on one-to-one interviews with individuals responsible for client data support, client onboarding, or know your customer (KYC) compliance at 10 capital market firms, was conducted by Aite Group during Q3 2013.

The main impact points include:

  • The majority of respondents currently tackles onboarding and KYC separately but is planning to consolidate the gathering of data for both functions under the responsibility of a single team. The driver for consolidation is to have a single team focused on gathering the required documents and data in a consistent manner across the business line or enterprise; thus ensuring the uniformity and reusability of this data.
  • Although all respondents indicated that legal entity data is a "high priority," almost half are dealing with workarounds such as client databases stored at the desk-level or a patchwork of downstream systems. Much change is therefore expected to happen over the next two to three years in order to move away from these heavily manual, silo-based client data structures.
  • The size and structure of client onboarding teams varies a great deal across respondents, with some featuring a considerable number of offshore-based FTEs dedicated to legal entity data cleansing and others with no dedicated resources at all or a single individual focused on data checking. This disparity is reflective of the progress of the respondent firms in moving toward a more consolidated client onboarding and legal entity data structure.
  • Dodd-Frank has been prioritized over other pieces of regulation because it was the first large regulatory agenda item to come into force after the post-crisis G20 agreement and FATCA is the next compliance item on the list due to the perceived high impact (for little benefit) on firms' ongoing maintenance and categorization of client data.
  • The majority of respondent firms either have definite plans or are considering investment in a client data hub in order to provide a single point of access to client data and a consolidated view of a client across the enterprise.
  • The due diligence checks required for a client classified as "high risk" can extend the onboarding process from hours to months. One investment bank respondent indicates that if KYC has already been carried out, then a new account can take 30 minutes to be onboarded, if not, the process can take several days. Another indicates that it extends the process from 24 hours to several months.

 

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