Download - CH&Cie_Rethinking client on boarding_Teaser
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– OTC clearing will call for an update of legal documentation (ISDA, give‐up agreements…)
– Reporting to trade repositories with time constraints will imply a more efficient onboarding
Dodd Frank Act –Title VII
U.S.
– More robust identification and more extensive classification schemes will need to be applied
– More detailed relationships (e.g. agent, principal) may need to be stored for more granular credit risk calculation and disclosure
Dodd Frank Act –Volcker Rule
U.S.
Legal Entity Identifier
Global
– Initiative currently incorporated into Dodd Frank and expected to be adopted by European regulators
– New identifier field to be captured and existing client data will need to be cleansed to incorporate the LEI
– Liaison to be built with Third Party Swap Data Repository
EMIR Europe – Similar requirements as DFA with regards to clearing documentation and reporting rules (see Appendix for the table of fields to be reported)
FATCA Global– AML: Stricter CDD and Client Acceptance procedures– KYC: Additional Client Profile requirements– Tax Identification Number (TIN or GIIN) needs to be collected for US persons
Basel III Global – Will require centralized data to support risk management calculation and a re‐evaluation of the types of customers and Due Diligence ahead of client onboarding
MIFID II and Market Abuse
Europe – Increased focus on client categorization and eligibility– New KYC checks and approvals
– Beneficial owner identification and disclosure– Enhanced Due Diligence in certain situations of high risk4th AML Directive Europe
Rethinking Client OnboardingKey Regulatory impacts on Client Onboarding
Regulation Jurisdiction Impacts on Client Onboarding People Process SystemsData
Resolution Planning
Global – SIFIs must provide detailed recovery and resolution plans for unwinding in case of default, including relationships with key counterparts and clients
Systems Multiple regional and/or product systems
Current IT architecture does not support necessary changes to client portals, workflows and compliance/ops systems
Major roadblock leading to operational breaks
Lack of synchronization among multiple systems
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Need to transform the onboarding function to allow timely response to
regulatory changes
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Data Lack of defined Golden source with
incorrect mapping between sources and downstream systems
Operated across siloed data sources Lack of unique client identifiers Non‐homogeneous client account
hierarchy used especially with funds
Process Fragmented process that prevents seamless
onboarding function and no centralized view of a client
High operational risk linked to manual processes
Difficulties reporting status of approval, documentation and client requests
Standard Operating Procedures (SOP) are often poorly defined and shared globally
People Increasing workload putting resources under
pressure
Client onboarding viewed as routine process
Overall ownership of end‐to‐end process rarely exists; roles and responsibilities are often unclear
Lack of information sharing between front and back office generating no revenue‐sharing model
Rethinking Client OnboardingChallenges faced by Corporate and Investment Banks
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Rethinking Client OnboardingKey success factors and benefits (1/2)
Key Success Factors Benefits
Single Point of Contact
Give ownership to a dedicated Onboarding team across the various business lines and divisions
Identify dedicated contacts across the business for internal requests
Establish a governance body to provide leadership and oversight
Draft SLAs to make all the stakeholders in the onboarding process accountable
Improve client satisfaction by avoiding multiple requests
Move from a traditional siloed approach to a functionally unified client‐centric governance model
Ease the access to information
Create synergies between business lines
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Global Organization
Deploy the organization globally across the different territories
Rationalize organizational structures to avoid delays in understanding needs
Base the global onboarding policy around the most stringent regulations and accommodate the different jurisdictions
Adopt a horizontal approach to managing compliance with existing and new regulations
Set up global standards to serve clients and provide consistent information whatever the location
Create synergies and leverage best practices of each territory
Smooth out the communication
Create flexibility to quickly adapt the organization to regulatory changes
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Process Standardization
Define a master list of client document requirements before contacting clients
Ensure that the COB team controls the master document and prevent from other groups to ask additional documentation
Set up similar processes for all the business lines
Set up a global document management solution
Study the opportunity to offshore some functions related to client onboarding (static data input and maintenance for instance)
Avoid back and forth with the client to ask additional documents
Homogenize the processes across business lines
Create synergies between business lines and territories
Improve the efficiency of the process, reduce overall onboarding time and associated costs and lower operational risk
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Key Success Factors Benefits
Data Centralization and Quality
Define a golden source of client data with a client data repository acting as a client onboarding master database with: A client identifier as a primary key A cross reference with alternative identifiers within the COB framework A standard client hierarchy Ability to support different statuses of client activity lifecycle
Define your own set of key client data attributes then focus on the client’s risk profile, trading preferences etc. at a granular level
Set up a single cross reference to link clients, accounts and documents Automate wherever possible – onboarding of low‐profile risk, referential
controls…Focus on the LEI Make sure that there are no multiple entry points for keying the LEI and
cross‐reference between multiple identification schemes and taxonomies The LEI field within the KYC database should feed into legal, credit, collateral
and operations systems for the purposes of consistency and transparency LEIs should connect to each other and properly reflect their hierarchies
throughout the system Enhance entity databases to include hierarchies, management profiles and
linkages to underlying asset classes, link entity level corporate actions data
Get a holistic view of client’s activities
Promote a single view of the client
Avoid repeatedly asking clients for the same information
Attributes and hierarchies consistency
Correct mapping between sources and downstream systems
Ability to support the lifecycle of an entity on an ongoing basis
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Rethinking Client OnboardingKey success factors and benefits (2/2)
Monitoring
Establish a governance body to provide leadership and oversight
Define KPIs to measure the performance of client onboarding operations end‐to‐end and monitor the business (segmentation, cross‐selling…)
Leverage client profiles for credit risk management and capital requirements
Build a monitoring process which takes into account potential changes of client and counterparty classification throughout their lifecycle
Get a clear view of responsibilities
React more quickly to potential changes in due diligence requirements
Enhance risk management, cross‐selling analysis, client segmentation and profitability reporting
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