March 2017

SPONSORED ARTICLE: A radical solution to KYC concerns

Paolo_BrignardelloThe 1MDB affair shows that lax know-your-customer and due-diligence procedures are a major risk, says Paolo Brignardello, head of product management and marketing, Fundsquare. New solutions are needed. Reputations, careers and earnings have been damaged as a direct and indirect consequence of corruption allegations at the Malaysian 1MDB state development company. If financial businesses had been working together, sharing information about the practices of clients and partners, they would have given themselves a better chance of avoiding the crossfire. Currently, professionals have to conduct their own background checks on each client, adding to cost and red tape. Duplicate proofs of identity criss-cross the globe, as the same customers are asked for the same information by different service providers. The risk of making an error is ever-present with these complex, laborious tasks. The challenge is all the greater when working cross-border. EXPERTISE
Specialised KYC market utilities would be an answer. A trusted, user-centric, well-regulated, secure information depositary would collate client information from different sources. This could be provided directly by the customer, by financial businesses, or culled from publicly available sources. This wealth of data would enable the utility to build a clear picture of the honourability of each individual. Moreover, this would be updated swiftly in the light of new information. Not only would this make it easier to on-board new clients, but it would flag up potential and real issues with existing clients. Clients would stay in control of their identities, able to specify who would and would not have access to this information. As well as higher-quality KYC work, this move towards mutualisation would cut costs as duplicate procedures are eliminated. The utility would also have the financial muscle to invest and develop cutting-edge tools such as digital ledgers and digital ID assurance. This would boost efficiency and accuracy further. For example, the utility could provide added value services such as a risk rating engine to give context to the information and ‘tokenise’ information that would be of use to other businesses. TAILORED TO CROSS-BORDER
Several KYC utilities have emerged around the world, but none addresses the specific needs of cross-border fund distribution. It is no surprise that work to deal with this question is ongoing in Luxembourg, the leading internationally focused fund domicile. The feasibility of a KYC utility is being discussed by a consortium under the coordination of Fundsquare, the Luxembourg-based user-owned, user-run utility for order routing and information services. Ideally this utility would operate worldwide, tracking the identities and interests of all customers. Regulators and legislators would welcome such an initiative. Not only would it facilitate compliance with existing rules, it would demonstrate the industry’s desire to tackle the problem of criminals using the financial system. This might help prevent the need for future regulation. BENEFITS
KYC rules are still causing headaches a decade and a half after their introduction. Related procedures are some of the most costly regulations faced by the financial sector. A utility designed to meet the needs of the cross-border fund industry would cut costs and, most importantly, risk. ©2017 funds global asia

Sponsored Profiles

Sponsored feature: How is DLT changing the global securities services landscape?

Oct 17, 2019

By Jeslyn Tan, global head of product management, securities services, at Deutsche Bank

Sponsored feature: A new base for fund distribution

Oct 16, 2019

To get the most value out of the digitisation of investment fund distribution, a blockchain-based infrastructure is fundamental. By Olivier Portenseigne, Managing Director and Chief Commercial Officer, Fundsquare.

Sponsored profile: Bridging the gap

Mar 11, 2019

Private equity is a core part of the business for Caceis’ Hong Kong office, which looks after clients in China and Europe. David Li, chief executive officer, explains why private equity enjoys strong client demand and how it is being used to fund China’s international infrastructure ambitions.

SPONSORED FEATURE: Market knowledge key to fund distribution in Asia

Jan 11, 2019

The highly fragmented investment markets in the Asia-Pacific region require detailed knowledge of each market’s unique characteristics and framework. By Lou Kiesch, Partner, and Marc Noirhomme, Director, at Deloitte Luxembourg.

Executive Interviews

Executive interview: Timing the market

Oct 17, 2019

Amy Cho, Schroders’ Hong Kong chief executive and regional head of intermediary clients, tells Romil Patel about Hongkongers’ love of investing, staying nimble in a volatile market and following...

Interview: Asia’s sweet spots

Jul 05, 2019

As the US-China trade war ramps up with a hike in levies, Tai Hui, chief market strategist for Asia-Pacific at JP Morgan Asset Management, tells Romil Patel where he identifies investment value.

Roundtables

Roundtable: Priming for Asia’s growth

Oct 17, 2019

Panellists discuss expanding product capability across Asia-Pacific, the opportunities and regulatory challenges around data and the prospects for ETFs in the region. Chaired by Romil Patel in Hong Kong.

ESG roundtable: Are the ESG stars aligning across Asia?

Jul 05, 2019

Our panel of experts discusses driving higher ESG asset allocation in Asia, growing calls to address the global climate crisis and the importance of governance. Chaired by Romil Patel in Hong Kong.