KYC Utilities – cleanse your data now!

Over the past few year’s more and more financial firms are leveraging a mix of internal manual processes, internal software solutions, and external vendors to manage their client reference data.  More recently however firms are now cooperating with other firms, to set up the services of established hub providers to pursue a centralized approach to collate, manage, and secure their client reference data on their platforms.  As the year has progressed there has been the emergence of what appears to be the three main providers:

Clarient Global owns Clarient Entity Hub – the new provider on the street, and whose emergence has arisen as a direct consequence of cooperation between DTCC and six Tier One institutions – BNY Mellon, Barclays, Credit Suisse, Goldman Sachs, JPMorgan Chase and State Street. It is an example of an industry governed, user-owned utility. The Clarient Entity Hub allows information providers – including investment managers, hedge funds and corporates, to securely make selected data available subject to Clarient’s “Golden Source” validation checks. Data providers are then able to control who has access to that information, which may then be obtained by an approved nominated bank or broker dealer via a user interface. Clarient will be able to leverage Avox, their legal entity data validation and monitoring service, Omgeo ALERT, the industry’s Standing Settlement Instruction (SSI) Utility and the largest global database for SSIs, and DTCC Client Reference Data and Enrichment (CRDE) service, a portal to collect counterparty information required for delegated derivative trade reporting in support of EMIR reporting requirements.

Markit  Genpac KYC services. Markit and Genpac teamed up with Citibank, Deutsche Bank, HSBC and Morgan Stanley to centralize collection and management of KYC data for financial institutions.  Markit are leveraging off their existing Counterparty Manager Product (MCPM), and using their existing client clientele. Markit serves to centralize the collection and management of data, and further to its MPCM product has added “entity enrichment, KYC screening, as well as operational and validation checks”. It allows users to upload and maintain documentation for FATCA, KYC, AML, legal and credit checks. It provides a dedicated team – including on-site consultants to assist data providers with on boarding, and is able to offer a range of additional services such as ISDA Amend.

Thomson Reuters Accelus Org ID product. This product relies on its experience in the data vending, e-FX brokerage, and entity screening space to develop its utility’s appeal to the market.  Thomson Reuters operates a ‘central clearing house’ through the creation of identity documentation. It functions as a ‘KYC passport’. The emphasis on money laundering characteristics, guaranteeing data accuracy, with three hundred analysts dedicated to this. The product, like Clarient’s, is industry governed and user-owned. Its aim is to concentrate data sharing between counterparties, avoid duplicate requests, and enhance the efficiency of data collation, storage, and maintenance.

Which provider to choose?

Currently there is much activity getting clients on boarded to the new platforms. Initially there will be multiple providers market participants can use as each provider seeks to attract clients using their existing solutions. There may also be a number of consolidator technologies, providing integration to the multiple new platforms. However, market participants should not be too concerned about which provider they should use. Instead market participants should use this period of flux and inevitable delay to focus on standardising internally where they store, manage and distribute their current client reference data. The firms doing this early cleansing, will allow the firms to capitalise on the benefits of centralised golden source industry client reference data quickly and hence more cost effectively when the utility becomes available.