Ipes is launching The ID Register on a digital platform www.theidregister.com, designed to streamline customer due diligence (CDD) processes and regulatory reporting. Tim Andrews, Director at Ipes, who is leading this project explains the rationale behind it.
Anti Money Laundering (AML) measures in the financial sector have been at the forefront of European and US regulators. In addition, to combat tax evasion, the US Treasury and the OECD have imposed similar due diligence and reporting requirements on financial services firms, namely the Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS). Compliance with AML, Know Your Customer ("KYC") and sanctions requirements continues to be a key focus area for management and firms must ensure that they demonstrate a robust compliance framework, ensuring that regulatory requirements are being adhered to at both a local and global level.
Contracting with a lawyer, investing in a trust or a Private Equity fund or even holding a bank account will often mean completing lengthy forms to prove that you are neither a terrorist (under CDD) nor a tax evader (under FATCA and CRS).
Know Your Client (KYC), Customer Due Diligence (CDD), Anti Money Laundering (AML), FATCA, these are all terms associated for most of us with a myriad of complicated forms. Firms who receive them have to bear the cost of deciphering handwriting, asking for evidence and transposing data onto systems or, more commonly, a spreadsheet. Unsurprisingly, few wish to jeopardise their client relationships by repeatedly asking for the information to be updated. It is common practice for multiple certified copies of passports and utility bills to be stored in paper and PDF formats across different firms. This makes it difficult for firms in one jurisdiction to correctly identify the true ownership of their corporate clients who may be scattered worldwide and may result in regulatory sanction, fines or reputational damage. There has got to be a better way.
Regulators are recognising these practical problems. The UK Financial Conduct Authority (FCA) have stated "In order to enable effective competition and promote innovation, it is important that technologies that help firms better manage regulatory requirements and reduce compliance costs are supported." The Guernsey and Jersey Financial Services Commissions have also updated their guidance to encourage firms to improve the cost effectiveness of CDD through the adoption of technology.
Spectrum of Solutions
A number of technology solutions are emerging from both governments and industry. The Verify project from Gov.uk aims to link UK consumers’ financial records across multiple major institutions in order to allow them to view and switch their investments more easily. Amongst the international financial centres The Channel Islands have shown their commitment to improving transparency and maintaining a central register by signing up to the UK Government’s beneficial ownership agreement.
A number of accountancy firms offer advice and technology based solution for global firms whose CDD problems require industrial solutions. Various data aggregators access disparate publically available information to create an automatic profile of any given individual or entity. Central due diligence document sharing apps and websites allows firms to post their certified documents in one place, where others may access them. Despite this, the vast majority of CDD continues to use paper and pen, especially for corporate vehicles with complex ownership structures.
The ID Register
www.theidregister.com brings together Ipes’ Fund Administration experience with FATCA and CRS expertise of tax partners such as KPMG, enabling financial firms and individuals to create a full KYC and FATCA profile and then connect it to their investments, lawyers or bankers. Just like a profile on social media, updates are published to each connection instantly with minimal effort. Continuously screened against global sanctions and PEP lists, each client profile is also assessed against FATCA and CRS and fully supported by an expert team. Firms are then able to review the live CDD status of all their clients and investors and help fulfil their FATCA classification, registration and reporting obligations paper-free world wide and at any time. Already acting for some of the largest global fund management firms and with over 8,500 due diligence profiles, The ID Register applies technology that most of us use in our personal lives to the practical problems of CDD and CRS for financial firms. Supported by regulators world wide, paper CDD will be a thing of the past. Whichever solution you use, Customer Due Diligence is going digital, to the benefit of everyone in financial services.