The document discusses the regulatory impacts and challenges of client onboarding in financial institutions, highlighting the necessity for updated legal documentation, enhanced regulatory compliance, and improved data management systems. It emphasizes the importance of a centralized onboarding process that streamlines communication, standardizes client document requirements, and establishes clear responsibilities among team members. Key success factors include global organization, process standardization, data centralization, and effective monitoring to improve operational efficiency and regulatory adherence.

1. Rethinking Client Onboarding
January 2014
Stephanie Baruk sbaruk@chappuishalder.com

2. Regulation Jurisdiction Impacts on Client Onboarding People Process Data Systems
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Rethinking Client Onboarding
Key Regulatory impacts on Client Onboarding
– 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)
Resolution
Planning Global – SIFIs must provide detailed recovery and resolution plans for unwinding in case of
FATCA Global
default, including relationships with key counterparts and clients
– 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
4 – Enhanced Due Diligence in certain situations of high risk th AML Directive Europe

3. 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
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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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3
Need to transform the onboarding
function to allow timely response to
regulatory changes
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 Onboarding
Challenges faced by Corporate and Investment Banks
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4. 4
Rethinking Client Onboarding
Key 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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5. 5
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 Onboarding
Key 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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