On an SIA show floor filled with acronyms, Cicada (booth 1501) has chosen to focus on KYC. The financial services industry is being bombarded by regulatory requirements, and Cicada's new solution, part of its Client Data Management Solutions suite, is aimed at helping securities firms "Know Your Customer."
The reference data management vendor has been evaluating the data requirements behind anti-money laundering guidelines for over a year, says Wendy Kassal, vice president of program management for Cicada. "KYC is beyond just raw data management - it's also about applying workflows and rules to drive the data distribution and data handling after it's verified."
Kassal explains that the first step of the KYC process is verifying customer data, such as name, location and type of business. In the context of KYC, though, additional investigation is necessary to find that customer's entity relationships, a process done with CounterpartyLink, a source for legal entity data distributed by the vendor. Once legal entities have been established, Cicada's application of business logic aids in workflow and data distribution. "It goes beyond just getting the golden copy of the record to actually putting in the business logic," explains Kassal. "It answers questions like, 'Can the institution deal with this party and how?'"
As directed by the AML guidelines, Cicada also keeps verification records to ensure the legitimacy of a firm's KYC process. Firms like Mantas and Searchspace already have carved out a niche in the AML marketplace, but Kassal notes that Cicada's solution is not focused on detecting suspicious transactions, but instead about organizing potentially impactful customer data. "We're just focusing on the entity side," she says.
The process of investigating legal entity issues around KYC and determining resulting workflows used to be a process relegated to the compliance team, Kassal says. And there are certain exceptions that will still cause a compliance department to intervene in the KYC process, she concedes.
However, in an environment where financial institutions must adhere to stringent account-opening procedures, as well as monitor accounts opened prior to the KYC rules establishment, institutions should welcome any ability to automate processes, Kassal says. Keeping up with the continuously evolving regulatory environment may be better suited for a vendor who specializes in it, she adds.
Tim Lind, a senior analyst with Needham, Mass.-based TowerGroup, points out that some data sets "lend themselves well to being delegated." He adds, "Data sets that require unique or specialist skills that you can't expect an institution to maintain, like KYC, may lend themselves well to outsourcing."
Cicada's KYC solution can be found as a component in its Composer data management platform, but the vendor also can configure the solution with customized data sources and manual research, as well as individual rules established by compliance departments. Firms can use the service via a software license, managed services, an outsourced relationship or a combination of any or all.