In June, The Network Forum’s (TNF) flagship Annual Meeting finally came back to Warsaw for the first time since 2017.
With Covid, the War in Ukraine, global supply chain disruptions and now the emergence of Generative AI, it is fair to say a lot has changed since that first TNF gathering seven years ago.
Just as the world around us is undergoing a seismic transformation, so too is Network Management and the wider post-trade industry, as Fraser Wikner, CEO at MYRIAD Group Technologies explains.
Reverse KYC demands ramp up
Although plenty of markets have always required Sub-Custodians to conduct reverse KYC on clients, it appears the amount of information being asked for nowadays is skyrocketing, possibly – I think – because people are worried about breaching international sanctions, inadvertently or otherwise.
No standards on KYC
These highly detailed reverse KYC exercises are creating problems for Network Managers at a time when their resources are already badly stretched.
Not only are Sub-Custodians demanding extensive KYC data from clients, but the information they are asking for is not particularly standardised.
While most – if not all – Sub-Custodians incorporate the Wolfsberg Guidelines into their reverse KYCs, I heard others are now leveraging the International Securities Services Association’s (ISSA) Financial Crime Compliance (FCC) Questionnaire.
Some providers have gone one step further by insisting that Board directors and C-suite executives at their Global Custodian clients hand over photocopies of their passports, a request one EU-based Network Manager told me was wholly incompatible with the General Data Protection Regulation (GDPR).
In an absolute worst-case scenario, this industry-wide tug of war over KYC documentation could lead to account opening delays or accounts being frozen – possibly resulting in investors missing out on return opportunities.
Finding the solution
Most Network Managers at TNF begrudgingly accept that comprehensive reverse KYCs are necessary, especially as the alternative, i.e. their Sub-Custodian falling foul of regulations on anti-money laundering or counter-terrorist financing rules, is much worse.
So, how can the industry make this KYC process easier?
One idea to emerge from last year’s Annual TNF Meeting was to create a reverse KYC standard, and I am pleased to see there is a dedicated Network Management working group now looking into this initiative.
From what I have seen, there is a lot of duplication in these reverse KYCs as many of the questions are strikingly similar.
Having spent the last decade refining the Association for Financial Markets in Europe’s (AFME) standardised Due Diligence Questionnaire (DDQ) template, the industry has extensive experience in delivering on harmonisation initiatives.
While I concede it will be hard to fully homogenise the reverse KYCs – mainly because local markets each have their own nuances – we should still try to standardise as much of them as possible, and also ensure that the technology used to deliver the KYCs is interoperable.
Addressing mentoring and recruitment
Finding the right talent
During the second day of TNF, I spoke on a panel where we discussed how attracting young talent into our industry needs to be prioritised, especially if we are to better future proof our organisations.
A cursory scan of the room at TNF revealed that while Generation X and millennials are well-represented in the audience, Generation Z – namely people born after 1997, also known colloquially as Zoomers – were much less visible.
Given that Generation Z is projected to make up 27% of the labour market by 2025 according to EY,[1] we need to engage with them more, especially with the financial services industry competing against the likes of Google and Amazon for top talent.
During the panel, I highlighted that MYRIAD Group Technologies has transformed its recruitment policies over the last 24 months. Where previously we tended not to hire people who lacked industry experience, we have since widened the recruitment pool to new graduates and even school leavers.
Not only did we boost headcount by 50% in 2023, but one third of our workforce is now under the age of 30, and this young talent is having a hugely positive impact on our business.
We have made a concerted effort to give these new joiners client-facing responsibilities and workplace autonomy, and the results have so far been excellent, with many of our recent hires creating genuine value-add for the business in less than 6 months.
Retaining the talent
If hiring the right people is tough, retaining that talent is arguably even more difficult.
Unlike previous generations (i.e. baby-boomers), people do not typically have one job for life anymore, with younger people increasingly pursuing more episodic and variable career paths. [2]
The challenge for every industry – including Securities Services – is making sure that the best hires stay for as long as possible.
So how can this be done?
During the panel, a number of banks said they had dedicated mentoring programmes to nurture young talent and limit attrition, but this is not always possible at SMEs, where resources are more finite.
I told the audience that while MYRIAD Group Technologies does not have a strict mentoring programme per se, we strive to ensure that everyone within the organisation has access to the leadership team, so they can talk to us about any issues they may have.
At the same time, however, companies do need to be sensitive to the needs of older employees.
A study by recruitment firm Randstad UK found 33% of UK workers over 55 described their workplace as being too woke, of which half said this perceived ‘wokeness’ made them more likely to leave. [3]
Losing experienced talent is a serious business risk for any organisation.
However, this can be avoided if the leadership has an open, honest dialogue with older colleagues, and makes sure that they feel involved in the change journey too.
Artificial Intelligence (AI) shows its mettle in securities services
A few years ago, nearly every conference I attended seemed to have a panel evangelising about Blockchain, a technology, which many would argue has not delivered what it promised.
Today, the focus is now on AI, a technology which I believe shows more potential, not least because people are actually using it in their businesses (unlike Blockchain) – and we are no exception.
MYRIAD Group Technologies, for instance, is scoping out some of the more traditional AI tools (e.g. predictive analytics, etc.) in areas such as PDF ingestion and processing, and the creation of library databases to answer DDQs or RFPs.
For me, AI, if used properly, could bring huge value and productivity benefits to our industry in the future. However, it is important the industry does not run on AI before it can walk.
[1] EY – July 10, 2023 – How banking on Generation Z talent will make or break the future of banking
[2] EY – July 10, 2023 – How banking on Generation Z talent will make or break the future of banking
[3] HR Magazine – March 22, 2023 – Woke workplaces causing senior employees to leave organisations
