Many large financial institutions use the regulatory status of a client or counterparty to help determine its risk level and therefore the amount of due diligence required to onboard that entity. The risk level is also used to determine how often that entity must be refreshed from a KYC perspective. An entity that is regulated by an approved regulator is typically classified as low risk and needs to be refreshed less frequently than an unregulated entity. Most banks maintain a list of “approved regulators” that they have constructed based upon the perceived legitimacy and location of the various regulatory bodies.

Alacra recently surveyed several of our banking clients who helped us compile a list of approved bank regulators, some of these can be seen below with the number of entities they regulate.

 

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The number of regulatory agencies and the number of regulated entities is very large, making it difficult to monitor status changes and cross-reference information across borders. While an entity’s regulatory status changes infrequently, a change from regulated to unregulated status is a red flag to compliance and reference data professionals alike. From a compliance perspective, an entity that was once classified as low-risk is now probably medium or high risk and should be re-vetted. From a reference data perspective, a change in regulatory status could be the result of a corporate event that should be noted in a firm’s reference database.

Alacra actively tracks each of G20 banking regulators including those listed above using one of several different techniques. Some regulators such as the SEC and the FSA provide feeds that we read. Others, such as FINRA and the NFA send out CDs on a monthly basis. BaFIN and the Bank of Italy each post a spreadsheet; the Japan Financial Services Agency posts a PDF that we need to parse and compare from one edition to the next. Alacra’s proprietary technology takes data from all of these regulatory sites and organizes it in a meaningful, easily searchable way to help speed KYC and other compliance workflows.

In cases where the regulator has assigned a unique identifier to each entity, Alacra picks up this data as well and then maps it to all the other entity identifiers available in the Alacra Authority File. This process includes rating agency issuer identifiers, ISIN, SEDOL, DUNs, exchange ticker, Markit Red Code, and many others.

Below is a sample of some recent “Stop Regulation” events as seen in Alacra’s Counterparty Intelligence Application.

Alacra CIA

Alacra clients use this data to trigger a refresh of a client or counterparty’s KYC information and to alert relationship managers that the regulatory status of their client has changed.

 

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