Author: Eugeniy Tatarchuk

Clearstream Fund Center will offer enhanced KYD through ume

Asset managers are required to perform initial and ongoing due diligence on their distribution partners to ensure compliance
with regulations.
Investment funds may only be sold:

  • by financial institutions that have implemented an adequate Anti-Money Laundering (AML) and Counter Terrorist Financing (CTF)
    sanction program, and
  • through suitable distribution channels that are recommended to an appropriate and pre-defined range of investors.

Clearstream is enhancing its Fund Centre platform by expanding the KYD offering to help asset managers to fulfil their regulatory requirements: In addition to the KYD due diligence questionnaire and corporate KYD documents already provided by Clearstream Fund Centre AG (formerly “Fondcenter”) itself, asset managers will now also have the option to access the KYD information from all or pre-selected distribution partners connected to Fund Centre.

Digital KYD solution

In this context, Clearstream is proud to be able to offer with Fund Centre a centralised 24 hours access through a digital platform to the required KYD information. Additionally, a standardised KYD due diligence questionnaire is made available and updated on a yearly basis with direct input from asset managers and in accordance with industry standards and applicable regulations.

This digital solution is supported by our partnership with ume, a leading KYD platform. That partnership provides an open solution that can also be used by the Fund Centre participants to leverage the ume solutions for flows that are outside of the platform.

Bernard Tancré, and CEO of Clearstream Fund Centre AG, said: “Our Distribution Support platform Fund Centre is now able to offer an extended KYD due diligence service providing a look-through view on the distribution partners connected to Fund Centre.”

Laurent Denayer, CEO ume added: “The partnership with Clearstream will further enhance our position as the leading platform for exchanging due diligence information between asset managers and fund distributors. The new users will further increase the network effects and bring significant added value to all participants.”

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Franklin Templeton selects ume for fund distribution oversight

Franklin Templeton is pleased to announce its partnership with UME, the reference platform for the exchange of due diligence information, serving investment managers and fund distributors in 87 countries.
The collaboration brings together a powerful combination of deep business and innovative technology skills to help Franklin Templeton, its clients, partners, and fund distributors through successful digital transformation.
This partnership will also allow Franklin Templeton to automate the exchange of due diligence information and automate regulatory compliance with its partners.

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How does the due diligence of fund distributors improve the financial industry standards

In recent weeks, we have highlighted the multiple benefits of investment managers collaborating on distributor due diligence, rather than each having to compile, distribute, collect and analyse its own questionnaire. You can find our previous articles on the financial and resources benefits, as well as the quality and compliance improvements to be gained by using the ume platform, here.

With regulators, particularly in the EU, looking to increase investor protection and the increased focus on compliance with money laundering rules, the industry gains from working together, through a more efficient process and better results that lead to reduced risk. Regulators want distributor due diligence questionnaires to serve as an education, setting a bar for the whole of the industry from producer to distributor.

Collaboration, in the form of investment managers agreeing on the questions to ask their distributors and sharing an online platform to share responses, increases the quality of the answers they receive and helps distributors worldwide to improve their own practices. The collaborative approach also improves understanding of the legal requirements and what needs to be done when DDQs reveal gaps or distributors that represent too much of a risk when benchmarked against shared standards. For distributors that do not improve, eliminating them from distribution networks should improve trust and standards over time.

As more fund groups and distributors join the ume platform, the greater the added value throughout the chain. That is important as the industry faces new challenges, some in the very near future. We expect fund groups to place greater emphasis on ESG issues in their distribution chains. As they and their fund managers face increased scrutiny and reporting on climate risk, they will want to ensure that distributors understand and accommodate ESG concerns and do not greenwash their credentials, nor the products they offer.

Already ume works actively with the world’s largest fund management groups and the largest number of distributors worldwide of any due diligence platform. The number of distributors who receive and respond to ume due diligence questionnaires will have tripled this year. It’s a fast- growing club in which everyone benefits from membership.

If you’d like to find out more about Club ume, we’d love to speak to you.

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