31 October 2014

Swift bids to carve out space in regulatory compliance

17 September 2013  |  7289 views  |  0 Swift logo

Financial messaging network Swift is looking to extend its remit to the emerging regulatory landscape, pitching its shared market infrastructure as a cost-effective means for financial institutions to ease the compliance burden.

Swift first tested the regulatory waters last year with the launch of a sanctions screening service for smaller and mid-size financial institutions. The service has since been taken up by more than 100 customers across 50 countries, and parses over 30,000 messages per day.

Now the banking co-operative is investigating new avenues of co-operation, including the development of a centralised know-your-customer repository. At a user-group meeting on Sunday ahead of Swift's annual trade show Sibos, Luc Merant head of banking and compliance at Swift said the Society is working on a new user-controlled profiling service, which would enable members to share information on their customer traffic flows.

Swift has received heavyweight support for its plans from Samir Assaf, chief executive of global banking and markets at HSBC. In an opening plenary session at Sibos on Monday, Assaf called on the industry to develop collaborative compliance solutions where there is no economic merit to competition.

"In our industry we all do so many of the same things, replicating work and costs for no advantage," he told the audience. "We can gain scale through combining activities, so we should look at where we can mutualise and share services, and reduce costs."

Picking up on the KYC theme, he said the industry "should be looking to create a KYC utility with other players in the market, which will save costs and improve practices in the industry".

HSBC and Morgan Stanley are understood to be in talks with Markit and US outsourcer Genpact about developing a centralised service for signing-up clients and conducting background checksy.

Elsewhere in the emerging regulatory space, Swift has partnered with LCH.Clearnet to utilise MX standard messaging for securities and cash collateral instructions provided to the clearing house by members.

It is envisaged that clearing members will be able to exchange automated, standardised information securely and reliably, with the potential for other CCPs to re-use the message types. In addition, members will benefit from increased transparency and straight-through processing within their middle and back offices.

Arun Aggarwal, head of UK, Ireland and Nordics, Swift, says: "The current emphasis on central clearing has changed the scope of the requirement for collateral messaging and created an opportunity for Swift to extend its solution to CCPs."

Martin Ryan, global head of operations at LCH.Clearnet, says the initiative will help streamline collateral processing for clients in line with new regulatory requirements.

Ryans' take on the plans will be music to the ears of the Swift hierarchy as it seeks to carve out a space for the network in the new regulatory environment.

"A cornerstone of LCH.Clearnet's collateral services strategy is to leverage market infrastructure providers to provide efficient, scalable and standardised solutions throughout the complete end-to-end collateral processing chain," he says.

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