Pain in your asset? Don’t lose your footing on KYA

Faisal Ayub Director – Business Development, KYA

Robin Cotterill Chief Compliance Officer

Clair Turketo Managing Director, Client Solutions

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The demands being placed on Know Your Asset (KYA) compliance are growing faster than the operating models that support them.

Private markets growth, sanctions divergence and increasing transparency requirements are all pushing firms towards a deeper understanding of the assets they hold. But at the same time, many compliance functions are still grappling with fragmented data, manual processes and increasingly complex structures.

The result is a mounting operational challenge: how to build a sufficiently complete picture of asset-level risk without creating friction elsewhere in the business. That’s the question that lies at the heart of our latest KYA research and series of Viewpoints from compliance and anti-financial crime experts.

 

Private assets are pushing operating models to their limits

The growth and democratisation of private markets have amplified many of the practical challenges involved in delivering KYA. Information can be difficult to obtain, ownership structures are often layered across jurisdictions and documentation frequently requires interpretation rather than straightforward verification.

In her recent Viewpoint, Clair Turketo, Managing Director, Client Solutions argues that private markets expose the tension between rising expectations and limited information. Managers are increasingly expected to produce robust, defensible assessments of risk despite dealing with incomplete disclosure, inconsistent documentation and counterparties that may be unfamiliar with the due diligence process itself.

As a result, she observes, asset-level compliance is becoming a significant operational undertaking in its own right, with direct implications for deal execution, risk management and regulatory confidence.

Read Clair’s Viewpoint: KYA and clearing private assets – the acid test for operating models

 

Transparency is posing a new data challenge

Regulators are demanding greater visibility into ownership structures, sources of capital and beneficial ownership arrangements. But what sounds straightforward on paper creates a considerable operational burden in practice.

For many managers, the issue is less about collecting data and more about managing it correctly. Information may sit across multiple systems, service providers and jurisdictions, creating difficulties around consistency, validation and ongoing monitoring.

Reflecting on long-awaited changes from AMLA and wider anti-financial crime reform, Faisal Ayub, Director, Business Development explores how transparency initiatives are steadily increasing the volume of data firms are expected to gather, maintain and evidence. For many managers, compliance is becoming as much a data management challenge as a regulatory one.

Read Faisal’s Viewpoint: Transparency is rising – so is complexity

 

Sanctions divergence is dialling up the pressure

As sanctions regimes in the US, EU and UK evolve in different directions, managers are increasingly required to navigate multiple frameworks simultaneously rather than rely on broad international alignment or a single ‘gold standard’.

That shift has significant implications for KYA. Indirect exposure, beneficial ownership and ongoing monitoring are becoming more important as managers seek to understand how sanctions risk manifests across complex structures and multiple jurisdictions.

Carne’s Chief Compliance Officer, Robin Cotterill examines how sanctions compliance is becoming an exercise in navigation rather than alignment, placing greater emphasis on judgement, interpretation and ongoing monitoring.

Read Robin’s Viewpoint: Sanctions fragmentation, friction and the future of KYA

 

From specialist function to strategic priority

The gap is growing between what firms are expected to know and the practical challenges involved in obtaining, validating and maintaining that knowledge.

The findings of our latest KYA research suggest this tension is only likely to become more pronounced. Some 89% of fund managers surveyed expect regulatory complexity to increase over the next two years. Yet 43% of managers report that more than half of their KYA and AML processes remain manual. At the same time, respondents identified data quality, fragmented information sources and resourcing constraints among the most significant barriers to effective KYA.

It comes as no surprise, therefore, that KYA now sits much closer to the centre of discussions around governance, operating model design and risk management than it did even a few years ago.

For a deeper exploration of these themes – including the full research findings, expert commentary and practical recommendations – download our KYA report.

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