Global Trustee and Fiduciary Services News and Views Issue 48

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Global Trustee and Fiduciary Services News and Views | Issue 48 | 2017 57
This is a deceptively simple idea, but the
practicalities of creating convenient, quick
and secure solutions are more complex.
Privacy, data protection, security and consent
mechanisms are at the centre of public
debates and technological challenges. Could
a utility be the way to open the door to
digital identity assurance schemes designed
specifically for financial sector businesses
generally or Luxembourg specifically?
Blockchain: the new opportunity
Distributed ledger technology could offer a
solution for this and other financial sector
data-processing challenges. Blockchain
technology was developed to power
cryptocurrencies, and increasingly it is
seen as a secure, tamperproof way to share
any type of data. The blockchain uses
distributed ledger technology (DLT) to track
everything from ownership of assets through
to identities. Anyone with permission can
update and access data on the distributed
ledger, with all users able to see who has
changed what, when, and by how much.
Counterparties could keep these ledgers up
to date in real-time without the involvement
of an expensive third party.
However, the blockchain is not seen by
many as ideally suited for KYC processing,
even though its contribution might be
crucial to the process of distributing funds
and tracking “who owns what”. There are
many private initiatives researching and
developing a way to ease the processing
of transactions, payments and entitlements,
as well as facilitating client onboarding and
KYC challenges.
Bold moves required
KYC was the forerunner of much of the
regulation that has since engulfed the
financial services industry. It has taken time,
but the industry and the technology are
catching up with the scale of the challenge
set to transform the way these KYC rules are
dealt with. Utilities backed with the latest
technology could help control costs as new
regulations and updates come on stream.
The next few years will see the fourth EU
Money Laundering Directive (4MLD), the
second Payment Services Directive (PSD2),
and General Data Protection Regulation
(GDPR). The latter, which comes into force on
25 May 2018, could be particularly relevant
to the utility debate. Instead of individual
companies spending time developing their
own digital identity modules, it suggests that
such activity could all be handled centrally.
Investors are demanding lower fees and
putting the fund industry sector under greater
pressure to deliver value for money. However,
this is just when regulations are driving up
costs. A bold new approach is needed. A
mutualised utility would represent such a
shift, with costs being shared and greater
accuracy ensured.
Olivier Portenseigne
Managing Director and
Chief Commercial Officer
Fundsquare
1 Deloitte Luxembourg — Europe’s fund expenses at a
crossroads, from
investment-management/articles/europe-fund-expenses-
crossroads.html, last accessed on 19 April 2017. Link
The blockchain
uses distributed
ledger technology
(DLT) to track
everything from
ownership of
assets through to
identities.