The fundamentals of financial product distribution oversight: Towards the age of maturity?

Sinisa Vacic, Marie Lyons and Yvan Pipoz

Journal of Securities Operations & Custody, 2018, vol. 10, issue 2, 107-116

Abstract: In recent years, regulators have placed increased expectations on financial product manufacturers to better understand and control their distribution network. The focus is to ensure financial products are sold in compliance with anti-money laundering (AML) and counter-terrorist financing (CTF) regulations, and in a manner that is suitable to and in the end client’s best interest. This requires financial product manufacturers to perform thorough distributor due diligence (KYD) over the intermediaries distributing their products. As a result, the former have had to implement and continuously adapt their distribution oversight function, as both the regulations and the expected outcomes thereof have become clearer, and the scope continues to evolve. With distribution networks becoming increasingly intermediated, the due diligence programme needs to be robust and, to really be successful in its mission, combined with efforts to build and maintain strong partnerships with distributors. In an environment where the financial industry is coming under increased pressure on its revenues, as well as costs to the end client, financial product manufacturers and distributors share a common need to rationalise this process. New emerging technologies and innovative approaches offer opportunities to create such a robust and efficient due diligence process. This paper focuses on describing the main regulations at play, highlighting the key challenges specifically for Luxembourg domiciled investment fund asset managers and the cross-border distribution of their products.

Keywords: distribution oversight; anti-money laundering; Know Your Distributor due diligence programme (search for similar items in EconPapers)
JEL-codes: E5 G2 K22 (search for similar items in EconPapers)
Date: 2018
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