In recent years, financial crime compliance has risen to the top of both regulators' and banks' priorities. At the end of August this year, ISSA released 17 Principles recommended to be implemented by the global community of securities custodians and intermediaries, in order to address the critical challenges posed by financial crime. It is anticipated that industry participants will commence implementation planning from next month, with a projected cross-market adoption of the Principles by the end of 2018.

Stephen Lomas, current Chairman of the ISSA board and Global Head of Market Policy at Deutsche Bank, noted the importance of the Group’s existence: “The community has heard and taken input from regulators very seriously and, by using ISSA as a vehicle, we have been able to bring together the views of market infrastructure providers and banking intermediaries to create what is probably one of the best examples of an industry driven initiative – one that truly identifies the issues and seeks to address them in a pragmatic and realistic way.”

For now, the Principles have been designed as intentionally broad in scope as ISSA looks to address transparency across the market, as well as ensuring that they are both practical and achievable within a realistic timeframe. Thomas Zeeb, Vice Chairman of ISSA and CEO of SIX Securities Services added: “We wanted to be able to meet the requirements of various markets and product lines, bringing a level of standardisation for all stakeholders within the chain of custody. As such, the principles are intended to be applied in a way that is both technologically and structurally agnostic.”

Zeeb also believes that the most important change will be the impact which the Principles have on behaviour. “The real objective of the Principles is to address and change behaviour in the market” says Zeeb. “Regardless of the technology that ends up supporting the implementation of the Principles, they will provide guidelines and outline responsibilities for participants and intermediaries in the process chain.”

As they stand, the Principles are not prescriptive, meaning that for adoption to be successful, market participation will be key. “It will come down to the commitment of various providers to not only adopt the principles themselves, but to communicate them throughout their sphere of influence, including clients and suppliers” added Zeeb.

Whilst it’s still too early to determine how the Principles will be accepted across markets, in the short to medium term, ISSA will continue its work, and have already discussed introducing standardised contractual language to assist market participants in implementing the principles.

Originally published on Post Trade Views here.