[ U P D AT E ]
Network
managers
reducing DDQ
questions for
sub-custodians
THE DDQ WAS AT RISK OF
BECOMING UNSTUCK AS NET-
WORK MANAGERS PUMPED
THE DOCUMENT WITH THEIR
OWN PROPRIETARY QUESTIONS.
T
he number of supplementary questions
being tagged onto the AFME (Associ-
ation for Financial Markets in Europe) Due
Diligence Questionnaire (DDQ) by network
managers is gradually receding in what is
likely to further streamline the reporting
exercise for sub-custodians and facilitate
efficiencies during the overall due diligence
process.
18
Global Custodian
Fall 2018
“The feedback I am receiving now is that
network managers are asking fewer addi-
tional questions than what they once were. I
think this decline is mainly because network
managers have realised that many of the
auxiliary questions they were asking were ac-
tually covered in the AFME DDQ already,” said
Alan Cameron, head of market strategy-bro-
kers, at BNP Paribas Securities Services and
chair of the AFME DDQ Task Force.
The DDQ, whose origins can be traced back
to NEMA Athens in June 2015, was at risk
of becoming unstuck as network managers
pumped the document with their own pro-
prietary questions, which ran counter to the
entire initiative’s standardisation objective.
An executive at one sub-custodian provider
– speaking at The Network Forum in Cape
Town in March 2018, said there had been an
80% increase in the number of questions
being asked in the DDQ, according to his
estimates.
A handful of sub-custodians – frustrated
by the extra effort involved in fielding all of
these superfluous inquiries – even touted
the idea of charging global custodian and
broker-dealer clients for completing the
expanded AFME DDQ. This suggestion was
predictably snuffed out by customers who
highlighted the sub-custodian market was
very saturated, stating firmly that remuner-
ation for filling out the DDQ would not be
forthcoming.
Nonetheless, AFME is soliciting industry
feedback about whether to integrate more
questions into the 2019 version of the DDQ.
“In our first review of the DDQ in 2017, we
reviewed hundreds of additional ques-
tions that network managers had asked in
addition to the standard ones. In the end,
we added or amended only a few. The view
of the team of network managers under-
taking the review was that most of the
additional questions were already covered
in the questionnaire or were not genuine
DDQ questions. This year, we are planning to
review only questions specifically requested
by users,” said Cameron.
Despite this, enhancements to the DDQ
will be made. Cameron said questions
covering client money, compliance with
anti-slavery regulations and cyber-security
policies would be introduced into the 2019
DDQ. “The present AFME DDQ is a bit light
on cyber-security. There is debate as to
whether we should extend that particular
section. Some think that cyber-security
questions are too new and sometimes too
specific to the institutions involved to allow
for much standardisation,” he said.