“Necessity is the Mother of Invention” Gaining Value

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					“Necessity is the Mother of Invention”
     Gaining Value from Regulatory Demands



                                     Kevin Butcher
                                   Senior Vice-President,
                                     Enterprise Systems,
                                    BMO Financial Group
                                           June 18, 2009
BMO Financial Group’s view on leveraging regulatory projects to gain a
          2-for-1 benefit, creating customer and bank value


       • A regulatory need can be met in two ways:
           – Meet the specific need
           – Meet the need with a broader perspective
           – BMO’s Anti-Money Laundering example


       • The business value depends on sound governance to support
         Information Integrity:
           – Stewardship/Accountabilities
           – Standards, Controls and monitoring




                     Necessity is the Mother of Invention: Gaining Value from Regulatory Demands   2
The Regulatory World
•   Regulators tend to look at risk aligned to the COSO (Committee of Sponsoring
    Organizations of the Treadway Commission) framework:



                                                                                 •      There is particular interest for
                                                                                        information management professionals
                                                                                        to look at things through a compliance,
                                                                                        reporting and information lens

                                                                                 •      At BMO, our view of Enterprise
                                                                                        information is that information should
                                                                                        simultaneously serve business strategy
                                                                                        (Customer, Pace and Growth) and
                                                                                        operations

                                                                                 •      Our Anti-Money Laundering (AML)
                                                                                        efforts illustrate the 2 for 1 outcome


         COSO’S Enterprise Risk Management — Integrated Framework




                                     Necessity is the Mother of Invention: Gaining Value from Regulatory Demands                 3
AML from a Compliance Perspective
•   Anti-money laundering regulations require an understanding of all customer activity
    across the organization in order to ensure there is no money laundering

•   In order to drive the implementation of the AML project on the development side we
    worked with the business to link the project to strategic priorities, chiefly ―knowing
    our customers‖

•   What we have to do: consolidate profiles (information about customers and other
    people and organizations of interest to the bank) from many systems



    Profiles: Personal & Commercial | Private Client Group | Capital Markets | Party



                        Data Integration: Consolidate | Cleanse | Package



                                                   Enterprise Customer View



                              Necessity is the Mother of Invention: Gaining Value from Regulatory Demands   4
AML from a Customer Perspective
•   Our customer focused program is dedicated to protect our customers’ financial
    interests and understand their financial needs

•   Efforts are focused on:
     – Building a formal framework to help us become more adept at asking for and
         interpreting customer information, resulting in better relationships
     – Introducing new processes, technology changes in products to ultimately result
         in better service
     – Fulfilling compliance of new mandatory regulatory changes for better protection
         of our financial system and our customers’ interests




                        Necessity is the Mother of Invention: Gaining Value from Regulatory Demands   5
The Customer View




            Necessity is the Mother of Invention: Gaining Value from Regulatory Demands   6
AML and Challenges in Data Consolidation
•   In order to consolidate the customer profiles across the Enterprise the fields in
    numerous information systems across the LOBs must be drawn upon:



    Retail Customers     • E.g.: account and credit information


                                                                                                        The challenge is the
                         • E.g.: accounts and authorized investment                                             general
     Private Clients       owner details                                                                   management of
                                                                                                        information across a
                                                                                                            complex multi
       Investors         • E.g.: lending and trading products customer
                           details; names of beneficial owners
                                                                                                         divisional company
                                                                                                             (e.g. naming
                                                                                                             conventions)
                         • E.g.: account information for brokers with
      Third Parties        BMO accounts




                          Necessity is the Mother of Invention: Gaining Value from Regulatory Demands                      7
Emphasis on Information Integrity
•   Whether using information with a customer, a regulator, or for decisions in the
    business, information integrity is key

•   Information Integrity has two core components
     • Information must be:
          •   A faithful representation of reality
          •   ―Fit for use‖




                                We Achieve Integrity Through:


                                                                                                  Effective Monitoring &
    Clear Accountabilities                 Standards & Process
                                                                                                         Reporting


                        These are key elements to our well defined
                                   governance program


                           Necessity is the Mother of Invention: Gaining Value from Regulatory Demands                     8
Information Integrity Accountabilities
•    Customer data integrity requires stewardship and custodial accountabilities:

                                                       Business                                           Technology
     Information Life-Cycle
                                                      (Steward)                                          (Custodian)



                                              Accountabilities


                                              • Primary business unit
                                                   accountability                                  • Developing and executing
     Collection & Quality                                                                                    control
                                            • Specifying requirements


                                                                                                   • Developing and executing
    Processing & Integrity                  • Specifying requirements
                                                                                                             control



                                                                                                   • Developing and executing
         Access & Use                           • Authorizing rights
                                                                                                             control


                                            • Specifying requirements
         Retention &                                                                               • Developing and executing
                                           • Confirming destruction of
         Disposition                            business records
                                                                                                             control



                          Necessity is the Mother of Invention: Gaining Value from Regulatory Demands                           9
Accountabilities for Access Privileges
•   Access privileges to customer information is one of the most complicated
    accountabilities:



                      Need for                                                                 Need for
                    Business Use                                                    Compliance Access



                                                                            CAMLO (Chief Anti-Money
                 Aggregate Data:                                              Laundering Officer):
                 Corporate Steward
                                                                                  Subject Stewardship



                        Personally Identifiable Information:
                                                    LOB Stewards



                         Necessity is the Mother of Invention: Gaining Value from Regulatory Demands      10
Standards, Controls & Monitoring
•   Standards, controls and monitoring provide the infrastructure for information
    integrity



                                           • Standards are applied at the Enterprise level and
         Data Standards                      introduced through master data management and
                                             are part of the AML compliance process



                                           • Technology process controls are well developed as
                                             part of our Technology & Operations and Enterprise
        Process Controls                     Infrastructure business model (e.g. CMMI, ITIL and
                                             COBIT Frameworks)



                                           • Our Information Management Corporate Support
     Monitoring Compliance                   Area develops governance framework with
                                             accountabilities to monitor compliance




                         Necessity is the Mother of Invention: Gaining Value from Regulatory Demands   11
Concluding Thoughts & Questions




            Necessity is the Mother of Invention: Gaining Value from Regulatory Demands   12

				
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