AFME provides revised due diligence questionnaire

The new version comes one year after AFME published the DDQ with the aim of standardising and simplifing the process of gathering due diligence information from sub-custodians.
By Joe Parsons

The post-trade division of one of Europe’s leading banking associations has published a revised due diligence questionnaire (DDQ) with a new sub-section for global custodians.

The Association for Financial Markets in Europe (AFME) released its updated its 90 page DDQ with an additional 10 pages of questions enabling global custodians to detail their network management and sub-custody relationships.

“The first version was designed for global custodians and investment banks to send to their sub-custodians,” said Alan Cameron, head of brokers market strategy at BNP Paribas Securities Services and head of the working group that produced the AFME questionnaire.

“It was not designed to be sent to a global custodian or an ICSD acting as a global custodian; however many banks used it for these relationships as well. By adding an additional section on third party relationships we now have a document that can be sent to both sub-custodians and global custodians.”

The new version comes one year after AFME published the DDQ with the aim of standardising and simplifying the process of gathering due diligence information from sub-custodians. Previously, sub-custodians had to respond to clients’ individual questionnaires, which, while requiring individual answers, covered much common ground.

Some users had, however, suggested that the DDQ in its initial form did not go far enough in streamlining the requisite workflow. 

Speaking at Network Forum Asia in November, one network manager commented that the combination of AFME’s DDQ with their own questionnaire has added another 60 to 70 more questions which their sub-custodian has to answer, making the process more onerous for them.

 “The revised document should allow firms to use the AFME DDQ without sending a sizeable addendum of additional questions, standardising the process further,” said Stephen Burton, managing director, post-trade, AFME.

According to Cameron, the AFME questionnaire has already hugely simplified the due diligence process: “That is why so many banks have contributed to this endeavour. And if we had not worked together to bring in this standardisation, things would have got even worse as more and more banks increased their due diligence requirements.”

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