The ever-increasing number of data sources and complexity of data in the investment management world can present a confusing landscape both from a business and a technology perspective. To make sense of this ‘data zoo’, the fundamental components of data need to be found, analysed, and recorded – in other words, the metadata.

Put simply, investment management firms need to hold business descriptions and knowledge about their data in an accessible and business-comprehensible form. This enables users to make use of the data more easily and consistently without being distracted by technical details of how or where data is stored or represented. From this captured business knowledge a repository of data about data can be constructed – the metadata. But there is no need to have all of the business knowledge captured up-front. Creating a repository can be approached on a target to source / point-to-point basis. Functionality associated with the metadata repository can then be used to ‘join-up’ these discrete datasets. The resultant joined-up data (i.e. data with lineage tracking) can now be used to understand how a specific data attribute flows through the business processing stack.

Applying metadata to the FATCA scenario
This metadata-centric approach can be applied to understanding and making sense of data items and data flows to ease the pain of many current business challenges. One in particular is achieving compliance with the Foreign Account Tax Compliance Act (FATCA). Approaching these challenges from a metadata perspective offers significant benefits, not only in facilitating a particular solution, but also in providing a strategic framework which will provide long-term benefits.

In any organisation, much of the data required by FATCA to report on a US person’s direct or indirectly owned financial accounts is probably already present; previous initiatives to implement accounting systems, CRM systems, KYC, regulatory reporting and earlier data management initiatives have seen to this. However, this data is more than likely to be distributed across disparate systems, and pulling it all together in a coherent fashion can be a problem.

It is tempting, out of habit, almost, just to build yet another silo of data with its own data integration layer. This approach will indeed work for this particular challenge, but what about the next regulatory change? And the one after that? Is there a better way to approach this?

The short answer is yes.

Repositories, data lineage and reducing costs
Let’s suppose for the moment that a metadata repository was available; what would we then have to do in our FATCA project? Initially, the new model (the ‘FATCA Model’) will be loaded up. The ‘FATCA model’ would then be compared to the internal standard ‘canonical’ model. This will quickly provide two important results. Firstly, that a good proportion of the data needed to populate the ‘FATCA Model’ is already available and secondly that there is a set of other data items which are not currently available. Because these ‘gaps’ will be known very quickly they can be addressed more rapidly. If the canonical model is found to be missing data items, then they can be added.

In addition, the data lineage reports will show where the required data is coming from and, if it is determined that changes are required, an assessment can be made as to the impact of applying these changes.

Even if in the end, part of the appropriate solution is a dedicated new ‘FACTA Reporting Warehouse’, how this is populated with data will be defined and recorded by metadata and stored within the metadata repository. It could plausibly be argued that this approach has no direct benefit as a FATCA solution per se; but by approaching the FATCA challenge in this way we would gain the ability to perform impact analysis on changing data requirements and also have a strategic framework which is applicable across the entire enterprise.

If an organisation already has such a metadata repository, the very high-level steps indicated above ARE what they will do. The risk to these organisations of not becoming FATCA compliant in the required timeframe is low and the corresponding costs of their achieving compliance will also be low.

In conclusion, for organisations not in this enviable position, the need to achieve FATCA compliance can be viewed as yet another driver towards adopting a metadata-centric solution that offers even more than the coveted goal of simplified compliance; it ultimately starts to tame their ‘data beast’.

Ian Mainwaring, Senior Consultant, Citisoft