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

Kevin Butcher Senior Vice-President,

Enterprise Systems,

BMO Financial Group

June 18, 2009

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

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

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

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

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

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

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

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

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

The Customer View

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

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:

The challenge is the general

management of information across a

complex multi divisional company

(e.g. naming conventions)

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• Whether using information with a customer, a regulator, or for decisions in the business, information integrity is key

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

Emphasis on Information Integrity

• Information Integrity has two core components• Information must be:

• A faithful representation of reality• “Fit for use”

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

Information Integrity Accountabilities

• Customer data integrity requires stewardship and custodial accountabilities:

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

Accountabilities for Access Privileges

• Access privileges to customer information is one of the most complicated accountabilities:

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

Standards, Controls & Monitoring

• Standards, controls and monitoring provide the infrastructure for information integrity

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

Concluding Thoughts & Questions

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