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Fund administrators have to embrace change fast, thinks ZEDRA

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Contributed by ZEDRA
06 April, 2018

"Regulatory evolution is driving a fundamental change in the way the Channel Islands will do business in the future" says Zedra's Mike Capraro, head of business development. "Compliance, transparency and information sharing are now at the forefront of every activity, with the result that service provides have to deliver robust, future proof systems that offer an automated, accurate and reliable solution to compliance responsibilities, " added Capraro. Tomorrow's successful service providers will offer this and have a strategy for actively winning new business across the globe, as historic referral channels fall away, he thinks.

A good fund administrator knows that whilst the investment manager drives performance, it is the administrator who assumes the pivotal role of ensuring that the fund meets its wide-ranging legal and regulatory obligations. The fund administrator interacts with all the service providers who in turn rely upon it to ensure that their own risks in relation to the fund are managed. The administrator is responsible for the compliance monitoring programme, including adhering to anti-money laundering laws and ensuring that all counterparties comply with their mandates, taking care of FATCA, CRS reporting, amongst many other obligations. Importantly, professional and institutional investors are increasingly requiring fund services providers to ensure that they are not exposed to undue risks of non-compliance.

Anti-money laundering

Very few high net worth and professional investors come into a fund in their own name. Invariably they invest through structures. Anti-money laundering law dictates that a fund must have up to date due diligence on all owners and controllers throughout the structure, all the way up to the beneficial owners of the structure. This may sound simple in theory but often difficult in practice, as capturing and updating this information is essential in terms of record-keeping obligations.

Consider a fund with hundreds of investors, some investing directly in their own name and others through a structure. The anti-money laundering law requires that when one has a trigger event, such as a distribution or dividend payment, investors' due diligence must be up to date. So how does an administrator monitor whether due diligence that was provided on day 1 is still in date?

An effective system should allow for the recording of expiry dates and use the system to generate a request to the investor for an update. In this way the administrator can stay ahead of any trigger events and make sure that it is not holding up key processes.


FATCA and CRS have brought about their own challenges; accurately classifying investors, capturing data and producing that data from the system in a reportable format. Some software vendors have kept ahead of the game, others not. So what one sometimes finds is a reliance on side-systems which mostly involves human intervention and in-house programming, which may well increase the risk of errors.

The best reporting systems have a single, integrated platform, with reports that are readily available and can be generated in any language required for data upload.

Such systems are available 24/7 across all time zones, with a dedicated web portal to allow investment managers to query system data and investors to obtain information on demand.

What to look for

Capraro ends, "Investment managers should expect their fund administrator to act as the pivotal hub for the fund and above all, to manage the numerous operational, regulatory and governance risks, to protect all the counterparties involved. The administrator must be resourced to meet the technical and technological requirements that the industry now demands and offer flexible web based reporting.  It can only fulfil that role if it has the experience and the required functional resources at its disposal."

ZEDRA is an independent fund provider offering depth and experience, excellent client support and service levels and a state of the art IT systems. To explore ZEDRA's fund administration capability, please contact Mike Capraro at mike.capraro@zedra.com.


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