Europe Funds & Trusts: Strategy for Modernization and Compliance

Role: Chief Financial Officer (CFO)

Industry: Funds and Trusts in Europe

Situation:

Overseeing financial strategy for a leading funds and trusts company in Europe. The industry is highly regulated and competitive, with a focus on transparency and compliance. The company has a strong reputation and solid financial performance but faces challenges in adapting to new regulatory requirements and market dynamics. Internal challenges include fragmented financial systems and a conservative risk management approach. Strategic initiatives include modernizing financial systems, enhancing regulatory compliance, and exploring new investment opportunities.

Question to Marcus:

“

How can we modernize our financial systems and enhance compliance to adapt to new regulatory requirements while exploring new investment opportunities?

Compliance

In the European funds and trusts context, compliance must be treated as a strategic enabler of market access and client trust, not just a cost center. Prioritise end-to-end automation of regulatory tasks: KYC/AML screening, transaction monitoring, FATCA/CRS reporting, PRIIPs/UCITS disclosures and AIFMD reporting.

Consolidate fragmented rulebooks into a single regulatory requirements register mapped to processes and systems so you can trace obligations to controls and evidence. Adopt a “compliance-by-design” approach for product launches and system changes (privacy impact assessments, legal sign-off, regulatory sandboxing where appropriate). Strengthen third‑party oversight — require SOC/ISAE 3402 or equivalent assurance, contractual SLAs for reportability, and periodic control testing. Invest in straight-through reporting to regulators (machine-readable formats, audit trails) to reduce manual reconciliations and audit risk. Build a small centre of excellence combining legal, compliance, ops and IT to accelerate regulatory change implementation and maintain a living playbook for common regulatory scenarios. This reduces time-to-market for new investment vehicles while reducing fines and operational interruptions. Immediate next steps: map top 10 regulatory obligations to current tech and people gaps; automate highest-volume, highest-risk controls first.

Digital Transformation

Modernizing systems should be outcome-driven: reduce manual reconciliation, enable near-real-time NAV calculation, and shorten regulatory reporting cycles. Move from a patchwork of legacy ledgers to a modular, API-first architecture that separates product accounting, transfer agency, order management and reporting.

Prefer cloud-native SaaS for non-differentiating functions (admin, reporting, CRM) while retaining control over core proprietary models. Implement a phased “wrap-and-replace” plan — wrap legacy via APIs and replace in prioritized waves to reduce migration risk. Use vendor selection criteria tailored to funds and trusts: multi-domicile support (Luxembourg/Ireland/UK), regulatory reporting templates, ISAE/SOC compliance, and strong data lineage. Automate reconciliations and STP for subscriptions/redemptions and corporate actions to reduce fail rates and liquidity shocks. Drive a parallel change programme for people and processes: upskill finance teams on cloud ops and devops basics, create product owners for finance functions, and run small pilots (e.g., one fund class) before enterprise roll-out. Measure success with clear KPIs: reduction in manual FTE hours, time-to-NAV, reporting latency and control exceptions.

Data & Analytics

Data is the backbone for compliance, portfolio insight and product innovation. Create a single source of truth (golden record) for clients, holdings, transactions and prices across domiciles.

Implement a data pipeline (ingest, cleanse, transform, enrich) with lineage and versioning so regulatory reports and audit evidence can be reproduced on demand. Prioritise use cases that deliver rapid ROI: automated regulatory reporting, NAV reconciliation analytics, liquidity and counterparty risk dashboards, and client reporting personalization. Use analytics to detect market and client trends that uncover new investment opportunities (e.g., flows into private credit or ESG demand by region). Deploy supervised ML models for AML/transaction monitoring with human-in-loop escalation, and unsupervised models for anomaly detection across custody and broker feeds. Establish data ownership, SLAs and a data catalogue; make data discoverable for portfolio managers and compliance while enforcing GDPR controls. Start with a measurable pilot — e.g., reduce manual reconciliations by 50% for top 20 funds within 6 months — then scale the platform.

Data Governance

For European funds and trusts, data governance must reconcile commercial agility with strict privacy and cross-border rules. Establish a data governance board with representation from finance, compliance, legal (DPO), operations and IT; make the board accountable for data quality, lineage, access and retention policies across jurisdictions (EU/EEA/UK).

Define data taxonomy aligned to regulatory concepts (client, beneficial owner, holding, NAV, trade) and enforce master data management for investor IDs and instrument identifiers (ISIN/SEDOL). Implement role-based access controls, consent tracking for marketing and reporting, and automated data retention that respects local regulatory retention periods. Ensure all datasets used for regulatory reporting include immutable audit trails and explainability metadata to satisfy supervisors during reviews. Bake GDPR and cross-border transfer assessments into vendor onboarding and data flow maps; require SCCs or adequacy mechanisms where needed. Focus first on the datasets that drive regulatory risk (KYC, ownership, transactional feeds, NAV inputs). Clear ownership, measurable SLAs for data quality, and automated lineage will materially reduce regulatory breaches, manual rework and time-to-compliance for new requirements.

Enterprise Architecture

Adopt a target operating model that treats finance and compliance systems as an integrated ecosystem. Move to a domain-driven architecture: separate portfolio accounting, investor services, risk, compliance and reporting into well-defined domains with standard APIs and message schemas.

This enables selective modernization without wholesale disruption and supports multi-domicile operations and fund wrappers. Standardise on common reference data (pricing, corporate actions) and a central event bus for real-time data distribution. Require vendors to support industry standards (FIX, ISO 20022 where relevant, FpML) and provide machine‑readable regulatory templates. Plan for resilience: active-active across EU regions, disaster recovery aligned with regulators’ business continuity expectations, and robust monitoring/observability for data flows. Tighten change control and configuration management to demonstrate control to auditors and supervisors. The architecture must enable rapid composition of new products (segregated accounts, tokenized funds) and produce auditable artefacts for each regulatory change. Begin by mapping current systems to business capabilities, identify single points of failure, and build a 3-year roadmap prioritized by regulatory risk and business value.

Risk Management

Shift from a purely conservative posture to calibrated, analytics-driven risk taking that supports new investment strategies while protecting client capital and compliance standing. Implement integrated risk frameworks that combine market, liquidity, counterparty, operational and conduct risks into a consolidated view used for product approval and capital allocation.

For funds and trusts, liquidity stress-testing at vehicle and investor level is essential — model redemption scenarios across market shocks and operational failures. Enhance counterparty due diligence and concentration limits (custodians, prime brokers, counterparties across borders) with automated monitoring tied to exposures. Introduce scenario libraries that include regulatory stress scenarios (e.g., rapid outflows under UCITS liquidity rules, AIFMD liquidity thresholds) and use Monte Carlo or historical scenario analysis for extreme but plausible events. Embed pre‑trade risk checks and real-time limit monitoring into order management to prevent breaches. Finally, formalise a risk appetite that permits controlled experimentation (pilot private assets, tokenization) subject to predefined stop-loss and escalation triggers. Document governance for exceptions and ensure periodic board-level reporting in a format supervisors expect.

Treasury

Centralise treasury functions to improve cash visibility, FX and liquidity management across domiciles and sub-funds. Integrate fund accounting and order management with a Treasury Management System (TMS) to automate cash sweeps, payment routing and collateral processes, reducing settlement fails and manual interventions.

For cross-border funds, optimise FX exposures via netting and hedging policies that are transparent for investor reporting and compliant with local tax/treaty rules. Ensure liquidity buffers are modelled against redemption stress scenarios mandated by UCITS/AIFMD and reflected in prospectuses and liquidity risk management statements. Automate intraday cash position reporting so portfolio managers and compliance can react to market moves. Strengthen banking relationships and require counterparties to provide quick access to reporting and intraday repo/collateral facilities. Where relevant, explore tokenized cash management and real-time rails for settlement to reduce settlement latency — pilot in a controlled environment with regulatory engagement. Short-term target: consolidate treasury reporting into a single dashboard with intraday granularity and automated exceptions.

Investment Vehicles

To grow AUM and diversify revenue, design products that balance investor demand, compliance constraints and operational feasibility. Prioritise vehicle types that ease cross-border distribution in Europe — Luxembourg and Ireland domiciles, UCITS ETFs for retail distribution and AIFMD structures for institutional private markets.

Use feeder/umbrella fund structures and master-feeder to scale strategies while limiting regulatory fragmentation and duplicative reporting. For private assets, implement robust valuation governance, liquidity management and side‑pocketing arrangements to meet investor expectations and regulator scrutiny. Consider tokenized fund pilots to improve settlement and fractionalization for alternatives, but restrict to controlled jurisdictions and accredited investor segments until custody, AML and tax clarity exist. Embed ESG and tax-efficient wrappers as product features where client demand is strong — ensure disclosure and data collection supports SFDR and local regulatory claims. Before launching, run a regulatory impact assessment, operational readiness checklist and a profitability forecast that includes distribution, custody and compliance costs. Use an MVP approach: launch one scalable vehicle and iterate based on investor feedback and regulatory outcomes.