Custodian Operations Overview
Assets Under Management
Total AUM
$2.8T
YoY Growth
+12.4%
Equity
$1.26T
45% of Total
↑ 8.2%
Fixed Income
$980B
35% of Total
↑ 5.7%
Alternatives
$420B
15% of Total
↑ 15.3%
Cash
$140B
5% of Total
↓ 2.1%
Asset Growth Projection
Estimated to reach $3.1T by Q4 2025
Compliance Checks
• Identity verification through World-Check, LexisNexis
• Document authenticity via Thomson Reuters
• Business registration validation
• Ultimate beneficial owner verification
Required by: FATF Recommendations, BSA, MiFID II
• PEP screening through Refinitiv
• Transaction pattern analysis
• Source of funds verification
• Ongoing monitoring via SWIFT
Required by: FinCEN, EU AML Directives
• Client risk scoring (Low/Medium/High)
• Geographic risk evaluation
• Business type assessment
• Transaction volume analysis
Required by: Basel Committee Guidelines
• OFAC SDN list screening
• EU sanctions database check
• UN sanctions verification
• Local regulatory watchlists
Required by: OFAC, UN Security Council
Account Opening Process
Required Documentation
Entity Formation Documents
- • Certificate of Incorporation
- • Business License
- • Articles of Association
- • Partnership Agreement
Tax & Financial Documentation
- • Tax ID Numbers
- • W-8BEN/W-9 Forms
- • Financial Statements
- • Bank References
Ownership & Control
- • Shareholder Information (>25%)
- • Director Details
- • UBO Declaration
- • Control Structure Chart
Authorization & Control
- • Authorized Signatory List
- • Specimen Signatures
- • Power of Attorney
- • Board Resolutions
Security Measures
Risk Mitigation Measures
• Counter-Terrorism Financing (CTF) Checks
• Fraud Prevention Systems
• Transaction Monitoring Setup
• Regular Account Review Schedule
Processing Timeline
Standard processing: 5-7 business days
High-risk cases may require
Additional 5-10 days
Transaction Processing Flow
Instruction Receipt
SWIFT/FTP/API
Validation
Format & Rules
Processing
Settlement & Clearing
Confirmation
Status Update
Record Keeping
Archival & Reporting
Compliance Framework
Client Due Diligence
- • Identity Verification
- • Beneficial Ownership
- • Source of Funds
- • Business Purpose
Risk Monitoring
- • Transaction Screening
- • Suspicious Activity
- • Risk Rating Updates
- • Periodic Reviews
Reporting
- • Regulatory Reports
- • Audit Trails
- • Compliance Records
- • Incident Reports
Real-Time Transaction Monitor
Wire Transfer - USD 2,450,000
Goldman Sachs → Deutsche Bank AG
Completed
14:32:15
SWIFT MT103 - EUR 875,500
JPMorgan Chase → BNP Paribas
Pending Approval
14:28:42
Securities Settlement - USD 15,200,000
Morgan Stanley → State Street Corp
Processing
14:25:18
Quick Actions
System Alert
3 transactions require immediate attention
Message Center
MT103 - Customer Credit Transfer
From: CHASUS33 | To: DEUTDEFF
14:15
MT101 - Request for Transfer
From: BNPAFRPP | To: JPMORGAN
13:42
MT202 - Financial Institution Transfer
From: CITIUS33 | To: BARCGB22
13:28
Funding Requirements
Current Balance
USD 485.2M
Minimum Required
USD 450.0M
Available Excess
USD 35.2M
Projected Shortfall
EUR account may fall below minimum by 16:00
Understanding Custodian Banks
What is a Custodian Bank?
A custodian bank is a specialized financial institution that holds and safeguards clients' securities and other assets. They serve as the guardian of these assets, ensuring their safety and handling various administrative duties.
• Digital custody of scripless securities in CSD accounts
• Physical vault storage for certificated securities
• Daily position reconciliation with depositories
• Multi-layer security access controls
• Real-time position monitoring and reporting
• DvP (Delivery vs Payment) settlement
• Cross-border transaction processing
• Trade matching and confirmation
• Failed trade management
• Settlement netting services
• Dividend and interest processing
• Tax reclaim services
• Income forecasting and reporting
• Currency conversion services
• Income reconciliation and verification
• Rights issue management
• Stock splits and mergers
• Proxy voting services
• Voluntary corporate action elections
• Class action claim processing
Modern markets primarily use scripless (dematerialized) securities held electronically at Central Securities Depositories (CSDs). However, some markets still maintain physical certificates for:
• Private unlisted securities
• Legacy certificated shares
• Certain fixed income instruments
Major Global Custodians
State Street Corporation
$43.3T in Assets Under Custody
BNY Mellon
$41.7T in Assets Under Custody
JPMorgan Chase
$31.5T in Assets Under Custody
Citigroup
$26.5T in Assets Under Custody
Primary Clients
Investment Funds
BlackRock, Vanguard, Fidelity
Why outsource custody:
- • Regulatory requirement for asset segregation
- • Complex global market infrastructure
- • Cost of building secure systems
- • Focus on core investment activities
Pension Funds
CalPERS, Ontario Teachers, ABP
Why outsource custody:
- • Fiduciary responsibility to beneficiaries
- • Multi-jurisdiction asset protection
- • Specialized reporting requirements
- • Risk management expertise needed
Insurance Companies
AXA, Allianz, Prudential
Why outsource custody:
- • Focus on core insurance operations
- • Complex regulatory compliance
- • Global investment diversification
- • Operational risk reduction
Why Not Self-Custody?
- • High infrastructure costs for secure systems
- • Complex regulatory requirements across markets
- • Need for specialized settlement expertise
- • Risk of operational errors and fraud
- • Resource drain from core business focus
Common SWIFT Message Types
SWIFT Network Overview
Society for Worldwide Interbank Financial Telecommunication
What is SWIFT?
• Global financial messaging network
• Connects 11,000+ institutions worldwide
• Standardized communication format
• Secure and reliable transmission
• Operating in 200+ countries
Message Routing
• BIC/SWIFT Code based routing
• Store-and-forward architecture
• End-to-end encryption
• Real-time monitoring
• Automated validation checks
Message Flow Process
Sender
Message Creation
SWIFT Network
Validation & Routing
Custodian
Message Processing
Confirmation
Status Update
MT5XX Series - Securities Messages
MT540 - Receive Free
Instructions to receive securities free of payment
MT541 - Receive Against Payment
Instructions to receive securities against payment
MT542 - Deliver Free
Instructions to deliver securities free of payment
MT543 - Deliver Against Payment
Instructions to deliver securities against payment
MT2XX Series - Financial Institution Transfers
MT202 - Bank Transfer
General Financial Institution Transfer between banks
MT210 - Notice to Receive
Pre-advice of an incoming payment
MT9XX Series - Cash Management & Status
MT950 - Statement Message
Detailed account statement with balances
MT940 - Customer Statement
End-of-day account statement
Message Routing to Custodian
1. Sender creates message with custodian's BIC code
2. SWIFT validates format and authentication
3. Message routed through secure IP network
4. Custodian receives via SWIFT gateway
5. Automated processing in custodian's system
Custody Fee Structure & Example
Fee Components
Sample Fee Calculation
Portfolio Details:
- • Assets Under Custody: $100 million
- • Monthly Transactions: 50
- • Asset Type: Global Equities
Monthly Fee Breakdown:
1. Safekeeping Fee (2 bps annually)
= ($100M × 0.0002) ÷ 12
= $1,666.67
2. Transaction Fees ($25 per transaction)
= 50 × $25
= $1,250
3. Account Maintenance
= $500
Total Monthly Fee: $3,416.67
Additional fees may apply for value-added services
Value-Added Services
Office Operations & Global Markets
Front Office
Client Services
- • Account Opening & KYC
- • Client Instructions
- • Query Resolution
- • Relationship Management
Market Access
- • Trade Execution
- • Market Information
- • Corporate Actions
Middle Office
Risk Management
- • Trade Validation
- • Position Monitoring
- • Compliance Checks
- • Limit Management
Performance
- • Portfolio Analytics
- • Attribution Analysis
- • Reporting
Back Office
Settlement
- • Trade Settlement
- • Cash Management
- • Reconciliation
- • Failed Trades Resolution
Asset Servicing
- • Income Collection
- • Corporate Actions
- • Tax Services
Assets Under Custody
Equities
- • Common Stocks
- • Preferred Shares
- • ADRs/GDRs
- • ETFs
Fixed Income
- • Government Bonds
- • Corporate Bonds
- • Municipal Bonds
- • Structured Notes
Alternatives
- • Private Equity
- • Real Estate
- • Hedge Funds
- • Commodities
Other Assets
- • Derivatives
- • Money Market
- • Certificates
- • Digital Assets
Global Stock Exchanges
NYSE
New York Stock Exchange
LSE
London Stock Exchange
TSE
Tokyo Stock Exchange
SSE
Shanghai Stock Exchange
Global Settlement Systems
Euroclear
International central securities depository (ICSD)
- • Multi-currency settlement
- • Cross-border transactions
- • Asset servicing
Clearstream
Deutsche Börse's post-trade services provider
- • Securities settlement
- • Custody services
- • Investment funds services
Custodian Bank Service Flow
Client
Investment Decision
Trade Execution
Market Transaction
Custodian Bank
Settlement & Safekeeping
Reporting
Asset Administration
Regulatory Compliance Dashboard
Compliance Status
Upcoming Deadlines
Quarterly capital adequacy submission
Annual foreign account reporting
Semi-annual stress testing report
Access Control
Sarah Mitchell
Senior Operations Manager
Michael Chen
Compliance Officer
Emma Rodriguez
Transaction Analyst
Enhanced security enabled for all users