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The cost of compliance
24 Jun 2026
As firms face growing compliance demands, documentation is changing from a record-keeping exercise into a cornerstone of operational resilience, finds Zarah Choudhary
Image: tiero/stock.adobe.com
Documentation has never been the most glamorous aspect of asset servicing. For decades, it has been viewed as a necessary administrative function sitting quietly in the background of onboarding, tax processing, reconciliations, compliance checks, and regulatory reporting.
Today, however, documentation has become one of the industry’s most significant operational challenges, according to many industry leaders.
As firms contend with increasingly complex regulatory requirements, growing volumes of data, expanding private markets activity, and compressed settlement timelines, the burden of collecting, validating, maintaining, and evidencing information has increased dramatically. While automation initiatives have transformed many operational processes, documentation remains one of the most persistent sources of friction across the investment lifecycle.
The challenge is no longer simply producing documents. Firms must now demonstrate how decisions were made, evidence every step of operational processes, and maintain consistency across multiple jurisdictions, counterparties, and regulatory regimes.
The expanding compliance burden
The regulatory expectations placed on financial institutions continue to grow.
Phil Flood, global business development director for regulatory and STP services at Gresham, points to an increasingly complex landscape shaped by European Market Infrastructure Regulation (EMIR) Regulatory Fitness and Performance (REFIT), Central Securities Depositories Regulation (CSDR), Securities Financing Transactions Regulation (SFTR), Markets in Financial Instruments Directive II (MiFID II) reviews and US Treasury clearing reforms.
“The regulatory landscape has grown significantly more complex,” he says. “At the same time, the shift toward near-realtime obligations has compressed the windows available for documentation accuracy and exception handling.”
Settlement reform has added another layer of urgency.
Steve Walsh, managing director at Duco, says the introduction of T+1 settlement has fundamentally altered operational expectations.
“T+1 settlement obligations have sent shockwaves through the US markets,” he explains.
“The complete timeline for understanding the impact of any posttrade event on underlying assets has been compressed to the trade or event date.”
The challenge is not simply regulatory volume. It is the interaction between regulation, market structure, and operational complexity.
Rachel Wheeler, global product head of regulated fund solutions at Waystone, says firms are now navigating a far more fragmented regulatory environment than they were five years ago.
“Documentation and compliance requirements have become significantly more complex as firms navigate an increasingly fragmented regulatory landscape,” she says.
“We have seen a substantial increase in disclosure obligations, governance requirements, reporting expectations, and evidential recordkeeping.”
At the same time, tax requirements continue to evolve.
Cross-border investing, withholding tax recovery processes, treaty eligibility checks, and global tax initiatives have created additional documentation demands.
Asset managers are increasingly required to maintain detailed records across multiple jurisdictions while monitoring ongoing changes to tax frameworks and reporting obligations. The result is an operating environment where documentation is no longer a back office consideration but a core component of governance, compliance, and risk management.
Managing documentation across global markets
As firms expand internationally, documentation challenges multiply. A document that satisfies one regulator may require substantial modification elsewhere.
Different counterparties, custodians, and service providers often maintain their own templates, requirements, and review processes.
Wheeler says firms are increasingly forced to balance consistency with local market requirements.
“A document or disclosure that is suitable in one jurisdiction may require significant adaptation elsewhere due to different supervisory expectations, investor protection requirements, or market practices.”
The challenge becomes particularly acute when firms are managing global custody networks, cross-border distribution models, and alternative investment structures.
According to Rehan Ahmed, CEO of Marketnode, each additional market introduces fresh operational friction.
“The impact is material, and it compounds,” he says. “Each new market or counterparty adds fresh friction rather than reusing the work already done.”
Cross-border transactions are becoming increasingly documentation-intensive as regulators demand greater transparency and stronger controls, as per the experts.
Research from the BIS Innovation Hub’s Project Mandala highlights how increasing regulatory requirements have driven up compliance costs across international payment and investment ecosystems. The report notes that cross-border compliance processes continue to be hampered by manual interventions, data quality issues, duplicate checks, and a lack of standardisation.
Meanwhile, withholding tax processing remains another area of significant complexity.
According to PwC, inconsistent treaty application, documentation requirements, and reclaim procedures continue to create operational burdens for firms managing international portfolios. Standardising documentation work?ows and automating validation processes are becoming increasingly important for organisations seeking to reduce operational risk and improve efficiency.
Why documentation remains highly manual
Despite years of investment in digitisation, many documentation processes remain surprisingly labour-intensive.
Corporate actions, reconciliations, tax reclaims, onboarding, and Know Your Customer (KYC) continue to rely heavily on manual intervention.
Walsh identifies corporate actions, settlement, reconciliation, withholding tax processing, and client onboarding among the industry’s most persistent documentation challenges.
“These are all pillars of process in asset servicing — challenges that have existed for decades,” he notes.
For many firms, the issue begins with information gathering.
Stuart Tait, head of LPPA partnerships for Europe and the UK at Carta, argues that documentation collection remains one of the largest operational bottlenecks in private markets.
“Data is still shared across numerous data rooms, portals, and email threads, so simply gathering and checking that all required documentation has been received typically involves a manual retrieval and verification process.”
The challenge is compounded by the long-term nature of private market investments.
“Maintaining accurate records across thousands of investors, entities, and fund relationships often requires substantial manual review and coordination throughout the life of a fund,” Tait adds.
Rob Calder, enterprise sales executive at Canoe Intelligence, says custodians and service providers frequently struggle to collect documents efficiently, particularly during peak periods.
“Collecting documents can be a time-consuming process for custodians, especially during periods when volumes are high,” he explains.
Even after documents have been gathered, extracting data often remains difficult because much of the information is contained within unstructured PDF reports.
Marketnode’s Sooraj Sreenivasan points to KYC as another area where significant manual work remains.
“KYC remains a clear example. While there has been meaningful progress in digitising parts of the process, it continues to be one of the more manual and resource-intensive areas of documentation.”
The lack of common standards across jurisdictions continues to create operational complexity, forcing firms to manage fragmented processes that resist automation.
Automation, digitisation, and AI
Faced with mounting documentation burdens, firms are increasingly turning to automation and AI.
Much of the early focus has centred on creating stronger audit trails and reducing operational workloads.
Murray Campbell, principal product manager at AutoRek, says automation offers significant benefits in evidencing controls and maintaining records.
“With all actions tracked and evidenced, it is far easier for a firm to demonstrate the controls they have in place,” he explains.
Automated work?ows can remove the need for operational teams to manually generate evidence while creating electronic review and sign-off processes that strengthen oversight. Increasingly, AI is being deployed to address documentation challenges that traditional automation has struggled to solve.
Ahmed adds that firms are focusing on high-volume processes first.
“Most firms have started where the volume is highest, automating extraction and validation to reduce manual handling and give teams a more consistent baseline.”
However, connecting information across systems, counterparties, and jurisdictions remains significantly more challenging.
Tait notes that AI is increasingly being used to connect fragmented information sources and create a more complete view of fund activity.
“Fund managers, investors, and service providers often hold different pieces of the same information,” he says. “AI is increasingly being used to connect information across those sources and create a more complete picture of fund activity.”
Waystone has also seen growing interest in AI-powered document analysis, regulatory horizon scanning, and data extraction. However, Wheeler emphasises that AI remains an enhancement rather than a replacement for expertise.
“Given the complexity of many regulatory requirements, firms still need experienced professionals to validate outputs and exercise judgement where interpretation is required.”
Flood believes the industry is entering a new phase of automation altogether.
“The most significant shift is the move from AI as an assistive tool toward agentic AI that handles routine classification, matching, and exception triage autonomously.”
Importantly, these systems are beginning to generate their own documentation and audit trails, creating greater transparency and explainability within operational processes.
Documentation as operational risk
Documentation failures increasingly represent more than administrative inefficiencies. They can delay onboarding, slow product launches, create reconciliation breaks, increase regulatory exposure, and damage client relationships.
Operational risk has become a growing concern across the asset management industry.
Research cited in Broadridge and Securities Industry and Financial Markets Association (SIFMA) operational risk studies highlights how increasing operational complexity, vendor dependencies, regulatory requirements, and resource constraints continue to challenge firms of all sizes.
The risk is particularly acute where manual processes remain heavily embedded.
Campbell notes that reconciliations and operational work?ows still frequently rely on spreadsheets and manual intervention, limiting transparency, and creating challenges for audit and compliance functions.
Similarly, Flood argues that documentation overhead often becomes the critical path in onboarding and client implementation projects, directly affecting time-to-revenue. As firms expand into new products, jurisdictions, and asset classes, the operational consequences of poor documentation management continue to grow.
What needs to change?
While technology is clearly part of the solution, most industry participants agree that automation alone will not eliminate documentation challenges.
Greater standardisation remains a key priority.
Wheeler argues that standardised templates and disclosure frameworks can reduce duplication and improve efficiency, although complete harmonisation across jurisdictions is unlikely.
Calder believes standardisation has become increasingly urgent as private markets continue to scale.
“As we look forward to the democratisation of private markets and the anticipated surge in retail investment, the need for standardisation and scalability has become both essential and urgent.”
Others argue that the standards themselves already exist.
According to Marketnode’s Sreenivasan, the challenge is often adoption rather than creation.
“The industry has implemented standards for high-volume and high-risk trading and settlement activities and has also established standards for KYC. The challenge is less the absence of standards and more their limited adoption.”
Looking ahead, the industry appears to be moving towards a future where compliance and documentation become embedded directly within operational work?ows.
The BIS Innovation Hub’s Project Mandala offers one example of this direction through its ‘compliance by design’ approach, which seeks to automate regulatory checks and validate requirements before transactions are completed. By embedding rules directly into processes, the project aims to reduce duplicate checks, improve transparency, and increase straightthrough processing.
For asset servicing firms, the destination is becoming increasingly clear.
The future is unlikely to involve less documentation. Instead, it will involve smarter documentation, stronger automation, and more intelligent ways of proving that processes have been completed correctly.
In an industry where operational resilience is becoming a competitive advantage, documentation is no longer simply paperwork. It is evidence, oversight, and risk management rolled into one.
Today, however, documentation has become one of the industry’s most significant operational challenges, according to many industry leaders.
As firms contend with increasingly complex regulatory requirements, growing volumes of data, expanding private markets activity, and compressed settlement timelines, the burden of collecting, validating, maintaining, and evidencing information has increased dramatically. While automation initiatives have transformed many operational processes, documentation remains one of the most persistent sources of friction across the investment lifecycle.
The challenge is no longer simply producing documents. Firms must now demonstrate how decisions were made, evidence every step of operational processes, and maintain consistency across multiple jurisdictions, counterparties, and regulatory regimes.
The expanding compliance burden
The regulatory expectations placed on financial institutions continue to grow.
Phil Flood, global business development director for regulatory and STP services at Gresham, points to an increasingly complex landscape shaped by European Market Infrastructure Regulation (EMIR) Regulatory Fitness and Performance (REFIT), Central Securities Depositories Regulation (CSDR), Securities Financing Transactions Regulation (SFTR), Markets in Financial Instruments Directive II (MiFID II) reviews and US Treasury clearing reforms.
“The regulatory landscape has grown significantly more complex,” he says. “At the same time, the shift toward near-realtime obligations has compressed the windows available for documentation accuracy and exception handling.”
Settlement reform has added another layer of urgency.
Steve Walsh, managing director at Duco, says the introduction of T+1 settlement has fundamentally altered operational expectations.
“T+1 settlement obligations have sent shockwaves through the US markets,” he explains.
“The complete timeline for understanding the impact of any posttrade event on underlying assets has been compressed to the trade or event date.”
The challenge is not simply regulatory volume. It is the interaction between regulation, market structure, and operational complexity.
Rachel Wheeler, global product head of regulated fund solutions at Waystone, says firms are now navigating a far more fragmented regulatory environment than they were five years ago.
“Documentation and compliance requirements have become significantly more complex as firms navigate an increasingly fragmented regulatory landscape,” she says.
“We have seen a substantial increase in disclosure obligations, governance requirements, reporting expectations, and evidential recordkeeping.”
At the same time, tax requirements continue to evolve.
Cross-border investing, withholding tax recovery processes, treaty eligibility checks, and global tax initiatives have created additional documentation demands.
Asset managers are increasingly required to maintain detailed records across multiple jurisdictions while monitoring ongoing changes to tax frameworks and reporting obligations. The result is an operating environment where documentation is no longer a back office consideration but a core component of governance, compliance, and risk management.
Managing documentation across global markets
As firms expand internationally, documentation challenges multiply. A document that satisfies one regulator may require substantial modification elsewhere.
Different counterparties, custodians, and service providers often maintain their own templates, requirements, and review processes.
Wheeler says firms are increasingly forced to balance consistency with local market requirements.
“A document or disclosure that is suitable in one jurisdiction may require significant adaptation elsewhere due to different supervisory expectations, investor protection requirements, or market practices.”
The challenge becomes particularly acute when firms are managing global custody networks, cross-border distribution models, and alternative investment structures.
According to Rehan Ahmed, CEO of Marketnode, each additional market introduces fresh operational friction.
“The impact is material, and it compounds,” he says. “Each new market or counterparty adds fresh friction rather than reusing the work already done.”
Cross-border transactions are becoming increasingly documentation-intensive as regulators demand greater transparency and stronger controls, as per the experts.
Research from the BIS Innovation Hub’s Project Mandala highlights how increasing regulatory requirements have driven up compliance costs across international payment and investment ecosystems. The report notes that cross-border compliance processes continue to be hampered by manual interventions, data quality issues, duplicate checks, and a lack of standardisation.
Meanwhile, withholding tax processing remains another area of significant complexity.
According to PwC, inconsistent treaty application, documentation requirements, and reclaim procedures continue to create operational burdens for firms managing international portfolios. Standardising documentation work?ows and automating validation processes are becoming increasingly important for organisations seeking to reduce operational risk and improve efficiency.
Why documentation remains highly manual
Despite years of investment in digitisation, many documentation processes remain surprisingly labour-intensive.
Corporate actions, reconciliations, tax reclaims, onboarding, and Know Your Customer (KYC) continue to rely heavily on manual intervention.
Walsh identifies corporate actions, settlement, reconciliation, withholding tax processing, and client onboarding among the industry’s most persistent documentation challenges.
“These are all pillars of process in asset servicing — challenges that have existed for decades,” he notes.
For many firms, the issue begins with information gathering.
Stuart Tait, head of LPPA partnerships for Europe and the UK at Carta, argues that documentation collection remains one of the largest operational bottlenecks in private markets.
“Data is still shared across numerous data rooms, portals, and email threads, so simply gathering and checking that all required documentation has been received typically involves a manual retrieval and verification process.”
The challenge is compounded by the long-term nature of private market investments.
“Maintaining accurate records across thousands of investors, entities, and fund relationships often requires substantial manual review and coordination throughout the life of a fund,” Tait adds.
Rob Calder, enterprise sales executive at Canoe Intelligence, says custodians and service providers frequently struggle to collect documents efficiently, particularly during peak periods.
“Collecting documents can be a time-consuming process for custodians, especially during periods when volumes are high,” he explains.
Even after documents have been gathered, extracting data often remains difficult because much of the information is contained within unstructured PDF reports.
Marketnode’s Sooraj Sreenivasan points to KYC as another area where significant manual work remains.
“KYC remains a clear example. While there has been meaningful progress in digitising parts of the process, it continues to be one of the more manual and resource-intensive areas of documentation.”
The lack of common standards across jurisdictions continues to create operational complexity, forcing firms to manage fragmented processes that resist automation.
Automation, digitisation, and AI
Faced with mounting documentation burdens, firms are increasingly turning to automation and AI.
Much of the early focus has centred on creating stronger audit trails and reducing operational workloads.
Murray Campbell, principal product manager at AutoRek, says automation offers significant benefits in evidencing controls and maintaining records.
“With all actions tracked and evidenced, it is far easier for a firm to demonstrate the controls they have in place,” he explains.
Automated work?ows can remove the need for operational teams to manually generate evidence while creating electronic review and sign-off processes that strengthen oversight. Increasingly, AI is being deployed to address documentation challenges that traditional automation has struggled to solve.
Ahmed adds that firms are focusing on high-volume processes first.
“Most firms have started where the volume is highest, automating extraction and validation to reduce manual handling and give teams a more consistent baseline.”
However, connecting information across systems, counterparties, and jurisdictions remains significantly more challenging.
Tait notes that AI is increasingly being used to connect fragmented information sources and create a more complete view of fund activity.
“Fund managers, investors, and service providers often hold different pieces of the same information,” he says. “AI is increasingly being used to connect information across those sources and create a more complete picture of fund activity.”
Waystone has also seen growing interest in AI-powered document analysis, regulatory horizon scanning, and data extraction. However, Wheeler emphasises that AI remains an enhancement rather than a replacement for expertise.
“Given the complexity of many regulatory requirements, firms still need experienced professionals to validate outputs and exercise judgement where interpretation is required.”
Flood believes the industry is entering a new phase of automation altogether.
“The most significant shift is the move from AI as an assistive tool toward agentic AI that handles routine classification, matching, and exception triage autonomously.”
Importantly, these systems are beginning to generate their own documentation and audit trails, creating greater transparency and explainability within operational processes.
Documentation as operational risk
Documentation failures increasingly represent more than administrative inefficiencies. They can delay onboarding, slow product launches, create reconciliation breaks, increase regulatory exposure, and damage client relationships.
Operational risk has become a growing concern across the asset management industry.
Research cited in Broadridge and Securities Industry and Financial Markets Association (SIFMA) operational risk studies highlights how increasing operational complexity, vendor dependencies, regulatory requirements, and resource constraints continue to challenge firms of all sizes.
The risk is particularly acute where manual processes remain heavily embedded.
Campbell notes that reconciliations and operational work?ows still frequently rely on spreadsheets and manual intervention, limiting transparency, and creating challenges for audit and compliance functions.
Similarly, Flood argues that documentation overhead often becomes the critical path in onboarding and client implementation projects, directly affecting time-to-revenue. As firms expand into new products, jurisdictions, and asset classes, the operational consequences of poor documentation management continue to grow.
What needs to change?
While technology is clearly part of the solution, most industry participants agree that automation alone will not eliminate documentation challenges.
Greater standardisation remains a key priority.
Wheeler argues that standardised templates and disclosure frameworks can reduce duplication and improve efficiency, although complete harmonisation across jurisdictions is unlikely.
Calder believes standardisation has become increasingly urgent as private markets continue to scale.
“As we look forward to the democratisation of private markets and the anticipated surge in retail investment, the need for standardisation and scalability has become both essential and urgent.”
Others argue that the standards themselves already exist.
According to Marketnode’s Sreenivasan, the challenge is often adoption rather than creation.
“The industry has implemented standards for high-volume and high-risk trading and settlement activities and has also established standards for KYC. The challenge is less the absence of standards and more their limited adoption.”
Looking ahead, the industry appears to be moving towards a future where compliance and documentation become embedded directly within operational work?ows.
The BIS Innovation Hub’s Project Mandala offers one example of this direction through its ‘compliance by design’ approach, which seeks to automate regulatory checks and validate requirements before transactions are completed. By embedding rules directly into processes, the project aims to reduce duplicate checks, improve transparency, and increase straightthrough processing.
For asset servicing firms, the destination is becoming increasingly clear.
The future is unlikely to involve less documentation. Instead, it will involve smarter documentation, stronger automation, and more intelligent ways of proving that processes have been completed correctly.
In an industry where operational resilience is becoming a competitive advantage, documentation is no longer simply paperwork. It is evidence, oversight, and risk management rolled into one.
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