Compliance and Surveillance

An Integrated approach to regulatory compliance

Regulatory compliance is catching up with the approach that we have recommended for years. We are now seeing capture decoupled from archiving, analysis and surveillance. Channels are normalized so that data and recordings can be stored in one data lake, either using a 3rd party SaaS solution or an in-house archive.

Having seen regulations rolled back by some administrations and pragmatic easing applied during the lockdown phase of the pandemic response, the trend is firmly back towards stronger controls. Regulators are more clearly working towards a requirement for real-time surveillance of trading activity. There are 3 main reasons:

digital data suggesting compliance capture

Financial regulations apply to overseas counterparties in your country.
Some financial misdemeanours are criminal rather than regulatory issues, with even higher penalties.
Real-time intelligence can help protect against costly rogue activity, there is very little sympathy for failing to spot it. On the flip side, you can identify copybook positive activities too.

Multichannel Compliance Including MS Teams

There is no “plug in and play” solution to compliance. The marketing for new compliance systems may make it seem like everything is done for you but IT Managers are experienced enough to know that this is never the case. Modern compliance recording systems can capture data and calls from IM, Chat, Video and Screenshare as well as Trader Voice, Enterprise Voice and Mobile Telephony. MS Teams is becoming one of the most important integrations for all systems. New archiving, analysis and surveillance systems can ingest data from all these plus email, social media and a wider range of specialist and public platforms including Bloomberg, Refinitiv, Symphony, WhatsApp, Zoom, WeChat and LinkedIn.

A wider range of integrations means more testing, validation, architectural design, engineering, governance, process design, documentation and training. As with compliance systems of the past, the ability to perform the job they were designed for does not equate to a fully fit for purpose solution. A seemingly off-the-peg solution is likely to require over two years of effort involving internal teams and specialist consultancies like ours.

Surveillance

Our role with surveillance is the same as above. Ensuring that human processes and protocols make it possible for technology solutions to perform their roles. We design and implement the wider infrastructure and perform testing and validation to make sure that required capture not only happens but is received dependably by the surveillance system.

Even with everything working perfectly, analyzing the conversations leading up to a transaction can only reveal so much, even when performed in real time. Rogue traders and market manipulators break the rules knowingly and don’t openly discuss their nefarious activities. This means that even the most advanced analytics will fail to find anything suspicious unless some sophistication is applied. Rather than lexicon based analysis with flagged words; machine learning systems look for scenarios including combinations of words, suggestions to chat offline, whispering, keywords following the receipt of an attachment, keywords at a certain time of the day or week. In this way, false positives can be reduced.

JP Reis also champions an existing solution that looks for anomalous blips in trading data. The diagnostic algorithms for this run in almost real-time. By cross-referencing the time from this data with captured compliance system data, patterns, codes and individuals can be identified even more effectively.

Every case differs based on your current technology portfolio and working practices. Contact us to see how our unique service offering could help you get the competitive edge.