Compliance regulations: unlocking the data that matters

Non-compliance incidents caused by people, system and technology failures are resulting banks incurring a series of ever-increasing fines. A recent Thomson Reuters infographic estimated that $235bn of fines have been imposed since 2008. The scale of oversight continues to grow with one US Senate Permanent Committee Anti Money Laundering investigation reviewing more than 1.4 million documents in a single case as well as interviewing over 100 people in the bank.

Unlocking the data that matters without having to recruit huge numbers of people is a key priority for senior compliance and surveillance officers. Based on our conversations with customers, we have identified three primary compliance challenges:

Scale of Investigations – Compliance Officers face a huge task in dealing with investigations requiring the collation and analysis of potentially hundreds of thousands of pieces of relevant information and documents, as well as identifying and interviewing hundreds of personnel. The Dow Jones 2015 Global Anti Money Laundering survey reported that 49 per cent of screen alerts were false alarms, known in the industry as a “false positive”. For some banks, false positive rates are as high as 75 per cent meaning that compliance officers are often chasing shadows.

Islands of Incompatibility – Most companies have built-up a collection of surveillance tools over time which are in silos. This makes it difficult for banks to integrate when looking at a consolidated picture of an event. These silos exist both from a technology perspective as well as organisationally.

Culture – Compliance officers often comment that they feel they have a formidable undertaking to act as both custodians and catalysts of change. An organisation’s executives need to work closely with the compliance community. Historically the working relationship across organisational towers has not been effective, with a lack of engagement between the compliance “consumers” and the IT “suppliers”.

From a siloed to a coherent world

The ability to move beyond simple discovery to intelligent joining of the dots can, and will, only occur when all data is ingested in a holistic manner to a common repository. The evolution of smart tools has allowed customers to embrace a coherent surveillance and discovery framework which exceed the sum of its parts.

Banks currently face a compliance challenge. Traders want the freedom to interact with their customers to build a relationship beyond a quotation engine. But communication channel fragmentation continues to deepen meaning most traders have a dozen plus identities to interact with their colleagues and their customers. So a move towards an environment where multiple personas are collapsed into a single identity will be a key stepping-stone to reduce complexity for compliance officers undertaking investigations.

Changing the culture of the trader community will take time, moving on from the old trading mantra of “if you ain't cheating you ain't trying” will not happen overnight. Rogue traders will evolve and adapt their behaviour to more subtle techniques to avoid detection. 

Indeed, a former Head of Intelligence investigation at one of the UK’s police authorities recently said that “only one’s imagination and the law limit forensic investigations”. Therefore, banks will need to continue to invest in their talent, tools and technology to ensure they have the skills and capabilities to stay one step ahead of rogue behaviour.

In addition, the continued use of social media platforms by traders and bank employees and their counter-parties means that new tools and technology will be required to identify and flag inappropriate internet based friendships and interactions. Investigations into the inappropriate use of social media by bank staff, requires specialised tools that span the multiple platforms and protocols used in the social media arena.

Finding a needle in a hay stack

With traders and fund managers accessing an ever growing suite of devices, applications and tools to execute transactions and communicate with counter-parties, it’s becoming increasing challenging for compliance professionals to reconstruct activities to spot mal-practice or other threats to the organisation. Finding the needle in the haystack is becoming more difficult due to the increasing size of the haystack and the increasing ability of the wrong-doers to better camouflage the needle.

Working with providers that can help banks to put in place coherent surveillance, discovery and investigation tooling will allow the compliance investigator to get to the core information faster and more effectively. This will help them to focus on the alerts and data that really matters to get to the facts fast.

By reducing the amount of time wasted by collecting information and discarding irrelevant “noise”, the compliance officer’s effort and energy can be focussed on the actual investigation rather than the mechanics of sifting through evidence.

An appropriate set of integrated tools that are intelligently deployed will help banks to leverage existing investments and intellectual property. They will help compliance teams to transform data and evidence collection, analyse and visualise without the need to discard systems that have taken years to establish.

The compliance haystack will continue to grow, the needle will be better hidden and the regulator will give you less time to find it.  Now is the time for banks to transform their compliance strategy before they drown in hay.