What’s the next step in regulatory compliance


Where the pandemic is taking us – What are the next steps in regulatory compliance

By Christopher Wooten, EVP, NICE

When the pandemic hit, we certainly felt that there would be a strong impact on our social lives. But what wasn’t immediately obvious was the extent to which Wall Street and its regulated financial services employees would be affected. The homework revolution had arrived, and a year later its influence became evident.

Unfortunately the ensuing remote working, especially among traders, created an environment that became more vulnerable to market abuse. Regulators around the world, like the Financial Industry Regulatory Authority (FINRA), Hong Kong Monetary Authority (HKMA), and Financial Conduct Authority (FCA), have found that scenarios such as insider trading become easier because many regulated employees were not physically monitored on a commercial floor any longer or certainly as directly.

As Julia Hoggett, FCA’s director of market surveillance, explains, “While the fundamentals of market abuse offenses are constant, the ways in which risk can manifest itself are not. The way of monitoring them must therefore also change. In addition to the new supervisory challenges, the markets have seen a dramatic increase in volume and volatility. As a result, most financial services organizations have used new technologies that could help reveal what is happening in their markets faster, and in some cases before it happens, so that market abuse can be put. evidenced more effectively or avoided all together.

During the period of March to May 2020, from pre-dawn until late at night, we were immediately faced with urgent requests from all types of global financial services organizations dealing with compliance issues. Primarily, they sought advice as they redesigned and prepared their remote or offshore trading rooms and compliance operations for shifts that were already underway. Through our 24-hour operational approach, coupled with a responsive and knowledgeable professional services team, our compliance management team has supported our clients in financial services organizations in managing this new remote and off-site world. There wasn’t a corner of the financial services industry that wasn’t caught in the changing dynamics of a pandemic.

When regulators granted safe ports with certain compliance guidelines, we worked with companies to modernize their operations with cloud-based technologies, and created more automated and agile processes. Where it was already in place, holistic behavior monitoring has been further strengthened and has become the hallmark of companies that have successfully met their compliance requirements. Those with supplier partners like us who offered 24/7 support have found it easier to meet the new requirements.

Today’s Changes – Real-Time Monitoring

At the end of our fiscal year, we were confident that the end of the fiscal year reflected a strong trend towards the adoption of supervisory enhancements and new capabilities in major financial institutions, particularly with regard to risk. driving. Cloud adoption was no longer a potential option, but a primary strategy. And this is also where real-time (intraday) monitoring has generated interest.

What do we hope to see in the future? Many of the banks and brokers we work with today want to shift monitoring from a routine end-of-day (or next-day) activity to a proactive, real-time approach – this shouldn’t be surprising. Companies are already monitoring other activities as they unfold, including things like liquidity and P&L.

Businesses that may still depend on end-of-day or next-day monitoring may already be late.

Companies are already considering changing this and we are actively expanding the existing real-time monitoring capabilities of our products.

In making the case for near real-time detection, it’s important to ask why companies are monitoring exchanges and communications in the first place. First, they do this for regulatory requirements, although at least currently there is no specific requirement for real time. There is just a requirement for detection. But another important driver of oversight is the ability to demonstrate best practices and strong controls, both to the market and to regulators. Near real-time monitoring makes sense. If you wait twenty-four hours, there is already a day of damage.

While the regulators themselves do not yet require real time, this practice shows regulators that the financial institution has rigorous controls in place. Regulators are monitoring market activity more closely these days, and because data is made available to them very quickly, they are more likely to raise questions when they discover something of concern.

The wave of new communication channels

The communications world has also caught fire over the past year – with Microsoft teams and mobile communications moving to the fore as telecommuters seek to communicate with each other. However, the conversations of remote workers need to be monitored, just like their chats, videos, WhatsApp messages and more. The mobile phone as the tool of choice for remote workers posed risks and compliance concerns. While the need to record all interactions on the mobile device is undisputed, the challenge is to separate personal privacy concerns from those of compliance requirements on dual-use devices. Obviously, communications monitoring capabilities is another area that has emerged as a priority.

This trend of remote communications monitoring continues to grow, and monitoring is served with new technologies, such as those that will monitor video conference calls like MS Teams or Zoom. Additional technologies will be available to allow companies to allow their employees to benefit from these new tools, while ensuring the protection of their privacy. We also plan to launch more and see a growing demand for communications surveillance technologies that are the next generation of what we have shown this year, with continued developments in natural language processing to understand feelings and emotions. We also harness artificial intelligence to detect behavioral anomalies and use this information to create employee sentiment profiles that help companies predict driving risks.

Despite some setbacks and challenges presented by the pandemic, industry analysts believe technology investments in trade surveillance will increase over the next few years, mainly due to pent-up demand and economic recovery for key markets. Quadrant Knowledge Solutions industry analysts estimate the commerce surveillance and monitoring market to reach $ 1.38 billion by 2025, with key drivers for future growth and adoption of surveillance solutions and commerce monitoring, including further innovation around advanced analytics, automation, and growing cloud adoption. based solutions; and the ever-increasing pressure from global regulatory agencies.

As one client recently said, “While we always follow the timelines set by regulators, we don’t always move fast enough to adopt new technologies. The pandemic has taught us that staying ahead of the innovation curve should be our next big strategy to overcome the next revolution before us. If we don’t, we will surely regret it.


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