A growing range of algorithmic tools are being used to enhance compliance decision skills to deal effectively with the tsunami of regulation according to Sybenetix’s Wendy Jephson in a recent article for Thompson Reuters Regulatory Intelligence.
Behavioral Analytics is described as one of the key technologies reducing compliance’s workload while zeroing in on activities that require closer investigation. According to Editor, Henry Engler, industry experts see these solutions as tools to support critical decision making, not as a substitute.
Jephson notes that by contrast in the medical field, “Excessive reliance on machines, can lead doctors to lose their skills in detecting problems that a machine might overlook. I think the finance industry is in a different position, the skill has not been developed in the first place to spot the newly described 'bad behavior,' As a result, compliance officers are attempting to develop search sills that add to their investigative skills. Technology that is freeing up the analyst’s time to do more investigative work, might also lead to an enhanced relationship with front-office staff. Knowing that once a certain type of trade is executed it will be flagged by an analyst will prompt more spontaneous collaboration and conversation with compliance, a behavioral change that should be welcomed.
Engler also reports that regulators are increasingly deploying advanced analytics to deliver more effective supervision. “It is no secret that many regulatory agencies both in the United States and abroad are increasingly using advanced technology to monitor and detect suspicious activity in financial markets. They recognize that with the pace of innovation, such as algorithmic and high-speed trading, they need to keep pace with the changes occurring,” writes Engler.
Stephen Epstein, vice president of product marketing at Digital Reasoning, is quoted as saying there is a tidal wave of expectation that regulators will demand greater automaton of misconduct management, as they did with anti money laundering. “At first, regulators were cautious in demanding that banks employ greater automation in the monitoring and detection of suspicious payments and transactions. Yet, as time passed, they recognized that it was vital for banks to adopt such tools in order to limit the amount of time and energy spent on combing through reams of reports.”