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The Next Generation of
eComms Surveillance
Solutions
Regulations Demand for Trade Compliance
FX Code of Conduct
Global Guidance
• Protect Confidential Information
• Complete, Accurate Data
• Measure and Monitor
Updated 2016
APACDodd-FrankU.S. Legislation
for Swaps
MAREuropean Directive
MiFID IIEuropean Directive
2018
Refers to
• Surveillance in Placeto Detect Market Abuse
• Record Keeping (Recording)
• Trade Reconstruction
2013 2016
• Record Keeping (Recording)
• Trade Reconstruction
• Detecting Market Abuse
• Detect and Prove Intent Even if Unsuccessful
• China to create it’s version of MiFID II
• Hong Kong expects Authorized Institutions to adopt a holistic framework
2018
Every major regulator in the world has developed a
FinTech incubator or sandbox to better understand:
• Electronic Communications
• Analytics
• Reporting Tools
The new normal is the expectation that firms will know what technology
can offer to promote an effective compliance program – because the
regulators certainly will
FinTech Incubators
What do regulators expect from a eComms Surveillance program?
• Empower end users with tools needed
• 1st line owns risk, mitigated by controls put in place by compliance
• Engage in a process of re-education stimulated by enforcement actions
• Manual tasks create operations risk
• Is this a formal process or simply owned by one person
• What happens if that person leaves?
• Whistleblowers – must go to the SEC before the firm.**
Key Insights
• Trade data reveals ‘the what’ Communications focus on ‘the why’
• Employees are using unified communications in real time with each other,
their clients, partners, vendors and the general investing public
• Instant messages, collaboration tools and social media to communicate
• Regulators around the world have made it clear that “content is
determinative” and are neutral about the channel
eComms are Key
Chats Emails Text messages Mobile phonesOffice phonesSocial Media
• $2M fine for failing to maintain reasonably designed supervisory systems
and procedures for reviewing e-mail communications
• The combinations of words and phrases, known as the “lexicon,” allowed
millions of e-mails to evade meaningful review including:
• Representatives borrowing from or lending to customers
• Solicitating penny stock transactions
• Sales of unregistered notes
CASE STUDY
• Representative fraudulently sold 1 million in unregistered securities
• At least 16 separate email chains contained evidence that, if properly
reviewed, would have indicated the fraudulent sales were occurring
• Two years after the last customer already invested, two relevant strings were
flagged by the system, but the firm failed to detect the misconduct.
• Susan Schroeder, FINRA Executive Vice President, Department of
Enforcement
• “Firms have a clear obligation to reasonably supervise electronic communications,
which includes periodically re-evaluating the effectiveness of existing procedures."
• “They should also assess whether their e-mail review and supervisory systems are
reasonably designed in light of each firm’s business model.”
CASE STUDY
• Global Regulators now Require Financial Firms to record the evidence -
lightening the burden on enforcement bureaus.
• Each of 3 major European Regulations have one particular recital in
common – almost verbatim
“Existing recordings of phone conversations and data traffic records
constitute crucial, and sometimes the only, evidence to detect and prove the
existence of":
• MAR – insider dealing and market manipulation.
• MiFID II – market abuse as well as verify compliance by firms with investor
protection.
• BMR – the compliance with governance and control requirements.
• Proactive eComms Surveillance pays – better to self report violations in
current “Whistleblower” environment
Impact: Regulators Learn from their Experiences
Today’s Challenges with eComms Surveillance
• Supervision of ALL relevant
conversations across any
line of communication
• Unreliable lexicon-based
searches generate too many
false positives
• Random sampling increases
a firm’s regulatory and
business risk
• Getting the complete picture
and reconstructing events
across all channels takes too
much time and requires
multiple solutions
More Communication Channels Unreliable Analytics and Processes Inefficient Investigations
Chats Emails Text messages
Mobile phonesOffice phonesSocial Media
Automatically reconstruct events and create investigation & escalation workflows
Centralized access to all your communications data
Index and Analyze all communications data using NLP analytics and ML models
The NICE Actimize Approach
Analyze
Act
Aggregate
Universal IndexAnalytics Relevancy ScoringLinguistics SearchCorrelation Enrichment
Reconstruct Investigate DashboardReview ReportsWorkflows
Aggregates and Monitors All Communications
• A single platform that aggregates and reviews 100% of the
data related to employee conversations including emails,
texts, chats and even voice
Solution
• Eliminate the risk posed by random sampling by automatically
analyzing 100% of all conversations
• Execute complete investigations by analyzing voice and e-
communications data together
Impact
Text
More Accurate Analytics Greatly Reduces False Positives
• Natural Language Processing driven analytics and models
tuned for financial markets correctly understand the context of
conversations
Solution
• Accurately identify suspicious communication and reduction
in false positives by 50% alerts
Impact
Speech-to-Text
Analyze & Review
Alert OK
NLU
AI ML
Intelligent Content Analytics to Gain Insights
Financial Services Domain Focus
Extract References to
Known Companies,
Products and People
Identify Bid, Ask, B/S Quantity,
Volume and Price Details
Machine-Learning:
Entity Based Sentiment and
Asset Classification
Statistical Entity
Extraction
Language Model-Based Key phrase
Analysis
Policy Driven DiscoverContextual Content Driven
Visual Model Tuning – Ensures Relevant Review Selection
Contextual Search or Existing Model
Results
Users provide feedback on the results within the tuning application
Machine Learning runs selection logic based on the user
feedback
New classified model is created from the
ML output
Deploy new model into production
Contextual
Searching
Label with desired
Classification
Comprehensive Case Management Expedites Investigations
• NICE Actimize ActOne Investigation and Case Manager
automates workflows, information gathering and story
creation. Robotic Process Automation (RPA) assists with
repetitive manual tasks.
Solution
• Comprehensive case management automates every step of
the process, improves collaboration and increases
productivity.
Impact
ActOne Investigation
Management
Market
Surveillance
Alerts
Market
Data & News
eComms
Alert
Actions Reports Checklists Analysis
Reduce Cost and Protect Against Reputational Damage
Ensure Regulatory Compliance and Increase Audit Responsiveness
Increase Compliance Analyst Productivity
Reduce the Cost of False Positives and False Negatives
Use Flexible Deployment Models
Trade Compliance Is Complex
“Can I get a
quote for..”“Done deal..”
“Have a large
deal coming for...”
“Will make the
changes..”
“Confirmed..”
“The deal has
cleared..”
Sales Trader with Client Trade Support with Back OfficeTrade Support with Sales TraderTrading Desk with Sales Trader
“Can you
recommend..”
“What are you
hearing about..”
CO
MM
UN
ICA
TIO
NS
LIFECYLE OF A TRADE
PRE-TRADE TRADING TRADE OPERATIONS CLEARING
Market Views Bid / Ask Market SoundingNews Negotiations Confirmations SettlementsTransfersQuotes Amends Cancels ReconciliationTR
AD
E D
AT
A
Compliance Must Evolve
• Analysts spend time
pouring through data
• Must connect
relationships manually
• Struggle with detection
inaccuracy
• Cannot keep up with
industry change
• Ever increasing
regulatory complexity
• More features = only
minor benefits
• Need more disruptive
change
• Demand for quick ROI
on new investments
• Sophistication of
threats constantly
changing
• Firms must stay one
step ahead
Operational
Inefficiencies
Risk and
Compliance Cost
New
TechnologyEvolving
Threats
Firms cannot keep up with segmented manual processes and offline tools
Compliance Transformation is Impending
One Compliance
Process
Manage Exposure to
Conduct Risk
Understand Intent and
Prove it
An Autonomous Alternative: Seeing into the Future
Need for
smarter
detection
Rising
tech costs
Improved
user
experience
Resource
demand
What if all the data
came together?
Could we improve productivity,
lower costs and focus on
high value work?
One Compliance Platform
BOUNDLESS
DATA
Transformative Technology
LIMITLESS
ANALYTICS
INTELLIGENT
AUTOMATION
Reshaping the Landscape