In this article we discuss the common, pressing concerns for all financial trading floor surveillance teams. We then look at integrated communications surveillance and how it solves these problems for financial organisations, leading to lower fraud instances and greater process efficiency.
Financial organisations face increasing trading floor surveillance challenges. One, the responsibility of complying with regulatory demands and petitions obligates financial organisations to invest considerable resources in surveillance. Two, they must meet the needs of analysing and holding massive amounts of data, to minimize fraudulent activity and to optimise the process of escalating potential fraud cases. Three, they must suffer the consequences of failing to successfully stop instances of fraud, usually involving fines and/or possible damage to their own assets.
Additionally, organisations must comply with two flagship regulations: Market Abuse Regulation (MAR) and Markets in Financial Instruments Directive II (MiFID II). MAR came into effect in 2016 and the MiFID II deadline is January 2018. Both regulatory protocols require extensive resources on the part of financial organisations. Regulators can inflict punitive measures on banks and financial institutions that fail to comply
Common trading floor surveillance problems for financial organisations
Regulators obligate financial entities to store huge amounts of trading floor communication data and to be able to analyse it for the purposes of fraud detection. This is no easy task. Let’s take a look at some of the most pressing problems facing trading floor surveillance teams:
Inefficient surveillance of data variety
The most pressing challenge in trading floor surveillance is not the management of big data, but rather managing data variety in an efficient manner. Many surveillance teams are over-reliant on monitoring specific communication channels. This leaves organisations vulnerable to fraudulent activity elsewhere, notably from voice communication and a failure to analyse behaviour patterns. Surveillance of all trading floor communication channels presents a challenge, but it must be met to successfully combat fraud.
Non-integrated surveillance data
Organisations manage huge amounts of floor trading and communication data that is not interconnected or interconnectable, as it is typically siloed away. As a result, tranches of data are inevitably lost – slipping through the surveillance process cracks. This exposes your organisation to greater risk of fraud. No matter how capable a surveillance team is, if it operates with an inefficient surveillance data capture and analysis system, the risk of losing crucial data will persist.
Human error compounds the first and second problems. Even the most experienced, capable surveillance team member will probably make some mistakes. Nevertheless, if human error does lead to a fraudulent activity going unnoticed and it is flagged by regulators, who gets punished by the regulator? That’s right – the financial organisation. This is of course on top of any possible fraudulent activity that damages the organisation’s financial assets. To minimise instances of human error, robust processes can be implemented through integrated surveillance.
How integrated surveillance solves trading floor monitoring problems and minimises fraud
Integrated surveillance is a system that integrates and analyses data across all communication channels in an efficient, interconnected, comprehensive manner. Rather than focus on sporadic voice sampling, which most organisations rely on, an integrated system surveils mass amounts of data across all channels, and crucially, all voice communication. All communication channels related to a trade under an integrated surveillance system, including voice, instant messaging platforms and email are surveilled together and interconnectedly. It also analyses behaviour patterns and metadata for more refined results. With integrated surveillance, gone are the days of siloing away mass amounts of communication data. This allows organisations to be much more thorough and efficient in their surveillance process.
The benefits of integrated communications surveillance for the trading floor
This system ensures that no data is lost and gives organisations a fuller, more detailed picture of what is happening on the trading floor. It demonstrates to regulators that the process of detecting and minimising fraud is holistic and efficient. A stronger, more intuitive surveillance system also acts as a stronger deterrent for would-be rogue traders on the trading floor as there is a greater likelihood that they will be caught committing fraudulent acts. Additionally, it makes internal auditing smoother and more accurate. With an integrated surveillance system, organisations improves fraud detection processes and make the process of escalating fraudulent cases easier. One key step to ensure an integrated approach to trade communications surveillance is to set a comprehensive approach to Voice Surveillance. Download this ebook and learn how to choose the right technology partner.