There has been a rapid increase in the cases of criminal conduct involving money, financial services, and financial markets at financial institutions.
It has led to an air of mistrust among the regulators regarding the working of financial institutions and their compliance practices.
Multiple regulations have been put on financial institutions globally to protect the investors’ interests.
These regulations are expected to bring transparency to markets and transactions.
To meet these regulatory guidelines, financial institutions need to record and store all electronic communications related to transactions.
Financial institutions need to take special care while recording communications related to clients and counterparties to ensure no confidential information is leaked during the process.
To conduct regulatory compliance and protect sensitive data, financial institutions monitor employees’ communication.
This surveillance is called electronic communication surveillance.
What is Electronic Communication Surveillance?
The monitoring and supervision of all kinds of electronically generated communication, including chats, instant messenger, text and voice messages, emails, etc., executed by the firm’s employees using a professional phone or computer are called electronic communication surveillance or eComms surveillance.
Communication surveillance practices strengthen the financial institution’s framework and prevent unethical behavior. It allows firms to monitor, review, and carry out investigations for illegal trading and non-compliance to the institution’s financial policies and procedures.
How financial institutions can use advanced analytics to enhance communication surveillance practices
In the absence of an efficient communication surveillance mechanism in place, financial institutions are prone to financial scandals and market abusive behavior.
Advanced analytics in communication surveillance practices can help financial institutions mitigate the risk and damage caused by such frauds.
- Contextual analysis: At the starting level, communication analysis systematically searches the email databases of the financial institution using key search points such as the time of communication or the name of individuals. Advanced analytical systems can scan the entire email database based on an extensive list of keywords and generate alerts for any breaches in the firm’s policies. These keywords could include inappropriate language, clients’ complaints, and restricted list securities.
- Behavior analysis: While uncovering unethical trading behavior, scanning only the content of the messages exchanged is insufficient. Electronic communication surveillance must cover the relationships within financial institutions. It is crucial to analyze fundamental questions like; Who is the trader communicating with? What is the relationship of the trader with the person with whom he is communicating? What is the frequency of this communication? Do they communicate using only one channel or multiple? Employees may pass insider information to unauthorized parties regarding upcoming projects such malicious communication may involve code words and vague communication to play safe. A stand-alone communication alert is not sufficient to raise a suspicion of compliance. An understanding of relationships and the frequency of contacts need to be a part of the surveillance system. Connecting the dots using such threads of communications can help uncover a web of market abuse within the financial institution and the industry as a whole.
- Trade analysis: Often, a suspicious trading alert or a compliance issue at the individual level leads to communication surveillance investigations regarding potential market abuse. Automated trade surveillance is still not mandatory across a number of financial markets and countries, and financial institutions depend on the communication surveillance department to manually conduct trade surveillance if needed. Most of the time, financial institutions do not employ trade alert based surveillance systems and depend on communication surveillance to bring to light any trade-related illegal activity.
The Final Word
The communication surveillance department needs to use advanced analytics to use the available data and reports to find out intricate and high-level malpractices within the financial institution.
They need to connect the dots to paint the bigger picture in order to fully understand the scale of market abuse.
The surveillance teams have to use advanced analytics to develop surveillance systems that look beyond the trade in question and conduct behavioral analysis to understand the context of communication even from subtle hints.
Using eComm surveillance, financial institutions can monitor any activity on all professional channels of communication through screen capture and keylogging software.
It can help the surveillance teams to lift the surveillance process to the next level and scrutinize the communication patterns to avoid financial losses for the financial institution.
