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The Top 3 Goals for Conduct Monitoring: Intent, Intent, Intent

What are the biggest conduct surveillance challenges facing compliance and front office control leaders today? Aite Group is producing a white paper that will explore how financial institutions are adapting to tougher regulations and new technology.

The full report comes out this summer, but some of the research data is already available and it hints at some interesting discoveries. Notably, it was intriguing to find that the top three responses to a question about the most important behaviors to monitor for all spotlighted a single overriding concern: Intent.

Source: Nasdaq and Aite Group’s Global Compliance Survey, 2017

The volumes and complexity of data generated in any markets business has always made surveillance a very challenging task. Identifying patterns of behaviors that indicate abuse or misconduct is a balancing act between signal and noise. False positives are the time-consuming and costly bane of the industry. Advancements in communications surveillance technology have helped analysts improve the balance between signal and noise. However, as anyone who manages compliance and control lexicons will attest, the gains are very much incremental.

That’s not prevented regulators edging expectations a little ahead of capabilities, but MiFID II catapulted demands well beyond what most institutions were set up to achieve. For the first time, regulators made monitoring for intent a specific requirement.

MiFID II requires firms: “to show the intention behind trading and the knowledge of the person at the point at which they trade, which are matters that are often not easily established, but may be crucial in a successful enforcement case.”

European Securities & Markets Authority, ESMA35-43-349, 18 December 2017

The need to identify intent has instigated a change in technology; next generation, machine-learning based communications analytics systems have begun to oust legacy lexicon solutions. It is also driving a broader shift in industry practice. Compliance and control leaders now appreciate that only an integrated analysis that combines insights from structured data (such as trade data, physical access, system access, HR data) and unstructured data (primarily communication captured in emails, phone calls, chat streams, etc.) can deliver a true picture of where (or with whom) conduct risk lies.

The future would appear to lie in an entity-centric approach, where compliance and controls focused on people and their relationships rather than today’s alert-centric model that sees snippets of data and relies on analysts to piece together a very complex picture.

Aite Group will be exploring these emerging technological and operational shifts in their forthcoming white paper, plus there will be a webinar session in advance offering the opportunity to present your thoughts and questions on these matters. Keep an eye out for further notifications.


Discover more content about conduct risk:
In the first of a series of 3 blog posts, Dr. Roger Miles, a leading expert in the analysis and reporting of behavioural risk, asks: Where’s Behavioural Regulation Heading?

Written By
James Ollerenshaw

James Ollerenshaw is Director of Content Marketing at Digital Reasoning. He has worked in technology marketing for almost 20 years. His experience includes running marketing agencies, representing high growth and established tech brands, and leading the Forrester Research Executive Leadership Board for technology marketers in EMEA for over 3 years.

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