Innovative Technology Will Help the Finance Sector With Compliance

By Benedikt von Thüngen, CEO of Speechmatics

In recent months we have seen the introduction of a host of new regulations in the financial services sector in relation to the communications channels used for official trading, regulated product or services sales, and data protection and data sovereignty of personal client records. Firstly, we saw the introduction of the second instalment of Markets in Financial Instruments Directive (better known as MiFID II), at the beginning of the year. We also saw the adoption on the General Data Protection Regulation (GDPR) which is due to come into place in May, as well as the overall regulation around conduct risk.

Benedikt von Thüngen

These regulations have been introduced, in part, as a result of the financial crisis a decade ago. Initially, new measures were brought in to shore up and strengthen the foundations of the financial system. A light was then shone on the conduct of the financial services sector as a whole, with new laws introduced to heighten personal accountability in relation to risk-taking and included a revision of remuneration packages and incentive arrangements that benefited a longer term view of success.

Today, the concept of “conduct risk” has risen to the top of firms’ and regulators’ agendas. Conduct risk is broadly defined as any action from an individual or a financial institution which leads to customer detriment, or has an adverse effect on market stability or competition. In the UK, the Financial Conduct Authority (FCA) expects conduct risk management to be embedded into firms’ risk management frameworks, supported by appropriate management information. With estimates putting the total amount banks have paid in fines for non-compliance at $375 billion over the last five years, it is clear that there is still room for improvement in this area.

New regulations and their effect on the industry

Early 2018 saw the implementation of MiFID II, a European-wide financial services regulation to improve transparency in the financial services industry. One of the key mechanisms of MiFID II is around call recording of financial advisers to support regulatory compliance, protect consumers and to resolve any trading disputes cost effectively. These conversations must be kept on file for at least five years.

While many banks are already archiving landline and turret communications, they are now required to do the same for mobile, as well as capture a wide array of context for each conversation. This is notoriously difficult across telephony or voice channels like noisy trading floors, contact centres or online multi-party voice conferences commonly used by financial, legal and M&A teams. Meeting MiFID II requirements such as these presents a technical challenge that thousands of organisations are now struggling to come to terms with.

Research commissioned by our call recording partners, Red Box Recorders, provides insight into the attitudes, preparedness and concerns around the MiFID II regulation just before it was introduced. Speaking to IT decision makers and senior compliance managers across the industry in late 2017 showed that while institutions were aware of the requirements, many didn’t have solid implementation plans ready to roll out, particularly surrounding the regulatory requirements for areas such as call recording. In fact, nearly three quarters admitted they were not ready for the MiFID II regulations and only a quarter were aware of the increased financial penalties for failing to comply to the regulation, which can go as high as 5 million euros or 10% of global turnover.

Not only is a lack of knowledge an issue, but the cost of complying is vast. According to estimates by consultancy firm Opimas, MiFID II will cost the finance industry more than €2.5bn to implement, with the largest banks expected to spend more than €40m each on compliance.

GDPR, which will come into effect from 25 May, aims to modernise data law and give EU consumers the right to know much more about how their information is collected, stored, used, processed, transferred and deleted by organisations. The introduction of GDPR will mean all firms will have to implement more stringent practices, ensuring data is better stored with adequate checks and processes in place to protect it. The purpose of this is to avoid personal information being accessed during cyber attacks, an ever growing issue in today’s digital society.

Once GDPR comes into force, the financial penalties for failing to comply, especially if the organisation is hacked and found to be negligent, could potentially reach four percent of company turnover. However, a report by analysts Forrester suggests that many organisations may not be GDPR compliant by 25 May: just a quarter of organisations across Europe are thought to be in the clear already, while another 22 percent expect to become compliant in the next 12 months.

Making your compliance investment work

The importance of the new regulation to all kinds of financial businesses, and their customers, is not in doubt. Neither is the impact its implementation will have on the industry for years to come.

The question comes when we look at how companies are making their compliance investment work. Looking at where they choose to prioritise capital and the types of systems they put in place will determine how they perform in the future. Due to the nature of the new regulations, one area of focus must be that of voice call recording.

The confidential and sensitive nature of client call records together with enterprise data protection and data sovereignty regulations prohibit the use of general-purpose cloud-based automatic speech recognition (ASR) technologies.  Additionally, effective wide vocabulary ASR usage has been restricted due to limitations associated with telephony noise, multi-party accents or dialects, differing international languages, and sector-specific vocabulary constantly changing. Until now, the onus for recording voice calls has been on the call maker – to record, make notes or keep a record of what the call is about, with no requirement to include any information on the sentiment or tone of the call. But this is no longer good enough or, indeed, legal.

This is an opportunity to support firms – not only to comply with the law but to future-proof their business and protect their customers.

Businesses in the banking sector will need a specialist in multiple language ASR, who can enable businesses to convert what was recorded on a call into an accurate transcription, even in a noisy environment and across all file formats, using agile, simple to deploy, on-premise technology that sits alongside our cloud-based service.

The majority of calls in the EU banking sector are conducted in English, but the challenge is when there are several different accents on one call. Any call conducted in English can be transcribed using our innovative Global English pack, a single English language pack supporting all major English accents for use in speech-to-text transcription. Global English was trained on thousands of hours of spoken data from over 40 countries and tens of billions of words drawn from global sources, making it one of the most comprehensive and accurate accent-agnostic transcription solutions on the market.

Technological solutions already exist for automating note taking, real-time monitoring, and screening and classification of calls for conduct and ethics. With in-line indexing of the call content, discovery and investigation is simple, as is retrieving historic audio archives. If a call contains personally identifiable information (PII) like credit card details or bank account and address information, these can be live screened and tagged, or retrospectively analysed to support records preservation and security classification.

We are working with Deloitte on an initiative that includes some of the most advanced behavioural and emotional analytics and workflow in the world. Open API architecture allows clients and partners to exploit industry standard Natural Language Processing and AI technologies to configure advanced big data analytics workflow solutions.

Deloitte believes technology is the way forward in compliance. They have developed an Artificial Intelligence voice analytics machine learning platform, BEAT (Behaviour and Emotion Analytics Tool) as a smart solution to deal with the growing regulatory pressures facing their clients. BEAT combines Speechmatics’ highly accurate transcriptions of conversations with the output from their own emotion analytics engine, which provides the basis for determining the outcome of customer interactions through sentiment and behavioural analysis, topic modelling and natural language processing – just a few of the things that make BEAT a unique product in the market.

Red Box Recorders, leaders in compliance recording technology for over 28 years, has seen regulation change dramatically during that time. They work with organisations across the financial, contact centre, government and public sectors and have had to adapt to increasingly complex compliance requirements. They partnered with us to offer an innovative end-to-end transcription recording service which allows companies to dig deeper with their analysis. By using accurate transcriptions of audio conversations, the data becomes easily searchable for auditing and compliance purposes and to yield valuable business insight.

This is a time of crucial change, and there is no question that firms in the financial sector must comply with the new regulations. But there is an opportunity for these businesses to improve their performance output and reduce their overall cost footprint by using innovative technology that is already available and in use today.

The bigger organisations in the financial services sector are in the best position as they tend to have large regulatory teams. For smaller companies the next few months will be crunch time. There is still a lot of work to be done by the financial services industry to not only comply with the MiFID II regulations already in place but to ensure that they are ready for the GDPR regulation in May.

As leaders in speech recognition and having worked with a variety of firms, large and small, we are confident that technology is the smartest, most efficient way to ensure your firm is compliant with all regulations. The key is to make sure that whichever supplier you choose, they understand your needs and are able to tailor their solutions accordingly.

By Benedikt von Thüngen, CEO of Speechmatics

In recent months we have seen the introduction of a host of new regulations in the financial services sector in relation to the communications channels used for official trading, regulated product or services sales, and data protection and data sovereignty of personal client records. Firstly, we saw the introduction of the second instalment of Markets in Financial Instruments Directive (better known as MiFID II), at the beginning of the year. We also saw the adoption on the General Data Protection Regulation (GDPR) which is due to come into place in May, as well as the overall regulation around conduct risk.

Benedikt von Thüngen

These regulations have been introduced, in part, as a result of the financial crisis a decade ago. Initially, new measures were brought in to shore up and strengthen the foundations of the financial system. A light was then shone on the conduct of the financial services sector as a whole, with new laws introduced to heighten personal accountability in relation to risk-taking and included a revision of remuneration packages and incentive arrangements that benefited a longer term view of success.

Today, the concept of “conduct risk” has risen to the top of firms’ and regulators’ agendas. Conduct risk is broadly defined as any action from an individual or a financial institution which leads to customer detriment, or has an adverse effect on market stability or competition. In the UK, the Financial Conduct Authority (FCA) expects conduct risk management to be embedded into firms’ risk management frameworks, supported by appropriate management information. With estimates putting the total amount banks have paid in fines for non-compliance at $375 billion over the last five years, it is clear that there is still room for improvement in this area.

New regulations and their effect on the industry

Early 2018 saw the implementation of MiFID II, a European-wide financial services regulation to improve transparency in the financial services industry. One of the key mechanisms of MiFID II is around call recording of financial advisers to support regulatory compliance, protect consumers and to resolve any trading disputes cost effectively. These conversations must be kept on file for at least five years.

While many banks are already archiving landline and turret communications, they are now required to do the same for mobile, as well as capture a wide array of context for each conversation. This is notoriously difficult across telephony or voice channels like noisy trading floors, contact centres or online multi-party voice conferences commonly used by financial, legal and M&A teams. Meeting MiFID II requirements such as these presents a technical challenge that thousands of organisations are now struggling to come to terms with.

Research commissioned by our call recording partners, Red Box Recorders, provides insight into the attitudes, preparedness and concerns around the MiFID II regulation just before it was introduced. Speaking to IT decision makers and senior compliance managers across the industry in late 2017 showed that while institutions were aware of the requirements, many didn’t have solid implementation plans ready to roll out, particularly surrounding the regulatory requirements for areas such as call recording. In fact, nearly three quarters admitted they were not ready for the MiFID II regulations and only a quarter were aware of the increased financial penalties for failing to comply to the regulation, which can go as high as 5 million euros or 10% of global turnover.

Not only is a lack of knowledge an issue, but the cost of complying is vast. According to estimates by consultancy firm Opimas, MiFID II will cost the finance industry more than €2.5bn to implement, with the largest banks expected to spend more than €40m each on compliance.

GDPR, which will come into effect from 25 May, aims to modernise data law and give EU consumers the right to know much more about how their information is collected, stored, used, processed, transferred and deleted by organisations. The introduction of GDPR will mean all firms will have to implement more stringent practices, ensuring data is better stored with adequate checks and processes in place to protect it. The purpose of this is to avoid personal information being accessed during cyber attacks, an ever growing issue in today’s digital society.

Once GDPR comes into force, the financial penalties for failing to comply, especially if the organisation is hacked and found to be negligent, could potentially reach four percent of company turnover. However, a report by analysts Forrester suggests that many organisations may not be GDPR compliant by 25 May: just a quarter of organisations across Europe are thought to be in the clear already, while another 22 percent expect to become compliant in the next 12 months.

Making your compliance investment work

The importance of the new regulation to all kinds of financial businesses, and their customers, is not in doubt. Neither is the impact its implementation will have on the industry for years to come.

The question comes when we look at how companies are making their compliance investment work. Looking at where they choose to prioritise capital and the types of systems they put in place will determine how they perform in the future. Due to the nature of the new regulations, one area of focus must be that of voice call recording.

The confidential and sensitive nature of client call records together with enterprise data protection and data sovereignty regulations prohibit the use of general-purpose cloud-based automatic speech recognition (ASR) technologies.  Additionally, effective wide vocabulary ASR usage has been restricted due to limitations associated with telephony noise, multi-party accents or dialects, differing international languages, and sector-specific vocabulary constantly changing. Until now, the onus for recording voice calls has been on the call maker – to record, make notes or keep a record of what the call is about, with no requirement to include any information on the sentiment or tone of the call. But this is no longer good enough or, indeed, legal.

This is an opportunity to support firms – not only to comply with the law but to future-proof their business and protect their customers.

Businesses in the banking sector will need a specialist in multiple language ASR, who can enable businesses to convert what was recorded on a call into an accurate transcription, even in a noisy environment and across all file formats, using agile, simple to deploy, on-premise technology that sits alongside our cloud-based service.

The majority of calls in the EU banking sector are conducted in English, but the challenge is when there are several different accents on one call. Any call conducted in English can be transcribed using our innovative Global English pack, a single English language pack supporting all major English accents for use in speech-to-text transcription. Global English was trained on thousands of hours of spoken data from over 40 countries and tens of billions of words drawn from global sources, making it one of the most comprehensive and accurate accent-agnostic transcription solutions on the market.

Technological solutions already exist for automating note taking, real-time monitoring, and screening and classification of calls for conduct and ethics. With in-line indexing of the call content, discovery and investigation is simple, as is retrieving historic audio archives. If a call contains personally identifiable information (PII) like credit card details or bank account and address information, these can be live screened and tagged, or retrospectively analysed to support records preservation and security classification.

We are working with Deloitte on an initiative that includes some of the most advanced behavioural and emotional analytics and workflow in the world. Open API architecture allows clients and partners to exploit industry standard Natural Language Processing and AI technologies to configure advanced big data analytics workflow solutions.

Deloitte believes technology is the way forward in compliance. They have developed an Artificial Intelligence voice analytics machine learning platform, BEAT (Behaviour and Emotion Analytics Tool) as a smart solution to deal with the growing regulatory pressures facing their clients. BEAT combines Speechmatics’ highly accurate transcriptions of conversations with the output from their own emotion analytics engine, which provides the basis for determining the outcome of customer interactions through sentiment and behavioural analysis, topic modelling and natural language processing – just a few of the things that make BEAT a unique product in the market.

Red Box Recorders, leaders in compliance recording technology for over 28 years, has seen regulation change dramatically during that time. They work with organisations across the financial, contact centre, government and public sectors and have had to adapt to increasingly complex compliance requirements. They partnered with us to offer an innovative end-to-end transcription recording service which allows companies to dig deeper with their analysis. By using accurate transcriptions of audio conversations, the data becomes easily searchable for auditing and compliance purposes and to yield valuable business insight.

This is a time of crucial change, and there is no question that firms in the financial sector must comply with the new regulations. But there is an opportunity for these businesses to improve their performance output and reduce their overall cost footprint by using innovative technology that is already available and in use today.

The bigger organisations in the financial services sector are in the best position as they tend to have large regulatory teams. For smaller companies the next few months will be crunch time. There is still a lot of work to be done by the financial services industry to not only comply with the MiFID II regulations already in place but to ensure that they are ready for the GDPR regulation in May.

As leaders in speech recognition and having worked with a variety of firms, large and small, we are confident that technology is the smartest, most efficient way to ensure your firm is compliant with all regulations. The key is to make sure that whichever supplier you choose, they understand your needs and are able to tailor their solutions accordingly.