Yet More Market Abuse? Why Banks Need to Raise the Stakes on Compliance

Nigel Hewett, SVP Global Accounts Financial Compliance, Verint 

Another day and another banking scandal hits the headlines. Recently, the Bank of England uncovered 50 instances of market manipulation and 42 of these have been given to the Financial Conduct Authority for investigation. Despite tighter scrutiny and regulations across the industry, Threadneedle Street’s reputation is still on the line and only time will tell just how severe some of these activities are. As banks are still working hard to improve their image and regain customer trust, what’s really required is a way to prove that they are doing so to avoid being next in the firing line.

Following the first high profile name and shames a few years ago, new regulations have been introduced including Mobile Phone Recording and the Dodd-Frank Act concerning trade reconstruction, which are forcing financial organisations to rethink how transactions are recorded, stored and accessed. The challenge is to turn the data recording, analysis and the trade reconstruction requirements in to a strategy that will have a positive effect upon the entire business.

The technology now available to capture, record and analyse communications around the trade in financial products is far more advanced than that available even a few years ago. In many cases, the sort of trade reconstruction capabilities required by financial regulation would have been technologically impossible and financially impractical in recent years. The various providers to the financial services industry have worked hard to tackle the objections voiced by the industry when such stringent recording requirements were first introduced.

But it hasn’t been an easy ride. For instance, the mandatory recording of calls made over mobile phones was delayed as the technology available was deemed inadequate and, even once it had been introduced in the UK; the launch was met by turbulence. However, since then improvements have been made to solve the connection delays and unreliable retrieval that plagued the earlier versions of this technology. There’s still some way to go, but the technology does exist to unobtrusively collect and store all forms of communication both within and without a company, and then to analyse it from both a legal perspective and as a means of improving customer service.

With pressure mounting on financial institutions, having the right systems and processes in place to give greater transparency and meet compliance requirements is critical. Avoiding hefty industry fines and keeping out of tomorrow’s scandalous paper headlines will help organisations not only restore reputation, but most importantly the trust and support of their customers.