3 reasons why CFOs should budget for communication surveillance technology in 2023

3 reasons why CFOs should budget for communication surveillance technology in 2023

Time and time again we hear of the importance of communication surveillance technology however for many firms it has become increasingly challenging to secure funds to for such changes. Implementing changes to surveillance technology is often put on the back burner in favour of multiple vendor solutions to fill surveillance gaps. Although adequate, this approach can be both cumbersome and costly, and doesn’t cover the communications channels which pose the greatest risk if left unmonitored.  

Having a proactive approach to surveillance technology for 2023 will not only better place firms when it comes to dealing with regulatory requests, but also harvest many additional benefits.  

Let’s delve into just some of these benefits and reasons why CFOs should budget for communication surveillance technology in 2023.  

1. Regulators up the ante 

With the SEC’s FY22-26 Strategic Plan indicating increased measures against firms that failing to comply, those who proactively monitor channels and conduct regular reviews of control systems, are better placed to respond to compliance requests at ease. This not only increases the efficiency of compliance teams and reduces the associated stress of audits, but it also enables traders to focus on their primary responsibility – trades!  

2. Better business decisions 

Beyond the obvious, communications surveillance technology enables firms to collect and store trade data in one place. With the right technology this data can be used to enhance business decisions across numerous departments and inform management and stakeholders of the benefits of a given plan of action.  

Furthermore, with enhanced visibility over trade communications firms can analyse profit and loss spikes and assess missed opportunities through targeted reports gleaned from communication surveillance systems. Identifying key market makers and evaluating the quality of client-trader relationships further aids in informed business decision making.  

3. Revenue Protection 

We have seen time and time again of regulatory boards continue to increase in frequency and size.  Failure to adequately comply with regulations have material impact on the bottom line. As the gatekeepers of company revenue, CFOs are well informed of the importance of safeguarding against the cost of non-compliance which has risen over 45% in the last 10 years. 

With the appropriate communication surveillance, technology firms are not only regulator ready when it comes to regulatory requests but can also improve the reputation of the firm through proactive means of compliance. What’s more, firms have the opportunity to resolve disputed trades and customer complaints in a prompt fashion to improve customer relations, increase competitiveness and overall profitability.  

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Although implementation of communication surveillance technology comes at a price, the return on investment is substantial when looking at the bigger picture.  

At VoxSmart we understand the budgetary pressures facing many institutions and strive to provide a leading communication surveillance solution to meet regulatory requests and aid in better business decisions to increase overall profitability.  

Get in touch with us today to find out more about our Communication Surveillance technology!  

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From the floor: From Analog to Algorithm

From the floor: From Analog to Algorithm

As technology has advanced, so too have trading desks. What was once a heavily manual system of booking trades is now a seamless process of automated means. However, despite greater access to automated technology some firms still rely on manual controls to reconstruct trades.  

Hear what ex-broker turned VoxSmart markets expert, Andrew Stone, has to say on the advancements of modern technology and the benefits of automated solutions.
 

From Analog to Algorithm (aka from Dinosaur to Modern Man!)  

Trading has come a long way since the analog days of my broking career. Back then trades were conducted over the phone, tickets handwritten and collected by the ticket boys to be delivered to the settlements department to process via vacuum tube. Each broker would have a notepad to record the trades (an old-fashioned spiral bound notepad, not the electronic version used today!) and a call would be made at the end of the day to the various bank’s traders to “check out” and confirm the days trades.   

It was during one of these checks that a client DK’d (don’t know’d) 2 trades that I’d done in what was the current German 10yr Bond (I’m saddened to report that it expired some 20 years ago, a little like my broking career!). Unfortunately, the check-out was done by a colleague as I had left early for the Bank Holiday weekend, so I was informed by a message left at a hotel reception! Did I mention this was before most of us had mobile phones? 

This meant that I had to cut short my holiday and return to London and make a trip to the dreaded Tape Room! It was a space resembling a 1960’s version of a supercomputer, rows and rows of double spool tape machines that produced the kind of heat that could melt steel. It wasn’t a place that you wanted to spend any longer than you had to, and certainly not somewhere to spend your Bank Holiday weekend!   

After many fruitless, sweaty hours of listening to tapes that should have contained my desk recordings but that actually covered every desk but mine, I finally found one of the trades. With this information I managed to convince the client to book both trades – saving myself a potential career shortening loss!  

Today’s trading floors are very different. Banks and brokers still use voice trading to transact business in certain markets but in others the choice of communication channels has increased drastically. Messaging and chat platforms have become the norm, and together with emails now creates the modern trading desk.  

Yet despite these advances to the front office, from improved communications to automated booking and pricing and trading systems, one thing remains largely a manual process. Trade Reconstruction.  

More and more regulators are requiring financial institutions to “show their work” by disclosing all communications that relate to a trade or series of trades. Banks and broking firms currently use hundreds of man-hours on a process that can be reduced to mere minutes with the right system.  

What’s more, an automated trade reconstruction solution fosters additional benefit beyond that of meeting regulatory requests. Internal teams can use it to investigate profit and loss swings, or to look at unusual trading patterns whether they be trades with new counterparties or transactions taking place outside of normal hours. The right trade reconstruction solution can protect firms from fines and reputational risks and save them money whilst doing so.  

If it had existed in the late 80’s it may have even saved my weekend!  

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In order to comply with regulation as laid out in the Dodd-Frank Act of 2010 and the more recent CFTC swap data rewrite, firms have a mere 72-hour window to submit trade reconstruction requests. This put firms under immense pressure and removes traders from their principal responsibilities.  

Get in touch with us today to find out more about our Automated Trade Reconstruction that could’ve spared Andrew a weekend in the tape room cellar!  

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    Looking back to look forward 2022: Regulators up the ante

    Looking back to look forward 2022: Regulators up the ante

    Regulatory authorities in 2022 showed no sign of slowing down as they revved up efforts to ensure compliance across markets. In this blog we take a look at just some of the key news stories which rocked financial markets and regulated industries over the last 12 months. 

    Additionally, we provide some insights for 2023 to help enable your firms to get ahead of the game when it comes to confidently dealing with the challenges yet to come as regulators are set to up the ante for 2023.  

    FX Markets

    It has been a turbulent year for FX markets with volatility across the asset class high. February of this year saw the gruesome Russian invasion into Ukraine which sparked chaos across FX markets. From a trading perspective, the invasion led to a plethora of newly sanctioned bodies and a significant change in the market structure supporting trading in the Russian rouble, reverting back to bilateral and voice execution of old.  

    However, regulators are beginning to turn their attention to trades that broke from established patterns that have occurred since February. Yet with trade information and communication data often sitting in two separate buckets firms now face the challenge of connecting the dots between these trade communications. 

    “There is still significant risk in OTC FX markets due to the inherent reliance on vocal communications, often in a plethora of languages, to agree and book trades. This is the challenge that faces financial institutions trading in global currencies – the ability to efficiently capture and translate conversations in multiple languages in real time. Moving into the new year, this is where we are expecting to see firms turning to technology more in order to exact effective risk management in OTC markets.” – Group CEO, Oliver Blower. 

    Wall Street Fines

    2023 has seen regulators significantly increase enforcement efforts when it comes to communications across encrypted messaging platforms, in particular via WhatsApp. Since the onset of the global pandemic, WhatsApp has fast become the de facto messaging application for traders across asset classes.  

    However, in May it was announced that the SEC had launched a full investigation into the use of mobile communication platforms following actions against a leading tier one bank earlier this year. The outcome of which saw 11 Wall Street giants fined in excess of $1.8 billion relating to “widespread” and “longstanding” failures in record-keeping practices across encrypted messaging services in September. 

    For many this came as no surprise as research had suggested WhatsApp employee blind spots with many institutions failing to adequately capture communication across the platform. In order to practice effective supervision and risk management, Group CEO Oliver Blower called for firms to embrace modern technology over restrictions.  

    In light of fines handed out over the last 12 months, regulators are expected to continue efforts to ensure compliance across the channel leaving firms open to additional risk should they fall to adequately monitor the leading messaging service.  

    “A decade long cost control measure to encourage staff to use their own devices for work communications is being reassessed with risk management in mind. We are seeing a significant shift back to corporate issued devices in the wake of the $2billion in fines doled out by the SEC to the wall street giants. However, firms need to be able to empower staff to continue to communicate with clients through the channels that they do currently, in a safe way. This means accounting for the rise in social messaging applications, such as WhatsApp, in business communication.”  Group CEO, Oliver Blower. 

    Get regulator ready for 2023 – Take our short quiz to assess how proactive your approach to surveillance is here! 

    Archegos Fallout Continues

    One year following the 2021 collapse of the family office saw the arrest of Bill Hwang, founder of Archegos Capital Management for federal racketeering, fraud and market manipulation charges. Federal indictment against the founder shone light on risk controls, or lack thereof, on sophisticated trading desks.  

    European Securities and Markets Authority (ESMA) recommended the creation of framework in order to enable supervisors to better monitor risks related to derivatives. “Looking forward, further work is needed to put forward a framework whereby different regulatory reporting could be analysed together to enable Authorities to monitor risks” concluded the regulatory authority. 

    It would be a brave firm that decides against carrying out a root-and-branch review of the context around their swaps trades as the post-Archegos analysis rumbles on.” commented CEO Oliver Blower following the arrest. With recent studies suggesting that 42% of employees believe their firms to be poorly positioned to meet the regulatory requirements relating to trade reconstruction, 2023 will be the year to get ahead of this issue with automated technology helping firms achieve this feat.  

    CFTC Rewrite

    Following a delay in the original implementation date of 25 May 2022, the CFTC rewrite has in recent weeks gone into effect with the aim of correcting errors in swap data. The reporting framework now includes harmonised critical data elements developed by the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO). 

    CFTC’s original data-related swaps rules were established under the Dodd-Frank Wall Street Reform and Consumer Protection Act, mandating the reporting of swaps data contracts to SDRs and the public dissemination of swap data, with the aim of improving transparency what was an opaque swaps market. 

    “The manual process of sifting through these disparate data sets and connecting the dots between trades, particularly during periods of heightened volatility, will continue to be a major headache. To meet the spirit of this CFTC re-write, expect financial institutions to lean on the support of automated technology to connect communication and trade data so that compliance teams can be empowered to check exceptional swaps trades almost instantly.” Group CEO, Oliver Blower. 

     

    A busy year for regulators and by default compliance teams alike! The aforementioned issues are expected to colour the regulatory landscape of 2023. Assessing your firm’s ability to face these challenges is vital in order to best position your firm for the year ahead.  

    Not only was 2022 a busy year for regulators but also for VoxSmart too as a company! We celebrated many milestones together including inclusion on The Sunday Times 100 Britain’s fastest growing private companies, a third consecutive feature as part of The RegTech 100 and front-page coverage as part of Raconteur’s Future of Finance Magazine (distributed by The Sunday Times). 

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        VoxSmart makes the RegTech 100 for third year

        VoxSmart makes the RegTech 100 for third year

        We’ve made the RegTech 100 list for 2023! 

        VoxSmart are delighted to be included in the RegTech 100 2023 list which recognises the world’s most innovative technology solution providers that offer products and services in the areas of compliance, risk management, information security and financial crime. 

        In its sixth year the RegTech list further cements VoxSmart as an industry leader within financial and regulated markets and highlights our commitment to tackling real industry issues with practical solutions. It is VoxSmart´s third feature on the prestigious list and the honour is not lost on us as we continue to strive to improve and enhance our offering.  

        With regulatory boards increasingly more stringent regarding compliance it has been of paramount importance to the team here at VoxSmart to connect with regulated industries to further understand their pain points in meeting these expectations. This year has seen astronomical fines, the most recent of which the SEC’s $1.8 billion penalty to Wall Street giant for surveillance failures, yet we strive to empower firms to communicate with confidence over communication channels of preference to employees and clients alike. 

        With regulators showing no sign of slowing down it has never been more pressing for firms to get ahead of the game when it comes to ensuring compliance across communications channels. With VoxSmart this had never been easier.  

        Check out the full list here! 

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            Proactive surveillance key in getting ahead of regulation – XLoD Global 2022

            Proactive surveillance key in getting ahead of regulation – XLoD Global 2022

            XLoD Global returned to London with 3 great days of discussions, debates and networking. With both virtual and in-person elements to the event there was much to be taken from the experience for all in attendance.  

            Noteworthy across the event was much attention to the increase regulatory measures which the industry has seen in recent months – the most recent and widely discussed of these being the SEC’s $ 1.8 billion Wall Street fine for failures relating to the monitoring of encrypted messaging platforms such as WhatsApp.  

            With the consensus from experts across all three lines that regulation is set to get more extreme getting ahead of this is key for firms within the market. Here are just some of the key takeaways from across the 3 days. 

            Increased need for WhatsApp monitoring 

            As recent weeks have demonstrated, traders are using the de facto messaging platform WhatsApp for business purposes. Much discussion at the event, including VoxSmart CEO’s Oliver Blower’s case study presentation, highlighted the increased need for firms to surveil across the platform.  

            A quick show of hands at the presentation showed that although majority of people present were using WhatsApp very few were enabled through firm policy to communicate over the platform. In light of recent fines, regulators are expected to continue efforts to ensure compliance across the channel leaving firms opened to additional risk should they fall to adequately monitor the leading messaging service. 

            An added challenge for firms widely discussed at the event was the question of Bring Your Own Device versus Corporate issued devices. One such discussion highlighted corporate issued devices as the way forward to reduce risk of conversations not being recorded, with a simple, user-friendly solution for the end user in addition to buy-in from executive levels. 

            Manual is unsustainable 

            The need for increased automation was a key feature to discussion and debate at the event with many questioning the sustainability of manual functions. Should firms strive for increased levels of transparency and governance then automated technology will be essential in ensuring this. 

            Trade Reconstruction debate, which featured VoxSmart Group CEO, highlighted the benefits of adapting an automated solution to connecting communications with trade data.  Both first and second lines of defence would reap benefits from such a solution. Firms have the opportunity to acquire additional insights into trades and profit and loss spike to inform better business in a timely manner while enabling employees to focus on primary responsibility and upscale talent. 

            The benefit of implementing a trade reconstruction solution is not limited to that of regulatory compliance but extends to the front office who arguably should be paying for such a system considering compliance and surveillance is a downstream beneficiary of data capture efforts.  Exposing insights into front desk efficiency and such a solution offers the foundations for higher levels of automation, such as speech trade executions. 

             

            “42% of participants felt their firms was not well-positioned to meet the regulatory requirements relating to trade reconstruction” 

             

            Future of the surveillance function 

            Calls for more dynamic risk assessments were made, with scalable tech solutions seen as key in addressing the current gap which firms are facing when it comes to surveillance. It was apparent that throwing people at the problem was not sustainable nor effective. In order to cut down on the noise associated with trade communication surveillance dynamic approaches such as AI and ML were key in minimising this problem. 

            In reducing false positives agile technology was hailed as the holy grail when looking to reduce alert fatigue in addition to the Cloud as fundamental in the process of data with analytical capability reliant on it. Firms are increasingly seeking to get to the real risk faster to get ahead of regulatory requests whilst also seeking greater insights from trade communications.  

            “57% of participants spend on new surveillance technology will be prioritised towards trade surveillance” 

            Firms need to be realistic regarding ESG claims 

            With many firms having signed up to be Net Zero regulators are expected to increase efforts in assuring firms are meeting their claims and responsibilities in the fight against climate change. Firms were advised to design and understand reporting and disclosures rules when it comes to ESG regarding accuracy, messaging, positive claims unbalanced by risk scale and inconsistent rating measures – all of which regulators will look at when tackling the issue of greenwashing.  

            However, firms were also reminded that regulators are there to work with not against them when it comes to the ESG, describing it as a process and a journey which many firms are on to ensure positive measures in halting climate change.  

            Cross collaboration vital to the success of both lines 

            A recurring theme for a number of years is the conversation around the data gap which firms are facing. This will only be solved through cross line collaboration and buy-in from each individual function. With data fuelling how firms are operating and much benefit to be achieve from utilising this data for better business decision, it has never been more pressing to dive into the data lake. 

            What this means for firms is and brings to an organisation is the need for a culture shift. People understand surveillance as an important function yet the 2lod needs to be a partner to all lines, with cross line collaboration fundamental. Management of taking risks needs to be as strong as systems dealing with risk. 

             

            These were just some of the talking points across the 3-day event – however what is clear is regulatory boards expectations and resolve will only increase in the future. By getting ahead of regulation firms a better placed to not only deal with requests but also gain enhanced insights to bolster trade opportunities for the future. 

            Get in contact with us today to find out how our solutions can help your firm enhance its control systems for the future! 

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              Scaling your risk control systems: Reactive to proactive surveillance

              Scaling your risk control systems: Reactive to proactive surveillance

              When it comes to communication surveillance every firm is on a different compliance and risk journey – what one firm needs another may not, depending on respective fields, regulatory requirements and the size of the enterprise. The technology to capture and monitor communications therefore also varies depending on the individual needs of the firm – with more intuitive technology needed to reap the full benefits of a more proactive approach.  

              In this blog we take a look at how your firm can achieve proactive surveillance and the main blockers which you may be facing when looking to achieve this level of surveillance. But first, what do we mean by reactive and proactive surveillance?  

              Reactive Surveillance 

              Most companies who are responding to their basic mandatory regulatory requirements and are aware and concerned about responding adequately to these requests, fall into this category. The priority for these firms is responding to past and present threats inside communications, rather than anticipating future compliance risks from monitored or unmonitored channels. Firms within this phase will more than likely actively record and store communications across the necessary channels and conduct forensic investigations after a regulatory request or whistleblowing event.  

              Additionally, some ad-hoc surveillance or sampling may be conducted when taking a reactive approach to surveillance. This approach, although providing firms with the necessary safeguards when it comes to regulatory requests, fails to capitalise on the value which a more proactive approach to surveillance can provide.  

              Proactive Surveillance 

              Proactive surveillance provides firms with an additional level of security when it comes to anticipating future dangers. Firms falling into this category will regularly monitor communications and have the appropriate management and controls in place to further strengthen security and compliance risk. Alerts will be tailored and designed to meet the needs of the organisation and will benefit from the enhanced overview which this provides – streamlining processes and saving time, money and physical resources.  

              Although this level of security has many benefits it is often difficult to achieve. Below are just some of the main obstacles you may face in progressing to proactive surveillance. 

              Budget 

              In the current macroeconomic climate, everyone is feeling the pinch, this is no different for many firms who seek solutions to bolster and strengthen their control systems. When it comes to this feat, ensuring you are getting the most bang for your buck is important whilst fulfilling your firm’s needs.  

              Time 

              Implementing and rolling out new controls takes not only money but also time. Finding time to execute a new surveillance system can put your firm under increased pressure and for this reason you may be deterred from doing so. However, with the right provider this need not be the case! 

              Priorities 

              Often firms prioritise money making efforts over surveillance systems – however having a communication surveillance solution in place not only leaves firms regulator ready but provides further safeguards when it comes to revenue protection.  

              Top Tips for achieving proactive surveillance 

              Achieving proactive surveillance can be challenging for firms so to get you started here are 5 tips to get you started on your journey to proactive surveillance!  

              1. Review your needs

              Take time to assess what degree and level of surveillance your firm actually needs. For smaller firms with just a few team members perhaps reactive surveillance functions adequately and no further surveillance measures are needed.  

              1. Assess your funds

              As previously mentioned, budget plays a leading role in impeding surveillance system updates. If you’re looking to upgrade and expand your surveillance measures you should carefully assess funds available and seek a solution which provides the best value for money.  

              1. Find a provider

              In addition to getting the most bang for your buck you should seek a provider with a proven track record and accreditations. Find a solution provider you can trust and one which will work with you to help achieve your goals and meet your requirements.  

              1. Understand the technology

              Having advanced technology is great, however not knowing how the technology works makes for a poor investment. Seek a provider who provides you with in-depth insight into how the technology works and the confidence to use this technology with ease.  

              1. Conduct regular checks

              Internal checks of your control system and technology must be undertaken regularly to ensure the solution is functioning as it should. Not only will this provide you with added reassure of compliance, but it will also inform you of further regulatory needs should gaps appear.  

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              We are aware of the obstacles and challenges firms face when it comes to enhancing surveillance systems with many of our employees having worked as traders, on compliance teams and in both front and back offices. We aim to provide cost effective solutions, in a timely manner with seamless integration to current controls in place to streamline regulatory requests.  

              Whether your firm is reactive or proactive in your approach to monitoring trade communications we can help your firm improve and adapt to meet the growing expectation of regulatory authorities and provide the safeguards to submit regulatory request with confidence and ease.  

              Get in touch with our team today to discover how we can equip you firm with the technology to meet you regulatory compliance needs!

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