Regulators drop their mics in their quest to preserve voice comms

Today’s regulatory climate, in tandem with the demands of the ever-evolving communications compliance landscape, demand robust voice surveillance solutions. Looking back through time, scandals such as LIBOR and The London Whale Incident initially underscored the need for both regulators and firms to ensure market abuse and disclosure of unlawful information is captured. As regulatory fines for off-channel communications and voice surveillance failures persist, it is becoming increasingly clear that no communication route should go unmonitored.

Monitoring voice, despite its challenges, holds great value for firms looking to ensure they capture non-compliant activity, especially as rogue traders increasingly find preference in telecommunications rather than eComms platforms.

What the regulator demands, the regulator gets

The Markets in Financial Instruments Directive II (MFID II) and the Dodd-Frank Act have been cornerstone regulations that restructured the compliance landscape. MFID II requires firms, within the European Union to ensure the comprehensive capture and preservation of all of their communications, both written and verbal, relating to financial advice and transactions. Dodd-Frank imposes similar requirements upon the United States, looking to enhance transparency and prevent market abuse. In fact, the Dodd-Frank Act goes one step further in that it requires communication records be available within 48 hours for regulator review. It is here, that voice surveillance solutions become indispensable for firms seeking to comply with the rules.

In the case of the Barclays LIBOR 2012 scandal it was voice monitoring failures that led to misconduct in real-time. The lack of available, robust solutions meant that traders at Barclays were able to use voice communications to collude with other banks to manipulate the LIBOR rates for profit for years without being caught. Once they were found out, Barclays was fined $450 million by the UK Financial Services Authority (now Financial Conduct Authority) and UC Commodity Futures Trading Commission.

While now cases of the past, it is exactly cases such as this that should encourage financial services to implement voice surveillance solutions to prevent illicit activities from taking place in plain sight.

More recently, a fine levied by the FCA against BGC brought the importance of voice monitoring solutions to the foreground once more. Despite being a firm in which “80% of the business was conducted through voice brokerage”, the FCA found that BGC did not have effect systems in place that would have detected market abuse within those communication channels. As a result, BGC was ordered to pay almost £5 million in fines, reduced from nearly £7 million owing to cooperation and early resolution.

This case has brought to the fore the underlying requirement to capture and monitor voice communications. Ultimately, voice is a channel of business communication and, as such, is subject to all the requisite recordkeeping, monitoring, and marketing rules as any other channel. Many firms have taken this case as a warning and are using its’ learnings to adopt technological solutions needed for recordkeeping and safeguarding both the firm and the client.

The regulatory requirement to preserve voice communications has a positive knock on effect with regards to transparency and accountability within audit trails. Not only do voice surveillance solutions allow for a more comprehensive capture and analysis, firms now have verifiable, and traceable records of voice communications that can be reviewed with ease.

Transcribe, translate, transcend

Modern voice solutions have served to transform the compliance environment through the incorporation of many different features – some even going beyond what the regulators have been demanding. These include:

• Reliable transcription – technological advances in transcription allows voice solutions to turn verbal communications into digestible text, and conduct lexicon sampling and keyword searches against transcriptions to identify any risk or misconduct
• Highlight suspicious areas – using a visual waveform representation of the call, intelligent voice solutions such as smart lexicon identification and sentiment analysis can directly highlight the area of a recording which may need to be investigated
• Clarifying audio quality – effective voice surveillance solutions will make sense of audios that are not compatible with the human ear, decoding those that possess a low volume, mumbling, or static interference
• • Language translations – modern solutions will look to cover a multitude of languages as to not limit comms monitoring, where transcription engines can cross borders and be used globally