MAXIMIZING COMPLIANCE EFFECTIVENESS

Transcription

1 Webinar MAXIMIZING COMPLIANCE EFFECTIVENESS Behavioral Analytics and its role in the compliance process 26 January 2017

2 Speakers Daniel Fernandez Product Manager NICE Communication Compliance Randy LeBlanc Head of Customer Success RapidMiner 2

3 Agenda Behavioral Analytics and its role in the Compliance Process 1. Industry challenges & regulatory environment 2. Evolving Analytics Technology & Techniques 3. Utilizing Communications Data to gain insight into Behavior

4 1. Industry Challenges & Regulatory Environment 4

5 Industry Challenges Wholesale Trading Markets are facing misconduct through collusive activity amongst participants Market participants failed to detect potential instances of insider dealing, market manipulation and other market conduct risks Regulators have directed market participants to implement controls and procedures to identify and document issues proactively

6 MIFID, FINRA Dodd Frank FED, FCA, MAS, ESMA MAR, BIS Capture Communications Trade reconstruction Benchmark Rigging Abuse and Conduct Record keeping beyond just trades Firms presenting data in a digestible manner Improve and integrate surveillance processes Looking for actual Intent and behaviors Regulation over time are requiring market participants to do more and more with data

7 Regulation is changing Request for surveillance to detect market abuse (Mifid II & Dodd Frank) Detection that protects the distribution of MNPI (MAR & BIS FX code of conduct) Need to proactively detect fraudulent trading practices (MAR & Dodd Frank) Identify and prove the Intent behind actions or potential events (MAR)

8 So how can firms address this? Firms are looking to improve their surveillance program with the ability to identify intent to manipulate and detect collusive behavior Existing surveillance programs struggle to identify anything that is not understood or prove why an event occurred The focus on highlighting behaviors to show intent even if the trader did not execute on the action successfully Be able to monitor the unexpected

9 Can you gain insight from behavior? How do you highlight what you don t know?

10 2. Evolving Analytics Technology & Techniques

11 The Logic of Behavioral Analytics Behavioral Analytics is the use of data from all available sources to understand and anticipate human behavior in a variety of contexts 11 Behavioral analytics are used to understand routine, compliant behavior and to identify abnormal and non-compliant behavior Profiles are created that provide history and understanding of what changes are happening Machine Learning, Business Intelligence, and Business Rules are combined to classify normal behavior, identify anomalies, and highlight instances where additional examination is required

12 Using Unsupervised Machine Learning Reveals the Unknown Clustering Outlier Detection Unknown Patterns Enables you to identify patterns in data that have not yet been identified for better insight into intent Provides detection of behaviors that sit outside the norm from day one without requiring previous extensive history for model training 12

13 Supervised Machine Learning Reduces the Noise History based Learn from past historical behavior to uncover similar risks and prevent recurring issues Improves over time Capturing Feedback provides continuous improvement in the model and detection capabilities 13

14 Multi-Dimensional Analysis for Better Insight into Behaviors Algorithm 1 Using combined techniques creates better understanding and confidence in the output from the model analysis Blending Rules-based detection methods and machine learning based algorithms ensure increased relevancy of results Algorithm 2 14

15 Multi-Dimensional Analysis for Better Insight into Behaviors Algorithm 1 Using combined techniques creates better understanding and confidence in the output from the model analysis Algorithm 2 Data Prep Speed & optimize ALL data exploration, blending & cleansing tasks Blending Rules-based detection methods and machine learning based algorithms Model & Validate Operationalize ensure increased relevancy of results Apply machine learning to rapidly prototype & confidently validate predictive models Easily deploy & maintain models and embed analytic results 15

16 3. Utilizing Communications Data to Gain Insight into Behavior

17 Communications tell a story Changes in the patterns uncover intent Understanding your employee communication patterns can uncover unknown manipulative or collusive behaviors based on conversational history and changes. Supplements the current lexicon processes and provides better insight into the intent. Benefits of Unsupervised Learning Early detection of potential misconduct Identity Risky Conversations which occurring outside the norm Learning from the past improves the future Understanding the communication behaviors of individuals from historical investigations can help identify similar behaviors to help prevent recurrence. Capturing feedback on detected behaviors enables continuous improvement for a more efficient compliance process Benefits of Supervised Learning Mitigate violation risk by focusing on high-risk, high effort investigations Increase reviewer productivity by prioritizing work queue Communications Reveal Relationships Communications will help uncover relationships and social networks that pose a potential risk through understanding how, who and when individuals collaborate Benefits of Network Analysis Expand investigation scope to previously overlooked individuals Spot changes in patterns otherwise not understood to prevent possible violations

18 What regulators expect Current approach Siloed channels of info Suspicious Traders Reactive Compliance Regulators Expect Multi-channel Trade Reconstruction Specific Trader, Behavior Proactive Surveillance Approach

19 Leverage all your data AGGREGATE Comprehensive Structured & Unstructured Data Analysis ANALYZE Using a hybrid approach to analytics, combining traditional surveillance best practices with predictive capabilities ACT Understand user level behavior

20 Are you ready for the Puzzle? New Sophisticated regulatory demands Existing compliance programs to continue New technologies to provide insight Need to understand what you don t know Are you ready to solve the Puzzle? 20

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