At this time you are full of brilliance. The first one to enter Wall Street's office every morning is you, and the last one to leave is you. It's you who work on the weekend, and it's you who text 24 hours a week to tell their creative ideas. However, think about it? You may have just labeled yourself as a potential rogue trader.
According to Bloomberg, this is a beautiful new world for trading supervision. Here, former Goldman Sachs Group analyst Erkin Adylov is building a database to collect bad behavior in banking business. According to hundreds of lawbreakers in the past, these unscrupulous crimes have been recorded, including Tom Hayes of UBS AG and Jerome Kerviel of Industrial Bank. ). Adylov and his team at Behavox, a start-up, collected thousands of computer data, ranging from the tension of telephone recordings to the frequency of employees eating at staff restaurants, and using the data to rate employees. This score can determine how likely these people are to do bad things, even if they have not done anything yet.
Bloomberg reported that although this sounds a bit like Philip K. Dick’s science fiction story, hedge fund company Marshall Wace and currency broker TP ICAP Plc have already used the software to monitor employees, some of the world’s largest Investment banks and commodity traders have also begun testing it.
In the past eight years, banks have already paid more than US$200 billion in fines for a series of negligence such as money laundering, market manipulation, and terrorist financing. Now they are looking forward to companies like Behavox to help them avoid being regulated by regulators. The "Vicious".
Erkin Adylov Photographer: Jason Alden / Bloomberg
"If you don't know what your employees are doing, you will become very passive and weak," Advlov said quickly. The 33-year-old Kyrgyzstan is a skinny businessman. He is a typical businessman. For him, time is an opportunity. Therefore, he does not allow any waste. "Some banks don't seem to know how dangerous their situation is, then they will be fined immediately."
artificial intelligence
Today’s censorship system is so strict that financial companies are willing to pay one-fifth of their income to ensure that corporate behavior is in compliance with laws and regulations. They employ tens of thousands of investigators, unemployed traders, and former intelligence officers to screen employees for communication. Inspiring them is not just a threat of fines. According to the new regulations that took effect in March of this year, senior managers in the UK are responsible for the behavior of their subordinates, and may even face serious prison disasters.
Behavox uses machine learning, the branch of artificial intelligence, to examine all aspects of employees' work life. Behavox scans PB-level data and marks any deviation from the specification for further investigation. The content of the investigation may include shouting on the phone, accessing a computer at night, or harmless behavior such as entering and leaving the bathroom more frequently than other colleagues. The system checks these behaviors and compares the cases of some traders who have deviated from the past and matched them.
Although there are other companies that use similar technologies to regulate trading venues, Behavox clearly does more. They edit these patterns of behavior into a central repository and give all customer access. Adylov calls it "behavior risk trading." The main challenge he faces is to persuade the company to share the potential details of their internal work. If he can establish a network large enough—more than the three companies that have been registered so far—this may change the way banks monitor themselves.
“With this system, users can benefit from their own observations of the industry and be able to promptly detect impermissible behaviors that have been detected. When it comes to compliance, this system should really not be ignored,†Marshall Wace said. Chief Technology Officer Conor Kiernan said. Marshall Wace is a $28.5 billion alternative asset management company headquartered in London, England.
Trump effect
There are signs that larger credit companies are relaxing credit. Barclays Bank, HSBC Holdings Ltd. and several other major European banks established the Cyber ​​Defense Alliance last year to gather information on hacking. However, an untested entrepreneur wants to persuade the Goldman Sachs Group to buy products that solve important issues such as corporate compliance, I am afraid it is not so easy.
This is not the only obstacle to Adyov. Trump, the billionaire has promised to end the 2010 Dodd-Frank Act once he is elected. If the bank's review is relaxed, it may reduce the bank's spending on compliance, but the risk will also follow.
John Harvie, a director of consulting firm Protiviti Inc., said, “The six years of legislation will take time to ease, but the tone of the top US executives has changed dramatically.†This may change the way regulators operate, not just in the United States. In the context of Brexit, the UK will also reduce regulatory pressures as London tries to compete with other markets.
Abnormal behavior
The software analyzes employee behavior based on historical observations of individuals and their peers. The software takes the history of the examinee's compliance record to detect abnormal behavior and gives a risk score. The system also maps the relationships between employees and flags potential problems.
Behavox has established an algorithm based on 16 years of open law enforcement cases against traders and banks around the world. Customers can use these programs to analyze the behavior of their own stores. When they found that an employee was doing something wrong, Behavox encouraged the company to share details anonymously.
“The more companies participate, the sooner the community can adapt to changes in the market,†said Kiernan of Marshall Wace. "Using tools like Behavox, we can act as a community to identify behaviors and share insights.
Behavox promises that they will save money for financial companies that spend hundreds of millions of dollars to hire attorneys, accountants and back office personnel to comply with risk, capitalization and money laundering rules. Behavox and other high-tech companies can automate many of the same functions at little cost.
Mike Baxter, a Bain & Co. partner in financial services in New York, said: “With regulatory easing, business cases that reduce compliance costs will still be very compelling.â€
But Adylov’s ambition is not just to save money for the bank. His goal is to change the way the global financial industry ensures its compliance with the rules.
"These companies are everywhere and they have different ways of handling compliance, so there is no way to cooperate," Adylov said. "These people cannot solve the problem on their own.
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