By Eugene Land, head of compliance products at BT
Increasingly stringent global financial services compliance regulations, such as Dodd-Frank, Basel III and Mifid II, require investment firms to record all calls that conclude deals with clients. This means that voice recorder assurance can no longer be ignored and that today’s voice infrastructure teams face a daily challenge of ensuring that relevant conversations on trading floors and in contact centres are continuously recorded.
Firms are now expected to oversee and monitor their voice and contact centre systems and controls to ensure that they are robust enough to identify risks before they become systemic in their business. In fact, in the UK, the senior managers and certification regime scheduled to be introduced in March 2016 shifts accountability for failures of oversight more directly on the shoulders of senior management.
Financial firms have to face broad consequences for non-compliance. These include monetary fines, already huge and still growing; senior managers placed in the regulatory firing line; expensive and disruptive operational consequences; and even greater regulatory scrutiny. Total fines levied by the UK Financial Conduct Authority in 2014 came to a staggering £1.4 billion, compared to £474 million in 2013. Needless to say, as news stories of hefty fines imposed on the financial sector multiply, firms are exposed to ever greater reputational risk, the repercussions of which may be perhaps the most damaging.
As a result of all this, the ability to easily retrieve firms’ voice recordings in a timely manner has risen significantly up the agenda of compliance teams. Robust retention policies must be put in place to ensure information can be easily accessed as and when required.
Unfortunately, however, complaints such as ‘I couldn’t find the audio file when I needed it’, or ‘when I found the file I was looking for the audio quality was poor’, still persist. This is frustrating as the regulators are less than willing to accept firms’ technological challenges.
Historically, banks have often had little choice but to invest in more human resources to demonstrate that their trader voice and wider enterprise voice, video and conferencing estate are up to standard. But increasingly they are seeing automation as the way forward.
Many routine daily tasks, such as "walk the floor" (where an engineer tests equipment on the trading floor), and tests such as “dot release testing” and “moves and change testing” – traditionally undertaken by engineering teams – can now be automated. In fact, automated compliance checking can take place on an ongoing randomised basis throughout the day, and the outcome goes way beyond the passive monitoring that banks had before.
But in this new automated age, how can firms be certain their automated compliance assurance tools are working, and what actions should they take to ensure that they continue to comply with regulations with ever-increasing complexity?
The simple answer is that the time-honoured principle of 'Who will watch the watchmen?’ still applies. Automated tools need checking just as much as their human counterparts, and customers need to challenge vendors to ensure they have robust checks in place to constantly monitor that their software is working. The good news is that with an automated system, any faults and failures are picked up sooner, therefore leaving less impact on the business.
Clearly automating compliance assurance can bring significant business benefits in terms of labour and business processes. But before wholesale adoption, firms need to consider what they want to achieve, what benefits/return on investment are required to support their business case and whether a pilot would be a suitable way to validate the business benefits.