Trade Surveillance Compliance officers are commonly known for their deep regulatory knowledge, strong command of details and ability to make informed judgements. In a Compliance in Focus Q&A, Jonathan Dixon, Director of Regulatory Affairs EMEA at Eventus, discusses how working collaboratively across all lines of defence is an important—and often overlooked—aspect of financial compliance. 

What are some characteristics of compliance officers who work well together?

Collaborative compliance officers have a combination of hard and soft skills and are strong communicators. They need to be able to work effectively with the front office who are time poor and focused on generating revenue, while also proving that they are knowledgeable and can add value. For instance, if compliance officers need a trader to explain the strategy behind activity that prompted a trade surveillance alert, it is key that this request is articulated succinctly and that they understand the answer given.

Compliance professionals must show the trader they are protecting both the institution and the trader, and help the trading desk do its job more effectively. For example, by giving a compliance officer five minutes of their time, the trader could save themselves a Financial Conduct Authority (FCA) market abuse investigation later, which would take up a much longer period of time.

Within the regulatory compliance function itself, there needs to be knowledge sharing, so trade surveillance team members understand complex cases and why decisions are taken. There also needs to be broader compliance knowledge sharing in the form of training or assisting audit teams doing level 3 surveillance and line defence. Firms need to make sure compliance officers and trade surveillance teams are the best they can be and educate the wider compliance team about what people do and why. This is especially important given that recent long-term market volatility is likely driving higher numbers of alerts, and regulators are issuing more fines and analyzing a larger number of product and asset classes for market manipulation than in the past.

Surveillance for cross product manipulation is especially challenging for OTC (over-the-counter) markets where there could be multiple legs for different asset classes. Regulators are aware of the difficulties, but firms need to be on top of it, so there needs to be strong ongoing communication between clients, regulators, and vendors to ensure any problems are handled properly.

Can you explain how technology supports both a culture of collaboration and problem solving? 

Person-to-person collaboration between the front office and compliance function helps the trade surveillance teams understand the risks for the business. The risk assessment process must come first. Technology then helps firms get to that risk faster.

Good technology enables market surveillance teams to compile comprehensive data on alerts and to focus on cases where the risk is greatest. Firms have a finite number of analysts with a finite amount of time. The right technology can enable them to focus on high-quality, high-value alerts, while still casting a wide net. Sometimes low-value alerts can accumulate over time and provide a cumulative risk or implication of continued malfeasance, and so firms also need a way to easily look back at previous issues and data

Traditional banking surveillance systems kept thresholds tight to avoid triggering a large number of alerts that did not meet their risk appetite, but this runs the risk of missing issues that build up over time whether by an accumulation of low-profit alerts or regular, minor, infractions. Eventus’ market surveillance platform uses robotic process automation (RPA) and machine learning to ensure firms can cover the breadth of alerts they need to cover and that they do not miss any issues that might have been cumulatively important. RPA technology can close out large numbers of alerts automatically using business-approved logic, allowing analysts to focus on a smaller number of higher value alerts. Firms can close alerts faster, but also store data in the background on what was done to enable retrospective analysis on clients, number of alerts, volumes, and various other data points.

Can you provide an example of how technological features might help or hinder collaboration and efficiency for compliance teams?

Say a good trade surveillance analyst can effectively investigate up to 40 alerts a day. If they are receiving 300 alerts, it is very difficult to do that effectively and consistently. To improve compliance team performance, firms need to ensure that analysts have high quality alerts to deal with, so that they can focus on actionable  alerts that add value to both the trade surveillance team and the wider regulatory compliance team.

The trade surveillance software should also enable other team members to step in and help manage the overflow if necessary. The platform needs to be able to handle the workflow of the whole compliance team, and document who is responsible for investigating which alert, who already looked at it, who is requesting collaboration, who forwarded an alert to a supervisor, and who closed out an alert. All of this should be auditable and documented within the system.

Other collaborative technologies also have their place in enabling communication in and between teams, especially for low value alerts that can be closed out easily. But for more complex alerts, bringing the data into the trade surveillance platform is very important to ensure sufficient audit trails.

What are the advantages of a collaborative compliance team?

One key advantage is internal growth. When there is more collaboration, analysts come to understand why decisions are taken, and increase their knowledge of alert types, procedures, models. The more they learn and grow, the better analysts they become. And the more they collaborate, the better they get at working with others. Interpersonal skills and learning how to manage others are vital.

In the wider context, better collaboration helps firms understand their compliance risk. Analysts work with the front office, or with auditors, to explain why they have a particular process and why they do what they do. Collaboration enables greater visibility across the firm and outside of siloes.

By collaborating with a broader team, both regulatory compliance and non-compliance, analysts can share knowledge, and foster a more positive working environment.

Compliance in Focus is a content series on regulatory topics for financial markets and the challenges compliance officers face in addressing surveillance and monitoring. Compliance in Focus is produced in collaboration with Eventus.