By Matt Smith, CEO of SteelEye
For those of you with teenage children, or anyone who gets easily excited over the simple things in life, the recent news that 118 new emoji characters are set to launch over the next year may serve as a light-hearted conversation starter at dinner. For those of you working in financial compliance, your reaction might be better illustrated with a ‘confused face’ emoji over what this might mean for illicit communications surveillance. For regulators, the ‘inspector’ emoji seems more apt.
With the Financial Industry Regulatory Authority (Finra) recently revealing one of its main priorities this year is to crack down on financial firms’ use of emojis, there is a new frontier emerging in trading and communications surveillance – one that represents a growing challenge for already stretched financial compliance teams. After all, while emojis may seem like harmless fun, it can’t be denied that they are another medium to communicate opinions or suggested actions when trading a financial asset. Take, for instance, the ‘rocket ship’, ‘stock chart’ and ‘money bags’ icons. Due to their ability to telegraph very specific market-related beliefs, a US District Court judge recently ruled their use as objective evidence of financial advice – with legal consequences.
Given one of the new emojis set to be launched this year depicts the mythical phoenix bird, famous for rising from the ashes, you can quite easily imagine how investors could use it in the context of a stock – perhaps suggesting a rally is due after a period of dire performance, who knows. But due to their nature, not all emojis can be easily interpreted, and that is where compliance teams face a challenge. How can you monitor communications for malpractice when systems are not able to pick up on the use of these symbols?
Making matters doubly difficult, most surveillance lexicons – or in other words, a company’s phone book of words and phrases that must be carefully monitored for regulatory compliance purposes – are predominantly text-focused. This means they fail to adequately detect the context behind a particular message or capture nuances present in modern communication methods, like emojis.
Relying solely on limited keyword-based monitoring systems – most of which only boast about 5,000 words and phrases (or lexica) – will mean compliance teams increasingly overlook sophisticated forms of manipulation and the evolving techniques used by wrongdoers. The big problem is it’s not just emojis that are missed by most lexicons. In fact, most do not even possess the capability to flag common slang, or even detect nuances between UK and US English, let alone other foreign languages.
An effective surveillance system must be able to account for all these permutations, tracking over 20,000 different lexica to be considered effective. Take, for example, someone writing: “this is the first time I've authorised the mkt move to Tele”. Most systems today are incapable of recognising these different spellings and would not trigger an alert. In the global business landscape that modern traders operate in, these dated and static lexicons are simply no longer fit for purpose before you factor in even more cryptic lexica like emojis.
Moving forward, compliance teams and regulators should shift their focus towards implementing advanced contextual analysis techniques that can capture the true intent behind communications – whether it be new emojis, the latest slang, or any other language, like Japanese. With recent breakthroughs in powerful technology such as natural language processing AI, many fintechs are already developing highly comprehensive platforms much more capable of detecting trade-related communications. However, only through close collaboration can financial institutions and watchdogs develop an improved surveillance platform that truly encompasses a wider range of modern communication methods.
By partnering with pioneering technology vendors, financial institutions can deploy integrated surveillance solutions that are fit for current communication trends and – crucially – able to adapt to emerging ones. Should they fail to make quick and meaningful progress on this front, compliance departments will soon resemble the ‘Three Wise Monkeys’ emojis – those covering their eyes, ears and mouths.
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