Financial services firms must comply with data mandates from a growing list of regulatory entities, from FINRA and the Commodity Futures Trading Commission to the Office of Compliance Inspections and Examinations of the Securities and Exchange Commission.
Amid this increasingly global regulatory environment, firms are struggling to comply with this vexing array of demands on their data. The proliferation of big data combined with changing rules and short response times create a perfect storm. In response, legal and risk management teams are increasingly using their corporate and employee data to their advantage to reduce or avoid legal fees and fines.
In May, FINRA issued a $17 million fine — the largest-ever penalty against a financial services firm — for anti-money laundering compliance failures. Financial institutions hoping to avoid a similar fate realize that a backward-looking approach to compliance cannot address future liability, especially now that governmental agencies are employing sophisticated data analytics to identify illegal activity.
Forward-thinking firms are mining their existing data for actionable intelligence to manage investigations more efficiently and cost-effectively, as well as stay ahead in managing compliance risk.
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Consolidating Data to Reduce Manual Reviews
Case-by-case analytics are powerful tools, but they pale in comparison to the might of a holistic approach. Over the years, financial firms have collected and reviewed documents for investigations and lawsuits from data sources that are typically within the scope of a FINRA investigation, including email, chat and social media. The problem is most legal and compliance teams view each matter individually, leading them to reinvent the wheel each time a new investigation or case arises.
Newer analytics platforms with predictive capabilities, however, can aggregate billions of prior data classifications across legal and compliance cases from multiple repositories, allowing counsel to repurpose and view their past work in the clearest possible context. By aggregating data into a single repository, corporations and their counsel, in conjunction with data scientists and analytics experts, can spot trends across all prior and current matters. The platforms’ ability to predict privilege, non-responsive and other attorney designations eliminate multiple reviews of the same documents, improving efficiencies and saving millions of dollars per case.