LONDON (Reuters) – Potential breaches of market rules have spiked since traders began working from home in March, drawing scrutiny from regulators and piling pressure on banks to plug “black holes” in surveillance systems, industry officials say.
With banks unable to check in person on the behavior of traders working remotely, they have to rely on machines that flag any apparent bad behavior or suspicious transactions made under the unusual coronavirus crisis working conditions.
“In your kitchen or spare bedroom there is no colleague to monitor what you are up to and what we are seeing across a number of clients is a spike in escalations,” said Erkin Adylov, CEO of Behavox, whose software is by banks, hedge funds and asset managers in New York, London and Asia to monitor staff.
Behavox has seen an 18% rise in conduct being “escalated” or singled out for scrutiny among clients since March, ranging from swearing to more serious incidents like disclosing client names.
They have also included prohibited activities such as taking conversations private, using personal email and giving financial advice to family and friends, Adylov said.
“These kinds of breaches typically don’t happen, but right now there is a noticeable increase,” he said.
When the coronavirus crisis hit, regulators in Europe and the United States initially gave some leeway to home traders, such as easing a rule that all conversations be recorded.
But working from home must not mean a relaxation in surveillance and firms could hold retrospective reviews to focus on high risk areas, Britain’s Financial Conduct Authority said this week, adding it was aware of a surveillance alert surge.
Greenwich Associates said there has been a jump in “false positives” or potentially suspicious trades that must be reviewed, driven by record trading volumes during March.
The consultancy said one global banking client saw more than 35,000 false positives during just one trading day in March, up from 5,000 in a normal session, leading to delays in reviews by compliance teams.