Banks these days, especially the world’s biggest banks, let it be the United States of America or the United Kingdom, are now hiring eligible and former spies in order to try to prevent the rise of yet to come or existing so0called rogue traders and to make sure that banks are put on the hook for fewer times.
At risk of being fined for individual acts of illegal trades or speculation, the biggest banks are deploying surveillance tactics not far off from ones used by the government in the war on terrorism. “The biggest threat to banks today, the absolute biggest threat, is the regulator,” said Mathers, who now runs his own consulting firm, Chrismathers Inc., in Toronto.
Every move bank employees make is likely being monitored by former military intelligence or CIA and GCHQ members, or even computer algorithms, according to a Bloomberg report based on interviews with“more than a dozen recruiters, bank executives and compliance officers.”
HSBC, Deutsche Bank, and JP Morgan Chase & Co. were listed among the too-big-to-fail banks monitoring everything from cigarette breaks to text message metadata. In a January interview, Deutsche Bank Co-Chief Executive Officer John Cryan told Bloomberg the business of banking was being balanced with new policing duties necessary for preventing heavy regulatory fines. Moreover, Barclays was fined $2.2 billion for its role in the Libor scandal, where six banks manipulated foreign exchange rates. Total fines for all the institutions involved amounted to nearly $6 billion.
On the look out
Military-intelligence people are used to parsing partial bits of data from communications, from behaviors, and putting those together in a way that would predict the next terrorist attack or some other type of much more horrible thing than they have to deal with. That is the major reason to why surveillance and monitoring needs to be taken up a level.
Banks are on the lookout for outliers — those who deviate from the norm, either by consistently making more money than colleagues, using their work e-mail less than peers, taking fewer holidays or accessing back office systems they don’t need to. Just about every moment of a trader’s workday is under scrutiny, from which areas of the building they access to how long they take for lunch. The websites they look at are of particular interest: frequent visits to spread-betting and gambling sites trigger alerts.
A look at some cases the U.S. Department of Justice is looking into involving what it says was money allegedly stolen by foreign officials and laundered in the U.S. (NY Times). Operators of gambling sites in the U.K. could also be coming under greater scrutiny for how they make sure their operations aren’t being used by money launderers.
Lately, financial regulators have been trying to reassure lenders handling dollar transactions such deals are safe and properly vetted, and is hiring more people to investigate potential money laundering.
Datuk Harzani Azmi, the former managing director of Malaysian oil and gas services company Tanjung Offshore Berhad 7228.KU -3.13%, was charged with two counts of money laundering for allegedly inflating the share price of a company he had his firm acquire. Mr. Azmi doesn’t appear to have been contacted. (Malay Mail)
The U.K.’s National Crime Agency says it’s making good progress in fighting cybercrime. (Computer Weekly)
Sanctions against Russia are being blamed for a 40% decline in vodka shipments from the country. (Independent) North Korea said it would retaliate against Japan for expanding sanctions against the country following it latest missile test.
Whistleblowers who worked at the U.S. Central Command in 2015 allege their superiors skewed and manipulated their reports to reflect better success in fighting ISIS than what was actually happening. The Defense Department is now investigating the claims, which were denied by administration officials. (Daily Beast)
The U.S. Securities and Exchange Commission is defending its support for new rules requiring securities brokers and dealers of stocks to disclose the beneficial owners of shares. Banks are hiring former spies to help them identify rogue traders. Prosecutors in San Francisco said they would be working with the FBI to investigate public corruption. roposals in the United Arab Emirates would stiffen the country’s cybercrime laws. (7 Days)
Stealing via hackers
Hackers are increasingly stealing directly from banks and other companies and helping organized crime to operate more efficiently, according to the chief of cyber-security firm Kaspersky Lab.
Examples range from infecting cash machines to dispense all their money to thieves, to hacking operations-management systems at ports so drugs can be smuggled more smoothly and at less risk, founder and Chief Executive Officer Eugene Kaspersky said in an interview at his Moscow office.
Hackers are increasingly targeting banks and corporations instead of consumers. They are also developing new methods to help steal things offline. They are breaking into systems that control loading of coal or wheat to create false shipment figures, so thieves can take the difference. They also infect systems at filling stations, making them pour more fuel than indicated to certain clients and less to everyone else.
Everyone is spying on everyone
Everyone is spying on everyone and stealing information. In reality, there are cyber-attacks of different origin — linked to native English speakers, to Chinese, to Russian-speaking programmers. There are also ones linked to France, Spain and Latin America.
It’s naive to assume that bank-hired spies would even have the appropriate skill set needed for early detection of fraudulent trading given the sophistication and complexity of such schemes as the Setting up draconian measures such as Big Brother also sends the wrong message to hard-working and law abiding traders.
Reason to the hiring of spies
Desperate to avoid more costly run-ins with regulators, investment banks are hiring former intelligence professionals like Linnehan to scrutinize virtually all aspects of their employees’ working lives, from how long they take for cigarette breaks to which websites they frequent. The goal: to deter the next market manipulator or rogue trader.
Following a slew of high-profile market manipulation cases, banks are hiring staff to listen in on their employees’ phone conversations. Recruiters sourcing talent for the financial are already facing challenges in sourcing talent, as 99% of finance executives believe recruitment will be difficult in the upcoming year, according to a survey conducted by Robert Half.
- The banking sector is now looking for a new set of candidates willing to eavesdrop on traders’ conversation. This follows from a report published by the professional services firm PwC. The report revealed that traders’ banter confounded sophisticated surveillance technologies, City AM reports. While the report revealed that banks plan to spend £156million on the surveillance technologies, it also demonstrated how these investments may not be enough to discover if traders are abusing the market. The reason is that technologies, no matter how advanced, lack the human touch to pinpoint the true meaning of a conversation.
- Banks are also hiring teams to listen in on phone conversations. Graham Ure is a Forensics Partner at PwC. He told City AM: “140,000 people work in banking in the City of London alone. That equates to tens of billions of emails, messages and phone calls every year. “In a fast moving environment, those communications often use highly colloquial or coded language. And to be truly effective, surveillance needs to be able to spot news or emerging forms of abuse – likely to involve only a few traders.”
Bankers may also be feeling pressured to insure themselves against fraud and market rigging after the banking sector paid £13.8billion in fines worldwide. Ure continued that banks are “taking surveillance much more seriously” which is shown in the planned investments of security technologies.
- Agents more used to tracking terrorists and busting organized-crime rings have found a lucrative second career keeping tabs on Wall Street traders, according to more than a dozen recruiters, bank executives and compliance officers interviewed for this article. Methods used to analyze voice, text and e-mail communications for national-defense purposes aren’t far removed from those now employed to unearth trader misconduct. That makes former spies a natural choice for banks, where they can expect to at least double their pay.
Example: Barclays is one of several firms exploring the use of behavioral science technology to analyze past scandals, seeking patterns that could enable them to prevent traders from becoming the next fraudster . A surveillance program that uses algorithms to identify potential rogue employees has been used widely.
In an era in which profits are getting more and more squeezed, the ability of banks’ balance sheets to absorb big fines is getting smaller. In recent years, bank employees including Jerome Kerviel, Kweku Adoboli, and Tom Hayes have been jailed for their roles in big banking scandals. I
Increased scrutiny on the banking sector, thanks in large part to stricter stances from regulators like the US Securities and Exchange Commission and the UK Financial Conduct Authority, has led many financial institutions to take big steps to try to keep such scandals from occurring again and costing them billions of dollar of loss that not only is embarrassing but bad repute for the bank as well.