How this company wants to prevent the next financial crisis

By on August 6, 2014
fraud

Fonetic listens in on traders’ phone calls so banks can try to stop fraud in its tracks.

As lawsuits and fines continue to pile up in the seemingly never-ending aftermath of the financial crisis, on top of reams of new laws (the much-maligned Dodd Frank Act reportedly has 14 000 pages of new regulations to accompany it), banks have to keep a closer eye than ever on those wayward traders.

So it’s not surprising there is now a market for giving banks a helping hand. Fonetic was founded in Madrid 15 years ago to track and analyse phone calls in bank, telecoms and insurance call centres and realised its technology could be used to track traders’ calls, which it estimates could total as many as 14 million hours over a year on a floor of 2 000 traders.

“Traders… don’t speak normal English. They speak slang, they speak dialect, they switch between languages,’ says Simon Richards, Fonetic’s US boss. “Trying to find that call is like trying to find a needle in a haystack.”

Fonetic’s search technology is more accurate in combing through the myriads of cryptic calls than transcription technology, which loses about 60 percent of data from the beginning, as its algorithms are based on categories and topics, Richards said. Compliance officers can set up alerts on the company’s platform, which also pulls in chat rooms and emails, so they can try to proactively detect a potential fraud before it happens.

The company’s technology has been used by Spanish bank BBVA for the last five years and is currently being rolled out by Santander across seven countries in five languages. It is still in talks with 35 banks, after expanding outside Spain to offices in London and New York last April, and hopes to have three to five more signed up by the end of the year, Richards said, although he was tight-lipped on revenues and more specific growth plans.

Clearly, even the cleverest technology can’t detect a type of fraud or trader terminology that doesn’t even exist yet. But there’s clearly money to be made helping banks mop up past misdemeanours and tick boxes for those reams of new regulations.

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