The warning message, “Iceberg, right ahead!” was received by the Titanic’s lookout minutes before the ship collided with the iceberg on its maiden voyage in 1912.

And since then, that three-word sentence has endured a symbolic summation of dozens of unexpected events that ended in disaster.

The Titanic was considered unsinkable, and its builders and passengers were confident it could withstand almost any disaster. However, the ship’s sinking demonstrated the hubris of human beings and the limits of technology.

Some see the tragedy as a warning against overconfidence and the dangers of disregarding nature. Some see it as a symbol of the end of an era and the beginning of a new, uncertain one. But the more profound meaning reveals that it can be unwise to trust manmade systems.

Financial Institutions Aren’t Unsinkable in 2023

The largest ocean liner ever built was allegedly prepared to withstand almost any calamity. It took just two hours to sink.

Cue up 2023?

It took 48 hours for Silicon Valley Bank (SVB) to meet a similar fate.

We don’t know the full scope of what caused SVB to collapse. But one thing is sure. For mid-level banks like SVB, things will never be the same, especially in the regulatory environment. Because what’s likely to follow is increased regulatory scrutiny.

“Credit Suisse falls over a weekend. SVB collapses in two days. We’ve seen this movie before,” said David Scott, Senior Product Director at Veritas. “We saw this with the financial crisis in 2008. We’ve seen it play out in different ways since then. And it always led to increased regulation, or at least attempts to do so,” he observed.

Cryptic Crypto: Caveat Emptor

There were news reports that SVB had crypto assets which might have played a role in its demise.

Accordingto the New York Times, Circle, a company that issues stablecoins, one of the linchpins in crypto trading, kept some of its cash reserves at Silicon Valley Bank. After the SVB failure and its frenzied attempt by depositors to withdraw funds, Circle revealed that $3.3 billion of its $40 billion reserves remained at the bank.

“Crypto’s unregulated status makes it a risky proposition for regulated banks, and that could easily lead to more regulations and enhanced scrutiny within the financial institutions with cryptocurrency assets,” said Chris Stapenhurst, Senior Principal Product Manager at Veritas.

A Billion Here, a Billion There. That’s Serious Money

One billion dollars is bracing. Especially when you’re losing it. And the SEC has enough muscle to inflict that kind of pain. Your organization can reduce that risk with robust surveillance tools to ensure that new financial products like crypto cannabis and SPACs meet the demands of regulators before a crisis arises.

Increased enforcement action has resulted in $6.4 billion in fines issued in 2022 and more than $1 billion in a single action in 2022.

“With crypto, in particular, there have been increased fines across the board and with class action lawsuits by investors,” Stapenhurst explained. “Financial institutions need to prevent activities like selling away, personal securities transactions, off-channel signalling, market abuse, fraud, and money laundering.

More robust electronic communication surveillance will be needed to detect violations.

What’s a Bank to Do? Get Ahead of the Curve with Veritas

Things might have turned out differently if the Titanic had had an advanced warning system. Unfortunately, there was no such technology available.

But today, financial institutions can get ahead of the curve by integrating advanced surveillance and compliance tools into their technology stack.

“Even before the shockwaves start, we want our clients in the financial sector to be prepared for the inevitable SEC and FINRA compliance reviews,” Stapenhurst said. “The time to do that is well before unexpected events.”

You Can’t Read Emails One by One Anymore

For financial institutions, the risks are clear. Non-compliance means fines and penalties are severe and tough.

But the sheer volume of voice, email and text messages between customers and bank representatives make it impossible to conduct bespoke compliance checks. Machine learning and AI solve a lot of those challenges.

“The banking sector today is in a race like never before,” Stapenhurst said. “New technologies like messaging apps, new financial mechanisms like crypto and increasing customer expectations are changing so fast that that old-school conservative banking approach doesn’t scale,” he explained.

Human-based monitoring isn’t sufficient. Organizations can monitor communications at a much greater scale by utilizing Natural Language Processing (NLP) and Machine Learning (ML).

Veritas Takes Surveillance AI and ML to a New Level

Veritas offers an AI solution that combines NLP and ML into a single solution.

“Our solution is two flavors that are controllable and configurable by the customer,” Stapenhurst explained.

The classification engine has prebuilt alerts, policies, and rules leveraging different techniques. Policies are based on nested condition logic, sentiment analysis, language detection, and regular expressions.

“Veritas offers a unique solution in the industry, Stapenhurst explained. “It’s an AI-based platform. Classification is on the front-end identifying behaviors based on our training and expertise. Machine learning is on the back-end, which makes predictions based on customer and reviewer expertise. It’s an end-to-end flow with full transparency.”

We’re witnessing an unprecedented era of upheaval and change, and financial institutions face a stark choice. Failure to adapt isn’t an option.

The path to success will be defined by financial institutions that position themselves ahead of unseen events that could lead to disaster. Veritas is a compliance partner with the right surveillance tools to avoid such Titanic consequences.

Click here to learn more about Veritas.



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