Interview with Joe Schifano, Global Head of Regulatory Affairs, Eventus

The Evolution of the Compliance Industry: Interview with Joe Schifano, Global Head of Regulatory Affairs, Eventus

By Joy Dumasia

April 04, 2022

  • AML
  • Asset Management
  • Compliance

Joe Schifano, Global Head of Regulatory Affairs, Eventus Systems

Eventus Systems is a leading global provider of multi-asset class trade monitoring and market risk management solutions. The powerful, award-winning Validus platform is easy to deploy, customize and operate across the equity, options, futures, foreign exchange (FX), fixed income and digital asset markets.

Validus is proven in the most complex, high-volume, real-time environments of tier 1 banks, broker-dealers, futures brokers (FCMs), proprietary trading groups, market centers, purchasing institutions and energy/commodity trading companies . Their rapidly growing customer base relies on Validus and the responsive support and product development teams to overcome their most pressing regulatory challenges.

IBS Intelligence spoke to Joe Schifano, Global Head of Regulatory Affairs at Eventus Systemsto discuss the evolution of compliance technology and what lies ahead.

Could you give us an overview of the service offerings of Eventus and the Validus platform?

Eventus is the world’s leading provider of multi-asset class trade monitoring and risk tracking solutions. The company also provides anti-money laundering (AML), transaction monitoring and monitoring services. Validus is a comprehensive multi-asset class platform for monitoring, tracking and analyzing trade flows and financial risks to maximize the efficiency of clients’ regulatory operations.

How is compliance technology evolving and what are the advances in compliance technology?

Compliance departments are continually under pressure to maximize their human and financial resources. In digital assets, compliance staff are increasingly responsible for advising and monitoring in more compliance verticals than their peers.

When it comes to efficiency, customers are upgrading their tools by turning to vendors that offer automation capabilities, including machine learning. Today’s legacy method used by monitoring platforms is parameter-based monitoring, where parameters and thresholds control the volume of alerts promoted for review. This leads to arbitrary over/under calibration trends that do not improve alert quality and leave surveillance analysts with too many false positives or the risk of missing early warning signs of a problem. To solve this problem, Validus introduces Automation. Automation is an advanced method of analyzing data and producing better quality alerts. The result is a better understanding of potentially suspicious activity that helps monitors make better use of their time, perform in-depth analysis, and detect early warning signs of a potential problem.

In a more holistic view of compliance risk, digital asset market clients increasingly want to aggregate data from their best KYC, AML and Trade Surveillance tools. Therefore, they seek out experienced surveillance and technology providers who collaborate well with their staff and bring a deep understanding of regulatory requirements, regardless of asset class.

Cross-market surveillance relates to identical fungible instruments traded on several platforms. This is essential in jurisdictions like the United States for equities and is increasingly discussed in regulatory circles related to digital assets. For example, a market participant can monitor tokens, securities, and issuers on digital asset platforms. Validus natively supports cross-market monitoring.

Multi-product (asset) monitoring covers two or more correlated instruments linked by the same issuer, underlying or series, etc. Multi-product monitoring is increasingly targeted across multiple jurisdictions and asset classes. For example, in digital assets, clients are asking about monitoring for potential market manipulation by participants trading in both spot and futures markets. And Validus is capable of conducting such surveillance.

What do you think about revolutionizing the current state of digital asset regulation?

Global regulators continue to grapple with this fast-moving asset class that showcases financial and technological innovations. The far-reaching impact of these innovations certainly requires careful thought, and it’s no surprise to see varying approaches by regulators across global jurisdictions.

One thing is extremely clear, and it is a global thread. Regulators are serious about entrenching our fraud and market manipulation across all asset classes. They are serious about applying the proven principles of AML/CFT frameworks in this new ecosystem.
We’re not surprised to see headlines like “US SEC Law Enforcement Cop Says Crypto Firm’s Amnesty Not on the Table”, appeared in Reuters. This is an essential concept in all jurisdictions around the world. While some see this as “regulation by enforcement”, we advise our clients to take the proven lessons of mature traditional compliance frameworks and apply them in their digital asset businesses.

Regulatory uncertainty should not mean less investment in compliance; this should encourage the sustainability of your business. We believe that proper oversight tools are a proactive investment that builds reputation with regulators and mitigates the high cost of latent regulatory enforcement. A safe, reliable and compliant business encourages institutional investment and attracts institutional clients.

What are the best practices for creating business asset monitoring systems, especially when digital assets are booming?

In addition to having the will to invest in a proper compliance framework, best practices, especially in trade monitoring, utilize next-generation technology and apply well-known lessons from traditional finance. Some of these best practices in practice and technology include:

  • Use a high-performance cloud platform to monitor on- and off-chain activity.
  • Keep your surveillance infrastructure efficient with robotic process automation.
  • Provide tools for surveillance analysts that enable rapid and flexible response to rapidly changing compliance needs.
  • Use an API-driven framework that provides future-proof interoperability and extensibility in the face of a changing landscape.
  • Pay close attention to early use cases to guide your compliance framework.
  • Consider the lessons of past nascent financial innovations that eventually presented themselves under the guise of regulatory frameworks and were always, from the outset, subject to regulatory scrutiny of fraud and market manipulation.

What are the main challenges facing cross-asset market monitoring?

Data is key here, and accessing reliable sources of order lifecycle, market data, and benchmark data to effectively link and analyze behavior across disparate markets is the challenge. This is especially true for less liquid or more over-the-counter markets, for example fixed income securities, or markets with dynamic instrument types, for example user-defined spreads. The other point would be the volumes of data needed to be processed within a timeframe and the need for automations to ensure you don’t receive many false positives.

What is planned for 2022?

Build a single window for financial risk across digital assets, leveraging integrations with other leading third-party solutions, e.g. Project Ten, to provide a holistic view of trade monitoring, risk, KYC and security. ‘AML. Multi-product monitoring is an important focus area and ensures that we have all relevant data sources and monitoring procedures to enable this in an efficient and practical way.

Continued investment in new ways to assess and investigate actionable alerts through new visualizations and insights such as backlog replay and behavioral statistics will help identify changes or anomalies in patterns on long periods depending on a particular trader, account or client. Build more programmatic access to data on the platform by expanding our API offering to provide additional integration points and extend Validus functionality into a client’s broader trading and risk workflows.

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