Close Close
Sign In
Newsletters
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards
Podcast Center Video Center Webcasts Resource Center Events
About ThinkAdvisor Contact Us Advertise With Us Asset & Logo Licensing Sitemap Terms of Service Privacy Policy Copyright © 2024 ALM Global, LLC. All Rights Reserved.
ThinkAdvisor
Kim Crawford Goodman

Regulation and Compliance > Cybersecurity

Troublemakers, Be Warned: AI Is Watching

By Jane Wollman Rusoff

X
Your article was successfully shared with the contacts you provided.

Artificial intelligence is helping to uncover rotten apples in financial services.

That’s what Kim Crawford Goodman, CEO of Smarsh, a leader in communications compliance, argues in an interview with ThinkAdvisor.

“We’re showing institutions the bad actors they might have,” Crawford Goodman says. “We look for things like insider trading or collusion to make sure [institutions] are keeping their systems safe and investors’ money protected.”

She forecasts that digitization and AI will transform compliance and oversight for financial institutions. Such changes will protect clients’ assets more efficiently and effectively, she adds.

Smarsh, whose clients are both large and small institutions, uses AI for analyzing data at major banks, including “every single email sent in the last 10-plus years, every single text message, every trade,” says Crawford Goodman, a finalist for executive leadership in ThinkAdvisor’s 2023 Luminaries awards.

With AI, Smarsh finds evidence of insider trading, for example, by going through masses of data and connecting patterns and noting elements in many communications from the same individual.

“We’re making sure that the truth is preserved,” says Crawford Goodman, previously head of payments and risk solutions at Fiserv and a vice president at Dell.

Financial advisors will best use AI to analyze investments they recommend to clients, Crawford Goodman, who has an MBA from Harvard Business School, maintains.

Here are highlights of our conversation:

THINKADVISOR: How will digitization and AI change compliance for financial advisors?

KIM CRAWFORD GOODMAN: That’s going to completely change compliance and oversight for financial institutions. 

Five to 10 years from now, regulators and compliance people will be inside institutions running very sophisticated models on all transactions, including trades.

The changes will bring more efficiency and protection for the institution, clients and money flows in a much more effective way.

Who’s responsible for keeping clients’ assets safe?

The institutions. Regulators just provide some oversight.

The biggest advances will be in how institutions protect themselves and their customers. But the regulators will continue to raise the bar on how the institutions will do that. 

How are you making AI available to your clients?

First and foremost we’re using AI to analyze all the data at major banks — every single email sent in the last 10-plus years, every single text message, every trade.  

How will individual financial advisors use AI best?

To reduce their risk, to analyze things as opposed to using basic analysis, like what the best investments are. They’ll build models to take their analyses to the next level.

They can use AI on a real-time basis to see trends, what kinds of things people are asking about and what sort of advice is being given out. 

But determining the best investments is the main responsibility of human advisors. Right?

The human should do it, but humans are best if they use the best tools. 

This is a great example of digitization that has happened across many industries. The best advisors are going to combine their own skill set and knowledge on top of the best tools. 

That’s going to make them more advanced and differentiated as fiduciaries.

How else is Smarsh using AI with its clients?

We’re showing institutions the bad actors they might have. This use of AI applies especially to people working from home. We look for things like insider trading or collusion to make sure [institutions] are keeping their systems safe and the investors’ money protected.

If you’re looking for insider trading, you can do that [traditionally] in a really rudimentary way and use a few keywords.

Or you can do it as we’re doing it with AI, going through the mass of data and connecting patterns, seeing elements in multiple communications from the same person.

What’s the chief goal of archiving this data?

We’re making sure that the truth is preserved. We store all the information in a way that’s compliant and cannot be changed, altered or disrupted in the future.

The issue of off-channel communications has been in the news. Please explain how it differs from on-channel.

On-channel communication is using a phone for, say, text messages, which go across your company-approved communications channels.

Off-channel is the myriad other ways that you can communicate on the phone, whether through WeChat, [WhatsApp] or other platforms.

Off-channel has been a very hot topic, especially because so many people are working from home. 

These communication methods have exploded. And in just the last two years, financial institutions have been fined over $2 billion by the SEC.

When communicating with investors and giving advice, employees need to do it in a way that’s above board.  

Where is all the data stored?

Smarsh is storing it in the public cloud and also in some of our own data centers.

We have the ability to scale globally because we’re using the public cloud.

Are your clients’ archived emails and voice conversations available only to them, or can the government access them if, say, it is conducting an investigation?

We capture, manage and store the data, but it’s owned and controlled by our clients. So when there’s an investigation, the financial institution accesses the data from the Smarsh system with tools we give them. 

Any other ways Smarsh is applying AI? 

We’re doing language models. We have the patterns, for example, of how traders and investment bankers speak, and how advisors speak to their clients.  

Those language patterns can be interpreted through AI, and then the institutions can use them for other processes in their banks.

When robo-advisors came on the scene, advisors worried that they would replace them. Does AI pose a job threat?

What we see with AI is that people don’t necessarily go away; they just become far more productive in protecting the institution and the investors that utilize that institution.

To what do you attribute your career success?

First and foremost, raw hard work. Secondly, sometimes setting an intention and making sacrifices for it. 

Third: I’ve had people who have given me opportunities along the way.

Any big challenges?

I’m an African American woman, and in my career, I’ve had my fair share of detractors. But I’ve also had more than my fair share of sponsors.

Jane Wollman Rusoff

@jrusoff2

NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.