Credit Suisse has formed an alliance with Silicon Valley’s Palantir Technologies, an artificial intelligence company backed by the CIA, which aims to stop rogue traders in their tracks before they can cause damage to the bank’s balance sheet.
The recently signed 50-50 joint venture called Signac, will primarily focus on detecting unauthorized trading, but there are plans to expand it to monitor all employee behaviour, catch breaches of conduct rules and eventually offer the service to other banks. Signac is able to look at historical incidents of rogue trading and identify when there is employee behaviour which matches this. Signac will also learn as new incidents occur in order to make improvements.
Palantir, considered to be one of the most secretive companies in Silicon Valley, uses what it calls big data which are essentially huge sets of data that can be analysed by computers to highlight trends and allow for improved decision-making, in areas ranging from defence to fraud.
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Valued at $20 billion, Palantir was co-founded by Peter Thiel, the venture capitalist behind Facebook and a co-founder of PayPal. The joint venture is named after the French painter Paul Signac, who helped invent pointillism, and will be led by Colleen Graham, the Swiss bank’s head of compliance in the Americas and Sean Hunter from Palantir.
Lara Warner, Head of Compliance at Credit Suisse, explained that the bank began working with Palantir after its biggest Swiss rival, UBS Group, lost over $2 billion on unauthorised trading in 2011. She added: “we study external and internal events to try and learn from them. There is a toxic combination of facts that present itself in any unauthorised trading event. We focus on individual behaviour which might be indicative of the risk, instead of focusing on the symptoms.”
The move by Credit Suisse is one of several measures being employed by the bank to bolster compliance and minimise losses. The bank also announced today that it is increasing its cost cutting efforts and is consolidating its FX Options and Cash FX businesses in a bid to boost its bottom line.