Financial regulations will ultimately reduce systemic risk in the financial services sector, but compliance is expensive, time-consuming, and complex for financial institutions. Crowd computing - the combination of machine learning and crowdsourcing - is a solution. The presentation was shown during a WatersTechnology Inside Reference Data webcast sponsored by WorkFusion to help viewers understand the potential that crowd computing offers financial businesses struggling with LEI, FATCA, EMIR, Solvency II, BSBS 239, and other data-intensive regulations.
Solving financial regulatory compliance through crowd computing
1. 1. What is crowd computing?
2. Why is it the right approach for
compliance?
3. How does it work?
2. “We’ll get back to competing with each other,
but right now we’re competing with regulations.”
Global Information Architect
Very Big Bank (VBB)
@ FIMA 2014
-
3. Compliance sucks time from work that
generates $$$ and competitive advantage.
AIFMD, EMIR, FATCA, LEI,
MiFID, Solvency II, etc.
Data
Operations
4. Build vs. buy isn’t much
of a debate these days.
BUILD BUY
Hiring
is expensive
and inflexible.
Outsourcing
is expensive
and inflexible.
vs.
5. 0
10
20
30
40
50
60
70
2012 2013 2014 2015 2016 2017 2018 2019 2020
300% increase
MM
16.9mm
The Internet changed how people do their jobs.
Now it's fueling a generation of freelancers.“ ”
FREELANCEWORKERS
65mm
Crowdsourced and freelance workers
provide a new world of capacity.
SOURCES: “The state of independence in America, 2012,” <http://www.mbopartners.com/state-of-
independence/docs/2012-MBO_Partners_State_of_Independence_Report.pdf;
“Freelancers Get Jobs Via Web Services,” Wall Street Journal, May 29, 2013
9. LEI mapping sort of looks like this.
Which is tedious.
MULTI-SOURCE SINGLE
SOURCE
10. UUID
Generator
START
Canada
lookup
Multi- to
Single source
Nova Scotia
lookup
Quebec
lookup
Newfoundland
lookup
Manual
lookup
Not
found?
Active
learning
Fields
Clean-up
Address
normalization
Fields
replacement
FINISH
Each regional lookup
task includes:
1.Name lookup
2.Profile scraping
3.Reg info databasing
Crowd computing automates and
crowdsources the tedium.
11. Microtasking and data obfuscation
ensure IP and data security.
METHOD
OF WORK
Crowd computing platform
12. Statistical quality control (SQC)
ensures accuracy
S
T
A
R
T
F
I
N
I
S
H
SOURCE TRAIN MANAGE
Selects the best
workers based
on historical
performance
Administer
training sets to
achieve task
proficiency
Integrate existing
QA methods and
monitor 60+
signals from
workers
13. The software provides an audit trail to
ensure data is built from approved sources.
S
T
A
R
T
F
I
N
I
S
H
ALLOWED
ALLOWED
FORBIDDEN
ALLOWED
FORBIDDEN
This was my favorite quote from a panelist at the FIMA event this past March. We’ll get back to competing with each other, but right now we’re competing with regulations.” There’s an awful lot of horsepower going into cracking and resourcing regulations, and there are still a lot of questions about how that’s going to happen.
One thing that’s certain is that compliance isn’t going to make any business wildly rich. Compliance just requires institutions to communicate more data more frequently, and that’s a huge burden on businesses. It draws valuable resources away from profit generating work.
There was a time when build vs buy was a thoughtful discussion, but when you really get down to it they both have the same disadvantages.
There’s a third option to building or buying. You could kind of call it borrowing. HR firm MBO partners estimates that half of the US workforce will be freelance by 2020, and web access has changed the rules of work. Crowd and freelance workers presents a huge new capacity for business, particularly with work that’s highly process and data oriented like compliance.
But crowdsourcing is only half of the story. The other half is automation and machine learning, and the combination of these resources and technology is what defines crowd computing. Crowd computing pairs machine learning with crowdsourced workers as a means not only of getting knowledge work done at massive scale but also as a means of creating the large data sets needed to teach machine algorithms to automate tasks. SMEs are included in the mix for higher value tasks that require true domain knowledge.
As a method of work, crowd computing solves the problems inherent in compliance and provides better levels of coverage and accuracy, faster processing of work to meet regulatory due dates, elastic capacity to scale up to match spikes in activity, and it reduces the cost of compliance. One of our customers said it best when he said that crowd computing provides scale without adding headcount.
The LEI has gotten a lot of attention the past few months, so I thought it’d be good to zero in on a case that’s relevant and interesting for both data providers and end users. The legal entity identifier.
The typical LEI process kind of looks like a tree tipped on it’s side. You basically have to go from many many sources and information about a business and its operations and involvements into one source of truth, and that’s a lot of work.
Crowd computing knocks that work off of the plate of SMEs by breaking the process into small tasks, automating those that are immediately repetitive, crowdsourcing exceptions, and using the crowdsourced data to train machine algorithms as a means of ultimately automating more work. What you see here is the step by step process that WorkFusion uses to reach a single source, that single source of truth. We have customers using a variation of this process for almost every market, but Canada seemed like a good one to look at mostly because I got to type Newfoundland on a powerpoint slide, which I’ve never done before.
Crowd computing is actually a more secure way of getting work done than outsourcing in that it “shreds” a business process into its smallest tasks and distributes them to online workers after ensuring that any sensitive data have been obfuscated.
WorkFusion’s SQC technology ensures the accurate output of crowdsourced workers during the sourcing, training, and management of each worker.
WorkFusion also tracks and controls where workers source data, providing a complete audit trail of the work and all sources.
Crowd computing as a method of work is vastly superior to all other forms of legacy workforce solutions, including direct crowdsourcing, managed crowdsourcing, and business process outsourcing (BPO).