IBM Tests Watson Technology to Keep Eye on Traders
April 24 2017 - 2:09PM
Dow Jones News
By Ryan Tracy
NEW YORK -- International Business Machines Corp. is piloting
its Jeopardy-winning Watson technology as a tool for catching rogue
traders at large financial institutions, executives said in an
interview Monday.
The company's Watson Financial Services product looks for
patterns in traders' chats and emails while also analyzing
numerical trading data. The surveillance tool is being piloted with
a handful, or fewer than 10, financial-industry clients, said
Bridget van Kralingen, senior vice president of IBM Industry
Platforms.
The company is also developing other capabilities for the
technology, Ms. van Kralingen said. One analyzes regulatory text to
identify obligations that companies might face and to help assess
whether the company's compliance programs are sufficient to comply
with the rules. Another would assist banks in detecting suspicious
customers or transactions.
The services are a new foray for IBM as it seeks to win a larger
slice of the multibillion-dollar business of helping banks comply
with regulations. The project is one of many efforts to make the
Watson artificial intelligence computer program bear fruit six
years after its debut besting human contestants on the Jeopardy
game show.
In September, IBM agreed to buy financial consultancy Promontory
Financial Group, a move executives said was designed to help train
Watson in the Byzantine business of bank rules.
When it went on Jeopardy, Watson was a generalist, answering
trivia questions about a range of topics. IBM has since been
working to beef up its expertise in specific fields, such as
treating cancer.
The trader-surveillance capability is Watson's most advanced in
the financial-services realm, said Ms. Van Kralingen and Eugene
Ludwig, who founded Promontory and continues to run it as part of
IBM, in a joint interview Monday.
They likened their effort to Watson's application for medical
diagnoses. In that context, Watson will read medical literature and
consider patient histories and symptoms before offering a potential
diagnosis. At a financial firm, Watson might analyze trader chats,
emails, trading data, market data and other inputs to flag cases
where a bank employee might be engaging in insider trading or
market manipulation.
The pitch is that banks need Watson because compliance officers
alone can't analyze all that information, and because other
technology relies on more rudimentary tools such as searching
emails for words that might raise red flags. Watson, IBM says,
analyzes more data and is more sophisticated in identifying
patterns.
"I think about it like a detective that can do problem solving,
rather than just a search. And that is the difference that many
risk and compliance officers are desperate for," said Ms. Van
Kralingen.
She said Watson is learning how to move beyond its ability to
process language, which was the basis for its competition on
Jeopardy, to work with numerical financial data.
The capability for Watson to analyze regulatory text and banks'
own compliance systems is still under construction, she said. That
project is relying both on Promontory's stable of expert former
regulators and on data that Promontory has created identifying
individual obligations for banks among thousands of pages of
federal rules, the executives said.
In the anti-money-laundering arena, IBM is trying to create a
tool that would be better than existing technology at identifying
suspicious transactions, they said. The goal is for the technology
to generate fewer "false positives" -- transaction alerts that
banks spend time investigating, only to find out later that they
are innocuous.
Mr. Ludwig said that "the enthusiasm is unbelievable" among
potential clients for the anti-money-laundering tool.
To be sure, the learning process for Watson can be a long road.
Previous projects have run into hurdles. One attempt to use it in
cancer treatment at a Texas hospital stalled due in part to
challenges of integrating the technology with the hospital's data
systems, even though IBM said Watson itself was working effectively
in that context.
Write to Ryan Tracy at ryan.tracy@wsj.com
(END) Dow Jones Newswires
April 24, 2017 13:54 ET (17:54 GMT)
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