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Compliance Assured: Chase Implements Plan to Detect Future Crime

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By Casey C. Sullivan, Esq. on April 10, 2015 11:58 AM

JPMorgan Chase is instituting new software that will identify "rogue employees" before they actually do wrong, the banking and financial services company announced. We'll skip the comparison to "Minority Report," the early aughts film in which Tom Cruise hunts down "precriminals" before they can act.

Chase has been rattled by compliance problems over the past years, having recently settled a Department of Justice investigation into its mortgage practices for $13 billion. It has faced continuing investigation on multiple fronts, from accusations that it manipulated energy markets, to claims it improperly steered clients into self-serving investments.

Could a corporate Big Brother be the answer to Chase's woes? If it is, will others follow?

Wall Street is Watching

Chase's algorithm looks at whether workers skip compliance training, overstep risk limits or violate personal trading rules. Data could also be gathered, according to security experts, from but it also scrapes data from less direct sources, snapping up info from employee emails, chats and telephone transcripts to see if workers are colluding or concealing intentions.

Described as a "surveillance program" by Bloomberg, the software aggregates data and predicts behavior, such as regulatory compliance. Chase has already hired 2,500 compliance workers over the past three years, but thinks its new technology will identify patterns that escape its human overseers.

Legal Bills at the Heart of the Effort

Noncompliant employees have helped keep a small army of lawyers in work over the past few years. Chase alone has rung up a $36 billion legal bill since the financial crisis. In a February memo, the bank's COO said that litigation costs and regulatory fees were more than just a "one-time fine," but a threat to the business' bottom line, according to Bloomberg. Along with implementing the new technology, Chase is seeking to review its corporate culture in order to improve compliance.

We're left with some troubling questions, though. Will this new software create an even bigger paper trail, should wrongdoing be found in the future? How much litigation might arise when employees are disciplined for acts they have yet to commit? When robots take over the world, will they be gentle?

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