E-discovery tools, which make data review more efficient and less expensive, are particularly helpful for financial services firms.

Key Points:

  • The financial services sector faces unique challenges, ranging from massive data proliferation to a vast and complex regulatory landscape.
  • Faced with a multitude of legal and regulatory threats, financial services firms must constantly be prepared to defend themselves.
  • E-discovery tools that use computer-assisted document review and predictive coding can quickly isolate relevant data, sharply reducing the time and cost of legal discovery.

When it comes to litigation and regulation, the financial services industry faces a broad array of challenges unique to the sector. Banks alone often spend up to five percent of their revenue on compliance, with one out of five identifying it as their number one concern.[1]

Legal discovery is often the most costly and time-consuming part of the process, with the explosion of email, texts and other electronically-stored information adding substantially to the industry’s burden. This makes the sector ripe for e-discovery solutions, which can automate and streamline document review.

Discovery Challenges Galore

Already challenging, the discovery requirements facing financial services firms are only growing more severe:

  • Electronically stored information is proliferating at an unprecedented rate. UBS provides a telling example. The Swiss-based multinational bank is required to maintain a record all communications with its millions of clients, including the recording of several hundreds of thousands of hours of telephone conversations per day. Regulators require the firm to retain some of those conversations for as long as 20 years, making them part of any discovery requirement.[2]
  • Discovery can be at odds with privacy. The process of storing and producing required data can conflict with various consumer privacy laws. The situation can be muddled further when a firm operates across borders. In the U.S., for example, California mandates stronger privacy protections (thanks to the California Consumer Privacy Act) than other states. For the financial services sector, this makes data retention and retrieval even more complex.
  • Custom applications add additional complexity. Once again, the situation at UBS is revealing. The firm reports that a typical discovery project can require data from more than 10 different chat platforms, involving online conversations that continued over a period of several years. And this is but one example. Financial services firms typically employ thousands of custom apps that make use of both structured and unstructured data — all of which can be subjected to discovery requirements.
  • Good people are hard to find. Managing and mining data requires considerable expertise. The data miner must not only be familiar with the requisite technology and the institution’s regulatory landscape, but must also have a keen understanding of how the business operates. This is not a common skill set.

An Abundance of Legal Threats

All this might not matter so much, if the legal landscape for the financial services industry wasn’t so treacherous. But it is. In addition to aggressive regulators, financial services firms routinely face lawsuits from their customers, investors and competitors — as well as other interested parties.

Routine legal issues faced by the industry include:

  • Lender liability
  • Breach of fiduciary duty
  • Breach of contract
  • Fraudulent fund transfers
  • Forfeiture disputes

A Textbook Case for E-Discovery: Saving

Which brings us to e-discovery — the process of seeking, securing and searching digital data so it can be used as evidence in a legal case. Such efforts typically focus on email, but may also include texts, documents, images, spreadsheets, data bases, audio files, calendars, websites, computer programs and even malware.

Tapping technologies such as machine learning, predictive coding and analytic software, e-discovery reduces the amount of data that attorneys must review. It does this by discarding irrelevant materials and flagging those documents and data files that are most likely to contain pertinent information. With document review accounting for 70% of the cost of discovery and per-case discovery costs frequently topping $1 million, replacing manual with e-discovery can dramatically reduce a firm’s legal costs.[3]

Given the extent of the litigation for which financial services firms must be prepared, this makes the sector a textbook case for leveraging e-discovery’s many benefits. Chief among them:

  • The technology keeps learning. There’s clear value in having technology that can pinpoint the relevant data buried under a mountain of less-relevant material. Better still, as a review progresses, an e-discovery solution’s predictive coding will continue to learn what information is most relevant to the case and adjust its search accordingly.
  • Pattern recognition can automate redaction. As noted, financial service firms must protect consumer privacy during the discovery process. By identifying patterns, e-discovery solutions can recognize Social Security numbers, account numbers, street addresses and other sensitive information. This data can then be tagged for manual redaction or automatically redacted.
  • Flexibility allows for scalability. No matter how diligent they are, people can review only so much data. But digital solutions can scale to accommodate even the largest discovery projects — although not all e-discovery software is equally adept at scaling.
  • E-discovery can be integrated with other systems. Certain e-discovery solutions can be integrated with other content management tools (think document storage). This makes it possible to index, search and collect large volumes of data where it is housed, as opposed to first having to export it — a time-consuming task.
  • E-discovery tools can conduct enterprise-wide searches. Financial services is one of the most heavily regulated industries worldwide. By searching a multinational firm’s data across business units and geographies, e-discovery can help institutions comply across regions.
  • E-discovery can prevent lawsuits. E-discovery is not merely a defensive weapon. An e-discovery solution can also be used proactively to spot non-compliance or apply retention rules to documents. This ensures that required data is securely stored, while unnecessary data — or data that shouldn’t be retained in the first place — is discarded.

One other significant benefit for financial firms is that unlike paper-based documents, digital data includes additional information, such as time and date stamps and author and recipient markers. In legal cases, this type of evidence can be invaluable.

The Bottom Line

The legal discovery process is both time consuming and costly, but several factors make it particularly onerous for the financial services industry. By automating and streamlining the process with e-discovery, the firms in this sector can significantly reduce the time, costs and risks involved.

 

[1]Global Regulatory Outlook 2020,” Duff & Phelps

[2]eDiscovery: Best Practices in Global Financial Services Organizations,” Ethical Boardroom

[3]eDiscovery Opportunity Costs: What Is the Most Efficient Approach?,” Logikcull

Want more great articles like this?Subscribe to our blog.

Get all the latest news, tips and articles delivered right to your inbox

You may also like:

Amazon Web Services Outage: Who is Responsible for Your Organization’s…

The recent AWS outage is a strong remind…

The recent AWS outage is a strong reminder of the risks that… Read More >

Matthew Gardiner

by Matthew Gardiner

Principal Security Strategist

Posted Dec 01, 2020

Elections Change Outlook for U.S. Data Privacy Policy in 2021

National privacy policy is on the agenda…

National privacy policy is on the agenda in Washington, a st… Read More >

Karen Lynch

by Karen Lynch

Contributing Writer

Posted Nov 24, 2020

Mimecast Cloud Archive Named Leader in 2020 Gartner EIA Magic Quadrant

For the sixth consecutive year, Mimecast…

For the sixth consecutive year, Mimecast Cloud Archive clinc… Read More >

Garth Landers

by Garth Landers

Product Marketing Director, Archiving

Posted Nov 19, 2020