Sedric: Revolutionizing Financial Compliance Through Employee Communication Monitoring

Introduction to Financial Compliance Challenges

For financial institutions, ensuring compliance with ever-evolving regulations has become an increasingly expensive endeavor. A recent assessment revealed that 76% of financial services firms experienced a rise in compliance costs between 2022 and 2023, largely due to new legislative measures. With compliance costs averaging around $10,000 per employee, firms are actively exploring innovative solutions to reduce these expenses while remaining compliant with regulatory obligations.

The Birth of Sedric

Entrepreneurs Nir Laznik and Eyal Peleg have stepped up to address this challenge with the launch of Sedric, an AI-powered platform specifically designed to assist financial institutions in implementing compliance rules and identifying potential issues. Before establishing Sedric, Laznik was involved in multiple startups, including a firm specializing in photo kiosk software, while Peleg dedicated close to eight years at Intel’s AI and machine learning organization.

Identifying the Need for AI in Compliance

According to Laznik, “We realized there was disproportionate pressure on mid-size organizations, combined with a new set of challenges for banks. We knew the rapid advancements in AI could address these problems in an entirely new way. This convergence of factors led us to create Sedric.”

How Sedric Works

Sedric functions as an overseeing mechanism, monitoring a range of communications from employees, including:

• Outbound and inbound calls
• Chats
• Emails
• Social media direct messages
• Instant messages

The platform proactively flags compliance issues such as omitted disclosures, compliance missteps, and potential misconduct in real time. In many instances, Sedric can provide automatic remediation and coaching to staff members who may have violated compliance protocols.

Empowering Compliance Officers

This technology gives compliance officers a comprehensive understanding of their organization’s customer interactions across diverse channels, enabling them to quickly identify deviations from established compliance policies. Laznik states, “Our platform covers the entire compliance lifecycle, from policy setting to enforcement, correction, and audit.”

Addressing Privacy Concerns

The depth of monitoring may raise concerns about privacy. Sedric rates interactions on an individual employee basis concerning their adherence to company policies. However, U.S. state and federal guidelines allow businesses considerable freedom in monitoring their staff, provided they maintain transparency about their practices.

Moreover, various federal regulations that deal with insider trading, collusion, and the sharing of sensitive financial documents necessitate that financial institutions closely track employee interactions with customers. These regulations often take precedence over state laws that might impose stricter monitoring requirements.

Mitigating Bias in AI Monitoring

One significant concern with AI monitoring systems is the potential for bias, particularly given the diverse backgrounds of employees. Biased AI can lead to unfair treatment and discrimination. For example, studies have indicated that some AI trained to detect inappropriate language may incorrectly identify phrases from African American Vernacular English as “toxic.”

Laznik addresses these concerns by ensuring that Sedric utilizes “fine-tuned models” trained on “proprietary datasets curated and validated in collaboration with industry experts.” The company also actively monitors performance dips in deployed models and retrains them when necessary to ensure fairness and effectiveness.

Data Privacy and Security Measures

To maintain the privacy of both customers and employees, Sedric allows companies to configure their data storage options and implement controls to redact personally identifiable information where necessary. Laznik emphasizes, “At Sedric, we’ve designed our platform with compliance and security at its core. Enterprises can set their own retention policies and compliance guidelines according to their internal standards and regulatory requirements.”

Tools to Support Call Center Agents

In addition to compliance monitoring, Sedric offers tools that assist call center agents while they engage with clients over the phone. As a result of its effective offerings, Sedric claims to serve “hundreds” of compliance officers and enterprise customers across both the U.S. and Europe.

Remarkable Growth and Future Prospects

The company’s revenue has experienced a remarkable fivefold increase over the past year, indicating strong demand for its innovative solutions, though specific figures remain undisclosed. Sedric provides off-the-shelf solutions for small and medium-sized businesses while tailoring hybrid models for larger enterprises and banks. Laznik elaborates, “Our focus on the specific needs of financial institutions, combined with our proprietary library of pre-trained, regulation-inspired models that can also be customized to each organization’s unique requirements, sets us apart in the market.”

Investment and Expansion Plans

As Sedric continues to flourish, Foundation Capital led an $18.5 million Series A investment, joined by Amex Ventures. This funding will be directed towards significantly expanding the firm’s go-to-market and research and development teams in both New York City and Tel Aviv. With the latest investment, Sedric has now raised a total of $22 million and plans to double its workforce within the next year.

Conclusion

Sedric’s innovative approach to compliance monitoring artfully intertwines cutting-edge AI technology with stringent regulatory needs, making it a formidable player in the financial services industry. Its commitment to compliance and ethical AI practices positions it well for continued success in a rapidly evolving market.