Push to keep tabs on employees spurs union of monitoring firms

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Two companies that assist employees in monitoring workplace communications for signs of risky behavior are joining forces.

Smarsh, which allows clients to archive communications between employees, is acquiring Digital Reasoning, the two companies said Tuesday. The latter applies artificial intelligence to monitoring communications for evidence of workplace harassment, compliance issues and other red flags. The purchase price was not disclosed.

The merger is a reflection of the fact that employers are increasingly seeking surveillance options to monitor their many employees who are working from home.

“If you look over the past few years, even pre-COVID, the amount of data generated in the form of electronic communication has been growing exponentially,” said Brian Cramer, Smarsh's CEO. “You've seen Slack, Zoom, Microsoft Teams and mobile platforms growing substantially. That has all created this perfect storm of much more data than previously. Regulations require that financial services firms not only capture and archive that content in a separate immutable repository, but it also requires them to supervise and monitor the communications of active market participants.”

“If you look over the past few years, even pre-COVID, the amount of data generated in the form of electronic communication has been growing exponentially,” said Brian Cramer, CEO of Smarsh.
“If you look over the past few years, even pre-COVID, the amount of data generated in the form of electronic communication has been growing exponentially,” said Brian Cramer, CEO of Smarsh.

Smarsh has about 6,500 customers, many of them banks, including nine out of the top 10 U.S. banks, according to Cramer. They use Smarsh’s technology to monitor and store Zoom, Google Meet and Microsoft Teams meetings, as well as emails, instant messages, phone calls and other communications. Smarsh's software can follow a conversation between two people as it jumps from text message to email to Microsoft Teams to a phone call.

Digital Reasoning also has financial institution customers, who use it for things like finding signs of rate-rigging among traders. The software finds behavior that correlates with keeping secrets, spreading rumors, market manipulation and other forms of suspicious behavior.

The company's investors include Barclays, BNP Paribas, Nasdaq, Macquarie Group and Standard Chartered, which will continue to support the business following this combination.

Digital Reasoning has had customers ask for help in monitoring the escalated use of Zoom meetings and instant messages during the past six months.

“It is perfect timing to bring these two things together,” said Tim Estes, CEO of Digital Reasoning. “Remote work has led to an immense amount of new volume that is right now, essentially unmonitored. It's the Wild West, and it's predictable that that's going to turn into a whole bunch of issues and scandals in the next year or so after we get past this grace period of all being in shock from it. There's a limited window for banks to catch up. That's why Brian and I wanted to bring this together: We know we can deliver this fast. We can deliver in months to a global bank what might take them years to put together as a Frankenstein.”

Banks are most interested in these technologies to find regulatory risks and general corporate risks, like possible bullying or harassment, Estes said.

Smarsh’s most progressive customers, Cramer said, care about the reputation of their brands and their bank.

“They're tired of being surprised by something that was said or activity shown in communications that reflect poorly on the values of the bank, whether it's discrimination, harassment or other areas,” Cramer said.

Digital Reasoning has trained models to find signs of harassment and discrimination in language.

Having machines read communications can help a company find patterns a human might not ever see and help protect privacy. Humans only look at them after an egregious case has been found, Estes said.

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Employee communications Risk management Compliance Sexual harassment in the professional workplace Artificial intelligence M&A
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