With another wave of prosecutions expected from rate-fixing scandals, and much of the evidence pouring forth in incriminating emails and instant messages sent by traders, here's a question worth considering: why didn't the compliance tools meant to police chat room discussions help banks stay out of trouble?

Most banks archive traders' instant messages in "write-once, read-many" storage (the Securities and Exchange Commission requires this), where they can be monitored and analyzed by compliance software without tampering.

The compliance tools sift through instant messages and chat room discussions for suspect words and phrases like "libor fixing" and "pure manipulation" that could indicate irresponsible behavior.

But such red-flagging is not so simple. For one thing, traders often use code words, especially if they know the keywords the compliance department has set up. In global markets, the software has to do language translation that accounts for multiple dialects.

"Those tools are effective and needed, but they're of limited utility in the real world if people are eager to game the system, and they seem to be," said David Weiss, a senior analyst at Aite Group. "What good [are the compliance tools] going to do if the will to use them for good is not there?"

Bloomberg LP provides chat monitoring, archiving, search and retrieval of the instant messaging platform it hosts. But not all its 320,000 users take advantage of this.

"Compliance wasn't a point of emphasis for financial institutions for a long time," said Mark Murphy, who is head of communications for financial products at Bloomberg. "We had the tools, but they were seldom used. There was a lack of understanding about the tools available."

Since the Libor rate manipulation investigations began a few years ago — Bank of America, Citigroup, UBS, Barclays and RBS have all been targets — regulatory compliance has become a bigger focus in the industry.

A year ago, Markit, a provider of financial information services, launched a "federation engine" that can act as a switchboard between different chat forums. This way, each bank could use its own internal chat tools (such as Microsoft Lync, Cisco Jabber or Thomson) yet employees of one company could communicate with another's. Today the network has 220,000 users. Markit also provides a directory of members on the messaging network that the company says helps alleviate the issue of traders calling themselves by mysterious handles.

"Because we have that directory, you suddenly know who everybody is," said Andrew Eisen, product manager of collaboration services at Markit. "If you searched some of the names they used in the chat rooms during the Libor rate fixing, they showed a lack of foresight. They called themselves bandits and pirates."

Markit's software lets a compliance department create chat rooms and set rules determining which companies and users may see or participate in the discussions, Eisen said.

It archives the messages using a standard application programming interface that, Eisen said, can work with existing compliance software from providers including Actiance, Global Relay, Smarsh, HP Autonomy and Symantec.

"We're saying, 'Here's a standard way for those compliance engines to listen to what's happening in chat rooms and decide what to do.' Otherwise we'd be reinventing that wheel," he said.

Ultimately, the desk heads ought to know what their traders are doing and saying and enforcing the rules of play.

"The reality is that the technology has very little to do with the traders staying out of trouble," Aite Group's Weiss said.

A more effective solution, in his view, would be for these publicly traded firms to revert to partnerships. Then, there would be "the countervailing pressure of ... 'you're playing with your partners' money.' "

Ultimately it's "trader DNA" and corporate culture that will get banks in trouble or keep them out of it.

When traders are openly using electronic chat rooms with names like "The Cartel" and "The Bandits' Club," supervisors shouldn't need software to tell them to act.

"If a desk head sees ‘bandit's room' — really?" Weiss said. "Good idea, guys."