Credit Suisse, CIA-Funded Palantir to Target Rogue Bankers

Updated on
  • Bank says it started working with Palantir after Adoboli case
  • Signac venture aims to detect unauthorized trading, misconduct

Credit Suisse Group AG founded a venture with Silicon Valley’s Palantir Technologies Inc. that aims to catch rogue employees before they can harm the bank, employing the expertise of a firm seed-funded by the U.S. Central Intelligence Agency that’s better known for identifying terrorists.

The 50-50 joint venture, called Signac, was signed in recent weeks and will initially focus on detecting unauthorized trading, Credit Suisse said in a presentation seen by Bloomberg News. The Zurich-based lender plans to expand Signac to monitor all employee behavior, catch breaches of conduct rules, and eventually offer the service to other banks.

Lara Warner, Credit Suisse’s head of compliance, said in an interview Monday that the bank began working with Palantir after its biggest Swiss rival, UBS Group AG, lost $2.3 billion on unauthorized trading by Kweku Adoboli in 2011.

“We study external and internal events to try and learn from them,” said Warner, a former operating and finance chief at Credit Suisse’s investment bank. “There is a toxic combination of facts that present itself in any unauthorized trading event. We focus on individual behavior which might be indicative of the risk, instead of focusing on the symptoms.”

Shadow Network

Palantir was co-founded by Peter Thiel, the venture capitalist known for backing Facebook Inc. and co-founding PayPal Holdings Inc., who initially funded the firm before winning an investment from In-Q-Tel Inc., the investment arm of the CIA. It was valued at $20 billion in a funding round in 2015, people familiar with the matter said at the time. That compares to a market capitalization of about $29 billion for Credit Suisse.

In April 2010, security researchers in Canada used Palantir’s software to crack a spy operation dubbed Shadow Network that had broken into the Indian Defense Ministry and infiltrated the Dalai Lama’s e-mail account.

Palantir builds software that ties databases together to make it easier to search for and analyze information, and its clients include police and intelligence services. While Palantir has done work for banks for years, this joint venture is the first of its kind.

Former Spies

Banks across the world are beefing up compliance, deploying algorithms to spot unusual behavior and hiring more lawyers to prevent scandal, and are sometimes tapping former spies as well. While Credit Suisse, led by Chief Executive Officer Tidjane Thiam, was spared the large fines recently imposed on other banks in benchmark manipulation scandals, it entered a guilty plea for helping American clients evade taxes and paid a $2.6 billion fine in 2014.

“Wealth management may benefit even more from using technology than investment banking,” said Warner, who was promoted to the executive board as head of compliance in a strategy overhaul last October. “There are more relationship managers than traders and they’re all around the world, speaking different languages.”

The venture is named after the French painter Paul Signac, who helped invent pointillism, the technique of using small dots of color to form an image visible at a distance. Signac will be led by Colleen Graham, the Swiss bank’s head of compliance in the Americas, and Sean Hunter from Palantir.

Credit Suisse supervisory intelligence staff will join Signac, Warner said. They will follow up on alerts generated by Palantir’s software, and devise ever more elaborate ways to test the bank’s lines of defense against illicit activity.

The bank has already been running monthly tests with fake unauthorized trades, which have evolved from simple one-day events to three-week affairs, and employees know the tests are being conducted, keeping them on their toes, according to Warner.

Signac analyses data such as employees’ swipe card access, block-leave history and whether someone is a so-called sensitive mover, said Anna Sexton, a spokeswoman for Credit Suisse.

— With assistance by Edward Robinson

(Updates with comment from Warner in eighth paragraph.)
    Before it's here, it's on the Bloomberg Terminal. LEARN MORE