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It took over 2500 years for the walls of China to become one Great Wall, and even now it has gaps in spite of the maintenance it receives. So it would appear the Chinese Wall of the financial world was named appropriately, gaps and all, for those who still seem to slip through the compliance cracks.

A recent report put out by TABB Group claims increased technology is needed if Chinese Wall compliance is to be effectively monitored and achieved due to the difficulty to, without technological advancements, draw relationships between such vast amounts of information that is so highly active. It’s been said that a wall is only as effective a barrier as those who defend it, and it is supported by the report in its claim that “we are witnessing the SEC and state regulators increase enforcement and raise the level of penalties in attempts to restore public trust in the financial markets.”

The role technology is intended to take is that of a predictor as opposed to a reactive tool, hopefully lessening fines charged to financial firms for non-compliance through their ability to “manage larger and more complex datasets in less time,” says Larry Tabb, founder and CEO at TABB Group. It is an undertaking not to be discounted, however, to implement new or additional technology. The report sites that, “While the top 1000 global firms can benefit most from an active/predictive compliance solution, in 2005 less than 2% will implement this solution, rising to 5% in 2006.”

In addition to the matter of cost is that of compatibility among systems intended to be interactive. The solution is the cooperation of at least a single pair of vendors in order to provide a solution that functions with the necessary seamless capability, according to the report.

“As we look into the future, it will be standard for firms to pursue both active/predictive monitoring of compliance infractions by electronically monitoring who you communicate with via email, IM, phone and even physical meetings within the confines of their offices,” says Tabb. “While this may seem intrusive, it will unfortunately become commonplace as fines become too large, challenges to firms’ reputations too great and liability to management and boards of directors simply too burdensome to ignore.”

Tabb’s claim may frighten some, encourage others and still enrage a few with its matter-of-fact truth. Compare Tabb’s statement with that of Henry Paulson, Chairman and CEO of The Goldman Sachs Group, Inc., in his 2002 speech calling for action to restore investor confidence when he claimed, "I come here as an individual who believes passionately in the strength of our free market system -- a system that generates growth, creates jobs, rewards initiative and fosters innovation like no other in history. In my lifetime, American business has never been under such scrutiny. To be blunt, much of it is deserved. But let's be clear,” continued Paulson. “The overwhelming majority of American executives are men and women of integrity who are committed to the long-term success of their companies, and to creating value for their shareholders. And so, I see this as an opportunity to reassess our practices, renew our principles and rebuild the trust that is so fundamental to our markets and their vitality."

There must be some middle ground to be found between Paulson’s call to action and the SEC’s decision to implement additional regulatory action. Tabb’s expectation of what will come with the increased use of technology may very well be that middle ground for which the industry is looking. Time will tell, but in the meantime the industry is left with the knowledge that there is a potential solution to the compliance matter on the horizon, and one day the gaps may indeed be filled. At least in our Wall.