[ by Larry Goldfarb ]

The same technology that is used by the Government to track down terrorists is now being used by JPMorgan Chase to uncover fraud or aid in some of its forensic and valuation activities. The technology involves crunching vast amounts of data to identify hard-to-detect patterns in markets or individual behavior that could reveal risks or openings to make money. Other banks are also turning to "big data", the name given to using large bodies of information, to identify potential rogue traders who might land them with massive losses, according to experts in the field.

"They're trying to mine not just trading data, but also emails [and] phone calls," said David Wallace, an executive at SAS, a US data analysis company. "They're trying to find the needle in the haystack."

Guy Chiarello, JPMorgan's chief information officer, said the bank was mining massive bodies of data in "a couple of dozen projects" that promised to have a significant affect on its business.  According to three people familiar with its activities, JPMorgan has used Palantir Technologies, a Silicon Valley company whose technology was honed while working for the US intelligence services, for part of its effort. It first used the technology to spot fraudsters trying to hack into client accounts or ATMs, but has recently started to turn it on its own 250,000-strong staff.

In another aspect of its big data work, the bank is drawing on large amounts of highly diverse information about local economies where it has troubled real estate loans, two of these people said. The information is being used to set prices for property sold before a loan goes into default, in an attempt to reduce the social disruption caused by the troubled loans. Other technology companies are also finding new purposes for number-crunching techniques used in intelligence to bring new data-intensive approaches to risk management, credit assessment and marketing activities. Quantifind, a tech start-up that has worked with the CIA to identify aliases used by terrorists, was called in by JPMorgan to explain how its technology could be applied to its credit card business, said Ari Tuchman, chief executive.

For more information, please read [CNBC, 12/14/12]