While the more recent financial scandals may have been somewhat US-centric such as the Madoff debacle and the charges against Galleon Group chief Raj Rajaratnam, financial markets worldwide are keen to learn what Wall Street is doing to prevent, discourage, and catch insider trading. No, Wall Street has not gone into police-mode. But it has to go through this exercise to claw back lost customer confidence.

In this campaign, the street has fallen back on good old process-based analog solutions back-stopped by technology implemented in varying degrees. You probably can gauge panic levels by looking at spending levels to deter, monitor, and catch employees who may be doing personal trades with a 'perceived' conflict-of-interest.

The tip of the spear is a communications monitoring effort. Rajaratnam was indicted for 14 counts of insider trading on the basis of wiretaps - a first in the prosecution of white collar crime. But it is not only telephone conversations that are falling to scrutiny according to Miranda Mizen, principal and head of European research at the Tabb Group. Even social media activity is being trolled by regulators in their search for not-so-kosher industry players, Mizen said. In a paper on dynamic surveillance, Mizen reports that even the UK's Financial Services Authority recently extended the recording of cell phone conversations to hedge funds and expanded taping rules for brokers to include all voice and electronic communications.

Mizen said that social networking activity have caught the eye of regulators because their use have been mostly opened up recently. Employees used to have been barred from using Twitter, or Facebook, and other similar networks by their employers for fear of violating compliance regulations, but the gates have recently been opened on this and even financial news giant Bloomberg has joined the game with Bloomberg messaging. Well, logs of social network posts are now being pored over by regulators in both sides of the Atlantic at least at the writing may be on the wall for the Pacific Rim markets.

But recording and logging phone and social network activities is just the first step in the fight to deter and catch any wrongdoing. For the rest, a load of tech and equivalent big bucks have to be thrown at the problem. After the data gathering, comes a load of analysis. Separating the innocent and innocuous from the possibly wrong and yet still innocuous conversations is not going to be easy.

This is where pattern detection technology comes into play. PDT is nothing new. At its core, it is quite simply, a computerised way to speed up an otherwise manual analytical process. Jim Heinzman, managing director responsible for global securities markets products at NICE Actimize, which provides market surveillance and monitoring solutions to the capital markets industry said "we use a combination of profiles, pattern detection and analysis to look for cases that must be investigated. Most of the stuff we've been doing for a while. But one of the differences is, the adoption rate is a lot higher now."

PDT is an automated way to look at trading activity and detect possible conflicts. In general, an employee's personal trading pattern is compared to that of his firm. Carol Becket, compliance surveillance technology manager at Wolters Kluwer Financial Services said doing this as a manual process has ceased to be feasible because of the sheer volume of data involved. When you pre-clear trading, you need to look for restricted lists (stocks that can't be traded due to the employee's access to inside information), as well as orders on the trading desk and short-term trading. You have to look for patterns, take things that may or may not have been flagged as a conflict and look at front-running reports. You need to pull data from one venue and then from another and put it together, compare it and make a report, Becket said.

The challenged has been posed to software suppliers, and companies like IBM, Oracle, and SunGard have all announced efforts to provide abuse detection capabilities in the trading software they have been supplying and make these capabilities available enterprise-wide. Implementation runs the full range from providing a simple compliance trading solution to offering solutions that integrate governance, risk and compliance -- from a data monitoring perspective to compliance reporting and reporting at the board level.

Amy Lynch, president of the advisory firm Frontline Compliance said that no matter what the system is, though, it's only as good as the information it captures. "If it's not capturing everything, it can't do a complete job in monitoring and surveilling violations. The more complex, higher-end solutions can do that."

Unfortunately, such solutions lose their economic luster with organizations smaller than 30 people. For that they fall back on traditional best practices. Ian Yankwitt, president of New York asset management firm Tortoise Investment Management said that at this level, it is more a process game. "In a firm like ours, where we're investing our clients' money, there is very little else that goes on -- all our employees have to clear all their personal trading. But that's not a technology function. The way our business is structured, and given what people are investing in, if someone has insider information and is trying to trade on it, it's going to stick out like a sore thumb," Yankwitt said.

But even with the intensive automated scrutiny being made a part of everyday process, although statistical probability of catching a potential malfeasance is increased, Tabb Group's Mizen said that it will continue to be a game of cat-and-mouse. if a tipster is meeting someone in a bar or restaurant, there is no technology that can immediately track that, unless one of the people is wiretapped, Mizen said. The legal impediments to doing can vary with each country. But in the case of US, an official legal investigation will have to be made before US courts grant permission for wiretaps.

Corporate politics also present an obstacle to investigating trading abuse, says Frontline's Lynch. "The higher up the individual suspected of insider trading is, the harder it is to monitor," she says. "The board is afraid to ask questions of its top management. That becomes a political issue within the firm. If something is flagged but it regards the CEO, they don't follow through. It's political; people are worried about their jobs."

For corporate boards, there is no choice however. A compliance investigation alone can rock customer confidence having that followed by a series of indictments can be the kiss of death as the fate of hedge fund Galleon Group has shown.