Unique-Shenzhen bourse faucets intelligence tech agency as China battles capital market fraud



SHANGHAI (Reuters) – The Shenzhen Inventory Change has sought assist from an intelligence expertise agency to detect fraud and vet listings, mentioned folks with data of the matter, as China adopts high-tech weaponry in opposition to crime and corruption in its bid to draw buyers.

The bourse has been testing EC Guard’s expertise in current weeks and employees have had coaching, mentioned the folks, declining to be recognized as they weren’t authorised to talk with media.

The Shenzhen Inventory Change didn’t reply to Reuters’ request for remark. EC Guard declined to be interviewed.

The initiative is in keeping with considering at Shanghai’s bourse whose president in a parliamentary session this week proposed combating fraud with huge knowledge and synthetic intelligence.

Strain to improve regulatory expertise, or RegTech, in China’s $57 trillion monetary trade has elevated as the federal government reforms capital markets and weeds out corruption.

Final month, the anti-graft company mentioned it might cease the “revolving door” of former regulators becoming a member of banks and leveraging regulatory connections, whereas the securities regulator – which mentioned it uncovered practically 100 accounting scams final 12 months – vowed “zero-tolerance” towards corruption.

The regulator itself was dragged right into a high-profile corruption case in 2021 when a former official was discovered to have made unlawful features from investing in itemizing candidates.

China can be reforming preliminary public providing (IPO) guidelines to hurry up inventory listings. On the similar time, bourses are tightening vetting processes, mentioned a Shanghai-based banker.

Underwriters have to extend scrutiny to firm paperwork in addition to look at government money flows and associated transactions to make sure itemizing candidates can move inflexible well being checks from more and more savvy authorities, the banker mentioned.


EC Guard was established in 2002 and modelled after U.S. huge knowledge analytics agency Palantir Applied sciences Inc, confirmed August bourse filings by enterprise companion Xiamen Jihong Know-how Co Ltd. Its 5 foremost purchasers are safety and regulation enforcement departments, the submitting confirmed.

The US in 2019 positioned EC Guard on its so-called entity checklist of firms which might be topic to U.S. commerce restrictions for causes equivalent to nationwide safety.

The Shenzhen trade has not signed any settlement with EC Guard however, like different regulators and regulator associates, is in search of higher instruments to cleanse the securities market, one of many folks mentioned.

The bourse has already invested closely in RegTech. In 2021, Deloitte helped it construct a company profile mannequin to detect accounting fraud.

EC Guard collects data from public sources, however has expertise that may scour the deep internet – web sites invisible to traditional engines like google – and darkish internet – encrypted our on-line world ripe for illicit exercise – one of many folks mentioned.

Utilizing that expertise, EC Guard can establish relationships between customers serving to regulators establish potential criminality and likewise hint an organization’s final shareholders to make sure they’re respectable house owners, the particular person mentioned.

The Shanghai Inventory Change, the nation’s largest bourse, stepped up its combat in opposition to fraud in December with a brand new technology of programs that supervise securities buying and selling.

Cai Jianchun, the bourse’s president, this week mentioned authorities businesses ought to share knowledge, and that combating accounting fraud requires cutting-edge expertise.

The trade has disclosed 2021 expertise funding of about 1.6 billion yuan ($229.5 million), practically double that of a 12 months earlier.

($1 = 6.9723 Chinese language yuan renminbi)

(Reporting by Shanghai newsroom; Enhancing by Sumeet Chatterjee and Christopher Cushing)

You may have missed