Which major banks have been fined this month for their unmonitored communications?

21st July 2022 by Brielle Hewitt

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July 2022 Regulatory update

As a heatwave sweeps the UK and sets record sweltering temperatures, it turns out that the kids enjoying paddle pools in their gardens aren’t the only ones in hot water this month.

This July – fines, fines, fines

Regulators have clamped down and are fining the five biggest US investment banks a total of $1 billion for failing to monitor their employees using unauthorised messaging apps. Morgan Stanley will pay a $200 million fine, the Bank of America will pay a $200 million fine, JP Morgan have already paid a $200 million fine, and Citigroup and Goldman Sachs are in discussions to pay a similar figure.

And the regulators aren’t done. The SEC and the CFTC have also sought information from other major banks including HSBC and Deutsche Bank to see if they warrant fines for the use of unmonitored messaging apps too.

It’s a lot of money for using WhatsApp, which is what led to the hefty fine for JP Morgan. The SEC found that JP Morgan employees, from at least 2018 to 2020, were using their own personal devices to send texts, WhatsApp messages and emails about company business. “Messages included content on a wide range of discussions, including investment strategies, client meetings and market observations, the SEC officials said.”

Not monitoring third-party apps at work? Two years too late

Two years of unmonitored messages is pretty astounding, so it’s no surprise the regulators are clamping down now. Considering how much we use apps like WhatsApp, Telegram, and Zoom in our lives, the fact that thousands of employees have talked to clients and discussed business using these apps, completely unsupervised, is not a good look. For anyone.

And the regulators know that. These $200 million fines are no joke, and are “a rare escalation from regulators looking into such an issue, with fines tending to be significantly lower in the past… dwarfing a $15 million penalty imposed on Morgan Stanley in 2006 over its failure to preserve emails.”

The operating landscape has changed – the firms know it, their clients know it, and the regulators know it too. We live in a remote and hybrid working world now, and we use a lot of different channels to communicate well. The regulators will not turn a blind eye, nor should they, to our personal devices and the messaging platforms that we now use, some of which didn’t even exist before 2020. They expect that ALL firms should have the right systems and controls in place to manage risk and conduct in this ‘new normal’.

And, to be honest, these systems and controls should’ve been put in place from the very get go when the pandemic first struck and forced everyone to work from home. Not a whole whopping two years later.

Ignore the regulators, and it’s not just the tier one institutions that they’ll come after. It’s everyone.

It was only last week that the FCA fined the TJM Partnership Limited £2 million “for failing to ensure it had effective systems and controls to identify and reduce the risk of financial crime and money laundering in its business.” This is a company that is currently in liquidation. Yes, you read that right. A tier three firm, currently on its way out, is still a target for the FCA. The regulators are taking no prisoners.

So, if you don’t think you have the right systems and controls in place to properly manage risk and conduct in 2022’s operating environment, then you might need to sleep with one eye open. It doesn’t matter if you’re not a major player – the regulators are looking at everyone right now, and the size of your firm will not save you.

Wait – but you can manage risk AND grow business (it’s possible!)

We’ve got some good news for you – it is absolutely possible to please the regulators, manage risk AND grow business activity in this new day and age.

Listen, we live in 2022. If your clients want to talk to you on WhatsApp, then why should you stop them? Using third-party apps at work doesn’t mean you have to look over your shoulder because the regulators are waiting to slap a fine on you.

You just need to make sure that you have the right policies and technology in place to manage risk and monitor your communications, all of your communications, so you can confidently say that no misconduct is going on and make sure everyone is happy.

So why not spend money on that technology? Why be a blocker to business and insist on calling your clients on a recorded line when they want to use WhatsApp to talk to you instead? Investing in the right technology to monitor your communications and ensure compliance with the regulators will cost you so much less compared to the fines you could be facing for not having your house in order. And, it’ll also save you a lot of stress and panic if you want to talk about the emotional wellbeing of it all (well, for your compliance department at least).

You don’t need to turn away from using those third-party apps in your firm – embrace them because it’ll make your clients happier and it’ll make growing your business so much easier.

How is this achieved you ask? – By implementing the right supervision policy framework, that is backed up by appropriate supervision technology that will ensure your firm is compliantly supervising ALL the communications that happen across your business

You can do everything by the book, and you can still watch your business grow.

And who offers this technology to monitor your communications? Well, we might do

We stand by our technology solution because it contains everything you need for the entire communications supervision process (it’ll make your compliance team very happy). Our supervision software ingests all of your communications channels into one unified platform (including Zoom, WhatsApp, emails, phone calls, and anything else under the sun); it then automatically identifies suspicious activity through some clever NLP (natural language processing) and risk ranks suspicious communications so that you can prioritise the riskiest items efficiently. Plus, it provides all the bells and whistles you’ll need to do the investigation, case management and reporting work needed to satisfy compliance policies and procedures, and most importantly, the regulators.

Our platform is policy-driven and made by compliance professionals, for compliance professionals. Using it will save you and your team a lot of time and hassle, and will also help your firm to avoid those pricey fines the regulators are dishing out.

So, if you want to stay out of the news, come and have a chat with us.

We’d love to help.


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