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Are you ready for more investigations of off-channel communications from US regulators?

Dr Nathalie Aubry-Stacey


After the FINRA annual conference, it is clear that the SEC will be issuing more sweeps. Gurbir Grewal, director of the Securities and Exchange Commission’s enforcement division explained that ‘it is a powerful tool, and we’ll continue to use it wherever we see risk in a broad industry segment.” He was also referring no doubt to the more recent off-channel communications fines, as well as previous sweeps. Indeed, the SEC has been investigating the use of social messaging platforms within large financial entities since 2021. Last fall, more than a dozen major banking institutions were each fined $1.8 billion after a 2-year investigation revealed staff would regularly communicate with fellow employees, clients, and outside advisors about investment deals via text and other third-party messaging apps, including WhatsApp.


As technology continues to evolve and new modes of electronic communication are born, companies are faced with increased compliance challenges and heightened regulatory risks. With more employees working remotely due to the COVID-19 pandemic, there has been a significant rise in the use of texts, chats and online meetings to conduct business. US regulators have focused their efforts on any business-related texts and chat communications on personal devices.


Banks and financial institutions are becoming more reliant on electronic communication channels like Slack, Zoom and WhatsApp, beyond email to conduct every-day business, and compliance teams in financial services and other highly regulated industries to access their employee communications, and provide them with the data they needed to stay ahead of market abuse, internal bad actors, and regulatory risks. To compound matters, many companies have now adopted remote or hybrid work models, enabling employees to mix working from the office and home, making it more difficult for financial institutions to track employees’ communications.


Regulators continuously change or add new compliance standards faster than companies can adapt, which can lead to large fines and reputational damage for banks worldwide. Another challenge is the difficulty in capturing digital data transmitted through apps such as WhatsApp. The complexity of communication channels, and the usage of both voice and text, make it more difficult for organisations to follow the audit trail. But as Grewal explained further at the FINRA conference, sweeps are “attention grabbing; they sent a message.”


The two latest banks that were fined are now part of a list of more than a dozen banks charged within the past year for violating SEC “recordkeeping provisions,” which require employees of financial institutions to maintain and preserve electronic communications. The latest fines combined amounted to $22.5 million after finding employees routinely discussed financial business matters on the social messaging platform WhatsApp.


The US Commodity Futures Trading Commission also announced settlements with the banks for similar violations.


To meet this rising demand for cross-channel communication monitoring and reviewing, there is an immediate market need to deploy services to allow financial institutions to capture data across the different communication channels and validate the data via reconciliation. Regulators will continue in this strict enforcement period, and banks will not be halting usage of communication channels as work from home is now permanent.


With CC1’s newest capability “CC1 Messaging Service”, you are able to effortlessly capture all employees regulated professional communications made from their personal mobile devices, without the need for third-party applications. Employees are able to continue using their preferred native chat apps for personal and professional communications, while CC1 Messaging Service captures all professional communications made through SMS, iMessage, WhatsApp, WeChat, and Telegram.

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