Banks need WhatsApp alternative fast to dodge hefty fines, warns former FCA official
Banks and brokerages need to roll out new messaging platforms fast to “crack down” on the use of Whatsapp by staff, a former City regulator warned today, after US regulators slapped a group of Wall Street giants with $1.8bn worth of fines.
Financial firms in the UK are bracing for regulators to clampdown on the use of encrypted messaging channels after a group of 16 firms including Barclays, Citigroup, Goldman Sachs, Morgan Stanley were fined when staff were found to have discussed deals and trades on private apps.
In a statement to Morning Wire last month, a spokesperson at the Financial Conduct Authority said it had “reminded firms” that electronic communication used for activities that fall within its scope must be “recorded and auditable”.
But a former official at the FCA told this newspaper today that firms had a dwindling arsenal of tools to clampdown on the use of encrypted messaging apps.
“It has become clear that simply telling staff not to use non-approved systems doesn’t work,” Matthew Nunan, former head of wholesale enforcement at the FCA and a partner at law firm Gibson Dunn.
“There are some ways to bring the communications into firms’ records – for example copying the firm into business messages sent via WhatsApp so that the firm gets a record of the message – but such solutions are clunky and easy to get wrong.”
Nunan said the best solution for traders would be to provide a “technological solution” and offer a messaging service as “easy to use and widespread as current platforms like WhatsApp and WeChat.”
There are signs that banks are already beginning to look toward digital messaging platforms as the remedy to the issue.
A spokesperson for DeutscheBank – one of the banks fined by Wall Street this week – told Morning Wire in a statement today it has “proactively deployed fully compliant and convenient text and chat platforms” and will “continue to scale” them.
Barclays, Jefferies, Citi, UBS and Bank of America did not respond to comment requests when contacted today.
Lawyers at City law firm CMS said surveillance technology could provide an alternative for firms to police suspicious behaviour and stamp out private messaging chat.
“Just as technology creates the problem, by providing bankers with communication channels that aren’t recorded, it also addresses it,” said Charles Kerrigan, fintech partner at law firm CMS said.
“Here in the UK, as elsewhere, there is now security tech that monitors behavioural changes in employees because this has been shown to be an indicator of suspicious behaviour.”