Compliance and communications – achieving balance

When the Covid-19 pandemic changed the way businesses operate, the use of collaboration and communication tools exploded. Messaging applications were particularly affected as in-person meetings stopped and remote working became the norm. Bloomberg saw a 50% increase in messages as financial institutions shut; Microsoft Teams grew from 33 million users in March 2019 to 75 million in April 2020 as businesses sort ways for employees to work collaboratively; WhatsApp hit 100 billion messages a day in Q220 as everyone found new ways to communicate. Communication channels changed but compliance requirements didn’t.

Pandemic and regulatory changes

With the pandemic and ensuing global lockdown, organizations required most of their employees to work remotely. PwC compiled a survey in June 2020 with 50 executives from the US Financial Services sector. The survey indicated that 95% or more of their office workers now worked from home due to the pandemic.

However not all market participants had corporately sanctioned tools or Bloomberg access set up to use from home. As a result, personal messaging applications have become the preferred tool for communication. 

In banking circles, many employers will not allow the use of these personal messengers. Strictly enforced by banks, these bans have resulted in HR impacts and in some cases regulatory fines. In October 2020 two senior Morgan Stanley executives left due to compliance breaches from the use of unauthorized communications tools.

Balance, compliance and change

The challenge for financial institutions is to find the balance between servicing their clients during extraordinary times and ensuring that they maintain surveillance of conversations for compliance and regulatory purposes.

The rapid deployment of these solutions – often as organic responses to the unexpected move to remote working – exposes them to regulatory risk. The conversations on these applications are invisible to supervisory scrutiny. This is an issue that cannot be ignored.

Essentially the requirements for regulatory compliance haven’t changed in the face of the pandemic, even if the way in which banks work has. Supervising organizations like the SEC, CFTC, ESMA and others still require the recording and storing of all vital business communications by financial institutions – including those on messaging applications.

As Julia Hoggett, Director of Market Oversight, FCA said in her “Market abuse in a time of coronavirus” speech, “We have all had to find… many new ways of working in the last few months… We will also have to navigate huge amounts of change over the coming months, depending on the path of the virus, as we work through Return of Office models that will no doubt include both hybrid ways of working and indeed, over time, potentially long-term changes to the way we all work.”

Importantly she noted, “…this also requires firms to adjust the way in which they think of the range of surveillance tools available to them.”

“It is essential in changing times that firms identify the risks associated with the new environment in which we are all operating. ” – Julia Hoggestt, Director of Marketing Oversight, FCA

Balancing the way forward

The fundamentals of market abuse offences remain constant. However, the ways that risk can arise are ever-evolving. Companies have to balance the realities of doing business with the real need to contain risk – even in a time of great disruption. They need to constantly evolve the way they perform their surveillance, governance and compliance tasks.

As financial institutions consider this balance, they need to decide how to  monitor conversations on consumer messaging. The new normal requires flexibility, while the environment of the conversations requires scrutiny.

Financial institutions must consider:

• What regtech is required for their business and how flexible is it to deal with remote working? How well does it deploy across a disperse workforce working not from specific office sites but from people’s homes?
• What communication channels will they allow; what regulatory obligations are those channels subjected to; and what technologies do they have to deploy to ensure compliance?
• How quickly can they deploy these solutions to a dispersed workforce? How easily can this be done with legacy systems?

Solutions for the new compliance normal

LeapXpert enables financial institutions to embrace consumer messaging applications while also delivering on their regulatory obligations. Financial institutions can record and monitor these critical electronic communications, ensuring compliance. With our Federated Messaging Orchestration Platform (FMOP) employees can also use their company tools (Microsoft Teams, Slack etc) to chat with their client’s preferred messenger (WhatsApp, Wechat, LINE etc).

LeapXpert captures and archives all messages, attachments, voice notes in the employers business-critical systems. This resolves four major challenges around messaging apps:

• Visibility of business/client communications as not hidden on personal apps
• Data Ownership and control as chats  stored within employer’s infrastructure
• Compliance Controls as communication  monitored and produced for supervisors, regulatory, legal, audit and compliance purposes
• Accountability – clients no longer force employees to communicate on personal messengers

 

LeapXpert allows Financial Institutions to ensure their employees can communicate within regulatory boundaries. Not only during  these pandemic times but going forward into the new normal and the normal beyond

Contact one of our experts to find out how your business can deploy a solution to engage with your clients securely and ensuring compliance.

Want to know more about how LeapXpert can help your financial institution read https://www.leapxpert.com/business-messaging-is-a-problem-for-stockbrokers/