Regulatory Compliance Guide for Electronic Communication in Germany

Germany is a country where many industries are highly regulated and have established agencies and regulations to oversee the country’s finances, insurance, health, and many other institutions. 

In the financial sector, BaFin is Germany’s major regulator, regulating thousands of entities. Here are important regulations related to electronic communication compliance. 

Agencies and Regulations Related To Electronic Communication in Germany

Federal Financial Supervisory Authority (BaFin)

BaFin, is short for Bundesanstalt für Finanzdienstleistungsaufsicht, The Federal Financial Supervisory Authority. It was established in 2002 as the main financial regulatory authority responsible for overseeing financial institutions and markets in Germany. 

 

Financial institutions include banks, insurance companies, financial service providers, and securities markets. Its main purposes are ensuring the stability and integrity of the German financial system, protecting consumers, and promoting market transparency. BaFin performs enforcement activities of its regulations, including issuing fines and revoking licenses of financial institutions that fail to comply with its rules.

Regulatory Requirements Related to electronic communications

According to BaFin, “In implementing mobile apps and omnichannel platforms, banks must quickly adapt their operational structures and governance mechanisms to the new developments.”

 

EBA IT-related regulations
The EBA, a regulatory body that includes BaFin as a member, has released instructions on the SREP, which evaluates important metrics, business strategies, management practices, and financial risks. The EBA has also provided supplementary instructions on assessing the risks related to Information and Communication Technology (ICT). According to the guidelines, the assessment process involves various factors. Specifically, regulatory bodies must review the following:

• Whether the institution has an ICT strategy that is effectively governed and aligned with the institution’s business strategy
• Whether the institution’s internal governance arrangements are appropriate for its ICT systems
• Whether the institution’s risk management and internal control framework adequately protects its ICT systems.

 

Regulations related to institutions with a German Banking license

BaFin is responsible for preventing negative outcomes in the lending and financial services industry that could jeopardize the security of sensitive data stored in IT systems, impede the effective operation of banking activities or financial services, or significantly negatively impact the overall economy. BaFin will assess if :

• The IT systems are insufficiently available, meaning they do not function as intended and fail to process data accurately,
• Complete assurance of data integrity cannot be ensured, meaning that the accuracy of data and the proper operation of the IT system cannot be fully guaranteed.
• Confidentiality protection cannot be guaranteed, meaning unauthorized data manipulation without detection is possible.
• A BaFin article on digital evolution during the global covid pandemic explains that the increasing importance of digital services is unsurprising as customers opt for online banking, mobile banking, telephone banking, and chat services. This trend is particularly noticeable at established institutions.
• BaFin’s’ study on Big Data Meets Artificial Intelligence explains that “institutions are increasingly communicating via WhatsApp or FaceTime. In the same way, this is also changing how banking transactions are conducted, increasingly, online”.

BaFin’s studies and articles highlight the importance of having the necessary monitoring and archiving facilities to accommodate emerging communication channels in banking and insurance institutions and achieve BaFin compliance. 

ESMA MiFID II

ESMA, or the European Securities and Markets Authority, is a regulatory agency of the European Union that has the task of safeguarding the fairness, openness, and effectiveness of financial markets across the EU. 

MiFID II, which stands for Markets in Financial Instruments Directive II, is a directive that outlines regulatory obligations for active investment firms within the EU. ESMA oversees the compliance and enforcement of MiFID II regulations throughout the EU.

According to ESMA Questions and Answers MiFID II and MiFIR investor protection Recordings 

• Telephone conversations and electronic communications that should be recorded by Article 16(7) MiFID II:
  • Conversations or communications with a client or a person acting on behalf of such a client relate to an agreement by the firm to carry out one of the covered activities, whether as principal or agent. 
  • Conversations or communications with any other person related to transactions concluded when dealing on their own account and providing client order services related to the reception, transmission, and execution of client orders. This should include telephone conversations or electronic communications such as: transmitting an order to a broker or placing an order with an entity for execution, conversations or communications relating to the handling of an order (including solicitations and acceptance of transactions)
• Article 16(7) of MiFID II requires recording telephone conversations or electronic communications. “Any electronic communications involving transactions when dealing on own account or providing client order services related to the reception, transmission, and execution of client orders will fall within the rules.

The phrase “electronic communication” encompasses various communication types and technologies, such as video conferencing, fax, email, Bloomberg mail, SMS, chat, instant messaging, mobile device applications, and devices used for business-to-business communication.

• Companies are expected to establish and enforce guidelines and protocols that prevent the use of communication systems that do not record relevant telephone conversations or electronic communications.
• Firms must keep records produced under Article 16(7) of MiFID II for five years, with an extension of seven years.

Federal Office for Justice and Consumer Protection (BMJV)

The BMJV, or the Federal Office for Justice and Consumer Protection, is a government agency in Germany that is tasked with safeguarding the rule of law and advancing consumer protection. It was created in 2013 by merging two previously existing agencies, the Federal Office of Justice and the Federal Consumer Protection Office.

How LeapXpert archiving solutions help communication compliance in Germany?

LeapXpert provides a modern and reliable mobile messaging solution that meets German organizations’ electronic communication regulatory compliance requirements. Its federated architecture integrates with various instant messaging apps, such as WhatsApp, WeChat, Telegram, iMessage, and Signal, enabling compliance-compliant messaging across different sectors. This solution empowers organizations to communicate securely and in compliance with regulations via the instant messaging app of their choice while still benefiting from the convenience and accessibility of those platforms.