As off-channel communication options proliferate in the UK financial sector in the wake of the pandemic, the FCA gave the clearest indication yet this week that it could take the kind of action that has seen over $2.5 billion in fines levied in the US. But the fact that this indication only came as a result of a senior FCA official being pressed on the issue at a media event following the FCA’s AGM has not gone unnoticed.
In our analysis piece The finance sector’s $2.5 billion communications compliance crisis, we detailed the fines imposed on 33 different institutions in the US since December 2021, when JPMorgan was hit with $200m in fines by the SEC and Commodity Futures Trading Commission (CFTC).
The first action in the UK on off-channel comms came in August 2023, with a £5.41m ($6.89m) fine against Morgan Stanley. But that was levied by energy regulator Ofgem, a move that raised eyebrows among industry observers, who had been looking to the FCA for regulatory intervention in this area.
WhatsApp and messaging
Asked at the FCA AGM press conference about whether the FCA was planning to follow the SEC’s clampdown on WhatsApp and take a harder line on monitoring messaging, Sarah Pritchard, the regulator’s executive director for markets and international, said: “Where we know that action is taken by other regulatory authorities overseas we remain in contact with them because it’s important that where our firms operate cross-border we have those good supervisory relationships with our fellow international regulators.”
She added that working with the SEC “is something that we absolutely do, and that is something we have been doing with the US authorities in relation to the concerns that you’ve highlighted”.
Pritchard also referenced a recent letter sent by the FCA to investment banks and other sell-side firms, highlighting conduct and culture.
UK finance sector
Sources within the UK finance sector are not confident that UK operations would be able to demonstrate compliance if the FCA did turn up the heat, a further indication of how widespread the use of off-channel comms may be.
But’s there’s also concern about the pace of the FCA’s response. One industry insider told us: “UK regulators have been slow out of the blocks on this and the constant tide of actions from the US has reached such a point that now it makes it look like the UK and others think recordkeeping completeness is not important. That is not a good image.”
