Messaging has become far more prevalent than it was when iconic hip-hop track The Message hit the charts in the early 1980s with its opening lines “It’s like a jungle out there; It makes me wonder how I keep from going under”. But the sentiment will resonate with compliance professionals as the latest set of reported fines over messaging breaches draw further attention to what has been described as “Wall St’s $1bn messaging nightmare”.
It’s not just a nightmare on Wall Street though. It’s a global problem. Fines on US banks and financial institutions were reported as having hit $1.8bn at the end of last year, and UK regulatory lawyers have warned of a boom in cases coming off the back of the increase in home working.
Heavy fines
There is no reason to suppose traders anywhere in the world are not using the same methods to communicate that have led to the heavy fines Morgan Stanley is reported to have imposed on its own bankers or the sanctions imposed on JP Morgan or the 15 firms fined last September. If an easy and everyday channel of communication exists, people will use it to do business as well as to arrange when to pick up the kids or get the shopping. As Warren Roy, CEO of our parent company Global Relay, said in our feature on WhatsApp-enabling your business: “Human nature is behind this – people want to communicate with clients on their preferred channel. This is a fact of life.”
One detail that stuck out from the Financial Times report linked above, was that: “Many banks now require employees to take a picture of work-related messages on personal devices and forward them to the compliance departments so that they can be preserved.” Let’s be honest. That’s unlikely to happen, and if it did become widespread it would be a huge burden for compliance officers charged with sifting out relevant information.
“All of the firms that faced significant enforcement, and indeed the rest of the market, have had time to analyze how pervasive the use of personal devices and messaging is within their own organization.”
Alex Viall, Head of Regulatory Intelligence, Global Relay
But there is no way around the need for compliant messaging, so businesses need to get to grips with the issue. The Morgan Stanley story, says Alex Viall, head of Regulatory Intelligence at Global Relay, could be an indication that the bank “is being proactive here and adapting to market practice that everyone is currently struggling with. The penalty system sends a strong message to regulators that it takes its recordkeeping compliance seriously.”
The problem, as Roy identified, is that the corporate world has been slow to adapt to changes in communications technology, first with email in the 1990s, and now with personal messaging. Whether we like it or not, the personal and professional now overlap and, as Viall says: “All of the firms that faced significant enforcement, and indeed the rest of the market, have had time to analyze how pervasive the use of personal devices and messaging is within their own organization.” Claiming surprise at the challenge is not a sustainable strategy.
Sensible approach
The Morgan Stanley fines are, says, Viall, “a remedial measure and a sensible approach to reinforce compliance training”, but “this is a short-term approach and firms need a better technology solution that enables traders, brokers and asset managers to continue connecting with their counterparts efficiently and compliantly”. Other sources we have spoken to question whether Morgan Stanley, which declined to comment to the FT, really has imposed these fines or is just sending a signal.
There may come a time when it is possible to look back with bemusement at a time when the financial services industry got itself into such a tangle over simple communication. It seems there’s a way to go before we reach that stage, though, and for now, compliance professionals are left pondering another line from the Grandmaster Flash classic – “Don’t push me ’cos I’m close to the edge”.
