Banks Restrict Messaging Amid Regulatory Pressure
In a corporate environment increasingly dominated by instant messaging apps like Slack, global banks, and regulators are taking novel steps to monitor and regulate employee communications.
HSBC has implemented a ban on staff texting from their work phones, as reported by Bloomberg. This action follows the hefty fines imposed by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) on 11 brokerage and investment firms in August. They were fined $549 million for their usage of messaging apps like WhatsApp.
The Issue: Banks must adhere to strict compliance rules regarding the usage and storage of employee texts and other business communications. However, messaging apps such as WhatsApp can pose a challenge because they are often linked to personal devices, making it difficult for compliance departments to monitor for recordkeeping.
Financial institutions are taking a proactive approach to limit their employees’ communication about official business to mitigate potential future errors and fines. “Banks use a wide range of approved channels to communicate in compliance with regulatory obligations,” a company spokesperson told CNN. “HSBC, like many other banks, reviews and adjusts functionality on its corporate devices as needed.”
HSBC’s text ban comes after the bank paid the CFTC $75 million in penalties for what the regulator termed “manipulative and deceptive trading and record-keeping failures.” The bank also paid $15 million to the SEC for its misuse of WhatsApp.
Private equity firms such as the Carlyle Group and Blackstone are also under investigation for using WhatsApp and Signal to discuss business matters. Lenders like Bank of America, Wells Fargo, and Citigroup have collectively paid over $2.5 billion since last year for similar recordkeeping violations.
A Broader Crackdown: These settlements are part of an ongoing, comprehensive crackdown by regulators investigating the industry’s failure to maintain and preserve electronic communications on personal devices. The SEC’s investigation revealed “pervasive and longstanding ‘off-channel’ communications at a number of banks.”
According to the SEC, the firms admitted that their employees had been communicating about business via WhatsApp, iMessage, Signal, and other messaging platforms on their personal devices since at least 2019. The SEC noted that these firms had violated federal securities laws by failing to maintain or preserve the “substantial majority” of these communications.
“We know that other SEC-regulated entities have committed similar violations, and so our work to enforce industry-wide compliance continues,” said Sanjay Wadhwa, the SEC’s deputy director of enforcement.
