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Home Compliance and Risk

What’s up with e-comms? Banks can’t slack in monitoring them

April 28, 2022
Reading Time: 3 mins read
What’s up with e-comms? Banks can’t slack in monitoring them

By Shiran Weitzman

Whether Zoom or Teams, WhatsApp or Slack, the pandemic-driven hybrid work environment has resulted in a significant increase in electronic communication platforms that are regularly relied upon everyday by employees at banks, despite the many compliance concerns that accompany these types of platforms.

Regulators are starting to pay closer attention toward e-comms usage, as the SEC has already opened an inquiry into how staffers at Wall Street banks are communicating, while institutions are proceeding with the utmost caution.

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For the past two years, COVID drove everybody’s attention toward business continuity, which is part of the reason why all these e-comms platforms became even more popular. Now, however, regulators understand the ever-increasing role e-comms is playing across bank communication, especially as hybrid work environments become more permanent. As regulations roll out, banks must ensure they are doing their part to adequately document all employee communications, including text messages, emails and especially communications that occur over third-party messaging platforms.

Modern communication tools across banking

While some may be relying on encrypted messaging services to circumvent compliance protocols and participate in nefarious behavior, bankers are forced into the unenviable choice between engaging with a client on the client’s preferred platform or not engaging at all. As a result, they use their personal phones to chat on various messaging apps. But most often, it’s simply to conduct business. For example, two top commodities bankers from Morgan Stanley recently left after it was found that they used WhatsApp without authorization. The two execs were let go not because they were discussing market manipulations or the like, but because they were simply using communication channels that were against company policy.

Benefiting from e-comms while remaining compliant

The problem with many messaging platforms, particularly WhatsApp and WeChat, is that they are encrypted, which makes it difficult to monitor, especially considering the multiple channels that are in use. There are, however, an increasing number of cutting-edge companies looking to replace outdated legacy vendors by developing advanced technologies that rely on artificial intelligence, machine learning and natural language processors, among other tech solutions, to efficiently record and archive employee communication across various platforms, regardless of encryption.

The need for a better way to store and archive employee communications has been heightened after the SEC’s head of enforcement mentioned in a speech that “recordkeeping violations may not grab the headlines, but the underlying obligations are essential to market integrity and enforcement.”

More than check-the-box training, the SEC made it clear that it expects proactive compliance measures to be taken by all institutions to avoid “new avenues of mistrust.”

The challenges

All of this needs to be done in real time, but it is particularly difficult to cross-monitor multiple e-comms platforms in parallel.

As this tech advances, and banks further develop their in-house, proprietary systems or become more reliant on third party services built specifically to address e-comms surveillance and compliance concerns, machine learning will be able to take all that data, identify any patterns in the activity and flag bad actors who employ a multi-channel strategy as a means of thwarting detection of their market abuse.

In addition to further developing the tech, another challenge banks are faced with in this new era of employee communication will be the integration of these technologies and processes. We are in a time of great transition when it comes to how we communicate across business, and given rapid development of both communication platforms and the advanced tech that can be used to monitor them, banks must balance current needs while also future-proofing e-comms solutions that are sure to face pending regulatory requirements.

Company size, budget and level of sophistication all influence integration. Some compliance teams are focused on improving their analytics so that they get fewer but higher-quality alerts. In contrast, other teams are integrating financial crime, HR, social media feeds and all sorts of other data types to create richer contextual maps that better inform alerts. It will be on compliance officers and their tech teams to decide the best route for their organization, whether that be in-house or third party.

The extensive usage of e-comms platforms in banks’ day-to-day activities remains crucial to business productivity. With regulators watching closely, this changing landscape can cause challenges for banks. Having an understanding of what platforms are being used across your bank and ensuring they are archived properly is the first step toward being prepared for these expected regulations.

Shiran Weitzman is CEO of Shield.

 

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