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Financial Firms Reliant on Management by Policy for Comms Compliance, Survey Finds

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Management by policy – specifically bans on communications channels, particularly WhatsApp – remains the most the most common approach among financial institutions to ensuring secure, compliant communications, according to a survey from archiving specialist Global Relay.

Although the figure dropped by 15% from a year, 43% of survey respondents said bans were their preferred solution. That said, the survey also found that 79% of firms are using communication surveillance technology to identify and mitigate against misconduct and culture risk.

Global Relay, which offers compliance, archiving, supervision, eDiscovery, and analytics solutions for financial services firms, released its second Industry Insights Report – Compliant Communications 2024 on June 13. The report is based on a global survey, conducted over two months that examined how compliance, surveillance, and risk leaders in financial services are responding to intensified regulatory scrutiny surrounding recordkeeping and compliant communications, covering attitudes to WhatsApp, social media risks, monitoring and surveillance, and AI sentiment.

Channel Bans

Despite many firms banning WhatsApp at work to mitigate non-compliant off-channel communications, only 50% of respondents believed channel bans alone would withstand regulatory scrutiny.

“Asset managers, broker-dealers, and investment banks are all grappling with the WhatsApp conundrum,” said Alex Viall, Chief Strategy Officer for Global Relay. “We engineered Global Relay’s unified platform to help institutions adapt to the fast-evolving business communications recordkeeping environment. It is significant progress that compliance solutions are more road-worthy than during the initial panic when the US Securities and Exchange Commission and Commodity Futures Trading Commission started their rolling enforcements. Many firms know they ultimately will have to enable this type of communication to stay competitive. We have worked hard to understand firms’ communications compliance needs and craft technology that addresses them.”

Enforcement Actions

The report highlights the significant fines issued by U.S. regulators, totalling nearly $450 million, including $81 million in penalties against 16 firms in February.

“Financial institutions are reacting in response to the substantial regulatory penalties,” continued Viall.

“They have got the message and are implementing strategic compliant solutions that ensure the capture, storage, and monitoring of all essential business communication channels. This is no easy task. Compliance and risk officers are more aware that banning social media channels and forbidding the use of personal mobile devices are impractical measures that are difficult to enforce. Many are still in the planning phase but all are tackling this and prepared to show stakeholders and regulators how they best plan to manage off-channel communications.”

RegTech Insight was able to sit down with Viall and discuss the market’s response to the enforcement actions where he noted that” the markets were shocked by the severity of the actions when there was no evidence of harm (i.e. no market abuse violation).”

BYOD and Behavioural Issues

Contrary to industry perception, Bring You Own Device (BYOD) policy usage has increased from 36% in 2023 to 53% in 2024. In response to enforcement actions over personal device usage for business communications, 45% of respondents have clarified their BYOD policies, with 17% moving away from BYOD altogether.

Behavioural issues and “getting staff to comply” was cited as the biggest challenge to e-comms compliance in 2024 with 65.2% of respondents saying it’s the biggest concern when ensuring compliance with business communications policy. This is an increase of 3.7 percentage points over 2023 which indicates the issue of instilling a culture of more compliant behaviour not only persists but is possibly becoming more challenging.

Technology Challenges and AI Adoption

In 2024, the number of respondents that said they have difficulty capturing and storing communication data across all channels has risen by 3.9% to 27%, up from 23.1% in 2023. Conversely, 23.4% of respondents said that they had difficulty monitoring all communication channels in 2024, which has decreased significantly from 53.8% in 2023.

The report finds general uncertainty about AI in financial compliance, with 17% seeing it as a risk, 10% as a reward, and 32% as both. Despite this caution, 42% of global respondents plan to introduce AI to compliance workflows in the next 12 months, while 57% have no plan to. Notably, 65% of North American firms have no plans to introduce AI within the next year, demonstrating a reticence compared to their European and global counterparts.

Viall noted that over recent months he’s seen “massive improvements” in GenAI and LLM capabilities to the point where voice capture, transcription and translation are now at a level of quality where they can make a significant difference in the e-Comms compliance space.

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