Recent ripples of regulatory turbulence have kept financial institutions in the spotlight, raising critical questions about regulatory compliance, reputation, and the role of technology in the modern financial landscape. But what lies at the heart of this issue?
The unauthorised use of personal messaging services to communicate with clients.
It is a challenge that has resulted in hefty fines from the US Securities and Exchange Commission and the Commodities Futures Trading Commission targeting Wall Street firms, and prompted impact to executive compensation, and even, for the first time, dismissal of finance professionals.
In our rapidly changing communications landscape, when compliance can feel like a regulatory straitjacket preventing finance professionals from working efficiently, convenience won – at least temporarily.
It is my strong view that the vast majority of people involved in these situations did not mean to break the rules, but just did not have the appropriate technology for the circumstances.
This challenge reinforces the urgent need for a progressive approach to the technology that powers and facilitates compliance.
The compliance challenge does not just end with banks. With the SEC’s and CFTC's focus on major brokerages, the broadening regulatory lens is encompassing further areas of financial services.
Compliant messaging will rightly continue to be held under the spotlight to mitigate against information breaches.This highlights the growing scrutiny around the issue, and that it is time for firms to take proactive action, which we have started to see outside of core banking firms.
Using unauthorised platforms like a personal WhatsApp for sensitive financial communications reaches far beyond financial penalties, casting a shadow over investor confidence, and the ability of these institutions to operate as global financial hubs.
As the US takes a stringent stance on compliance issues, UK financial firms are bracing themselves for increased scrutiny from regulatory bodies.
It is clear that a forward-looking, preventative approach to regulatory challenges is not just a matter of best practice, but essential to maintain the UK's status as a global financial hub.
Failing to adopt such an approach risks reputational damage and, more importantly, negatively impacts investor confidence, potentially pushing business elsewhere.
In the face of these challenges, technology emerges as a powerful solution. Financial institutions are increasingly turning to AI-powered tools to monitor employee compliance with regulations, for example.
These tools not only serve as a safeguard against unauthorised messaging but also offer employees a way to protect themselves from the potential fall-out of non-compliance, such as job loss, compensation reductions, or personal reputational damage.
We are increasingly seeing firms offer a variety of tech solutions to employees to ensure that their communication across multiple channels – from text chats to audio and video – remains compliant.
This technology offers a win-win solution, allowing staff to communicate effectively while upholding regulatory standards.
The recent fines in the US clearly demonstrate that compliance is no longer a legal and back-office issue. Protection against information breaches and disasters is business-critical for financial services firms, and technology is a key part of the solution.
As regulators tighten the reins across the pond, UK firms have the opportunity to strengthen their systems, empowering staff to communicate confidently in ways that are both convenient and compliant.
Striking the right balance is the key to approaching this issue.
Clearly, compliant messaging will rightly continue to be held under the spotlight to mitigate against information breaches. It is a complex issue that spans the globe, impacting the reputation of institutions, investor confidence, and the very core of the financial system.
Technology, in the form of AI-powered tools and compliance-focused communication solutions, can be a path forward. But it must work together with strong regulation that ensures transparency, accountability, and the adaptability to meet evolving communication needs.
Institutions that accept this issue as soon as possible and work in harmony with the regulations, adapting the right technology for it, will be spared from the consequences and thrive.
Together, these elements can safeguard the integrity of the whole industry, facilitating liquidity and economic growth.
Brad Levy is chief executive of Symphony