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Wells Fargo and BNP Paribas are among the recent banks to incur multi-million dollar fines from US regulators due to employee engagement with unofficial communication platforms such as WhatsApp and iMessage.
The Securities and Exchange Commission (SEC) has charged 11 financial institutions, including Bank of Montreal and units of Mizuho Financial Group, for “widespread and longstanding” lapses in preserving electronic communications. The cumulative penalties amount to $289 million, with Wells Fargo units receiving the largest penalty of $125 million.
Concurrently, the Commodity Futures Trading Commission has imposed penalties totaling $266 million on some of the same entities, including Wells Fargo and Bank of Montreal units, for similar violations.
These recent settlements follow the SEC’s action in September, when it fined entities such as Bank of America, Citi, and Goldman Sachs a collective $1.1 billion.
The investigations focused on traders and brokers’ use of personal messaging services for discussions related to investment terms, client interactions, and other business matters. The utilization of personal messaging apps like WhatsApp for conducting or discussing bank business runs afoul of regulatory stipulations. However, the transition to remote work during the pandemic resulted in an uptick in the usage of these services.
The financial institutions have acknowledged that since at least 2019, their employees frequently communicated business matters via iMessage, WhatsApp, and Signal. A large portion of these off-channel communications was not archived or maintained, constituting a violation of federal securities laws.
The SEC has now administered fines surpassing $1.5 billion, and Gurbir Grewal, Director of the SEC’s Division of Enforcement, cautioned that additional companies remain under scrutiny.
Grewal asserts that “while some broker-dealers and investment advisers have…self-reported violations, or improved internal policies and procedures, today’s actions remind us that many still have not”.
“So here are three takeaways for those firms who haven’t yet done so: self-report, cooperate and remediate. If you adopt that playbook, you’ll have a better outcome than if you wait for us to come calling.”
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