Have you seen how many banks are being fined for non-compliance lately? But that’s not the real story here – the real story is that these fines for non-compliance around communications are just the tip of the iceberg.
In the first eight years following the financial crisis of 2008-9, banks around the world were fined more than $321 Billion for various transgressions. Two-thirds of the banks fined are headquartered in North America. That number is mind-blowing: misconduct fines account for about 15% of total bank equity. And this monstrous tally represents fines imposed in a pre-digital communications era, a pre-remote work era, and a pre-smartphone era. This could suggest that the next few post-COVID years hold the potential to cripple some banks and do more than simply dent the financial industry.
Fines imposed on banks for non-compliance
We’ll begin with an overview of the recent fines to set the foundation for our hypothesis that more angst is to come regarding communication compliance challenges and obligations. JP Morgan Chase got the ball rolling by wrapping up 2021 with a record-breaking $200 million fine for not storing all of its e-communications and using non-approved (i.e. personal) devices. Even their executives were held accountable for the termination of a few senior personnel.
The SEC, CFTC, and FINRA were just getting started. Shortly after that fine became public, word spread that regulators had informally begun “asking around” and gently inquiring what other banks were doing with regards to their E-Comms compliance efforts. Translated, there is nothing “informal” or “gentle” about anything that the regulators do. Short of calling it an industry-wide audit, customer discovery efforts had begun in full earnest. It became a matter of “when” not “if” the next bank would be served a hefty fine.
Table stakes have begun. JP Morgan was likely secretly nodding in agreement with a poker face when Bank of America got a $200 million fine for similar transgressions in July 2022. That’s on top of the $225 million fine they were served at about the same time for “deceptive and unfair practices” related to a prepaid card program unveiled at the height of the pandemic panic.
Morgan Stanley reportedly said that it expects to be fined $200 million in the weeks ahead. Once again, a recurring theme. The fine is “related to a specific regulatory matter concerning the use of unapproved personal devices and the firm’s record-keeping requirements,” according to the source who informed the media of the pending fine. Last week’s earnings call by CitiGroup suggested that they face a similar fate. CFO Mark Manson stated that they had placed a reserve for a pending fine which was “aligned with what peers had disclosed.”
Up until now, that seems to add up to around $1 Billion in e-Comms compliance fines from the world’s biggest banks. To text or not to text, indeed, becomes a question worth pondering. Fortune goes so far as to call Wall Street’s penchant for texting a “bad habit.” As a sidebar, the way we communicate has changed, and banks will need to adapt quickly.
These financial regulatory fines are more than a one-time slap on the hand
The world has shifted. We know this. However, our acceptance of how tectonic these shifts are remains highly variable. Where we work and how we work have been forever altered. There is no way that we can put “our new ways of doing things” back into Pandora’s box. It’s open now. Some leaders seem slow to accept that work is wherever it happens – not the office anymore.
Getting to that place of acceptance requires more than a mind shift – it requires execution at a level of mastery typically reserved only for periods of crisis. Leaders will need to understand that NOW IS THE TIME. Each bank leader at the helm of their financial institution is holding the wheel of the ship that’s sailing straight for the iceberg. Again, recall that it’s only the tip that we or they can see.
Even the “rules” appear to be written in gray space where the executives themselves – those tasked with enforcing the rules – don’t feel beholden to abide by them. In practical terms, it’s back to flawless execution that begins with an end-to-end compliance monitoring solution that includes every employee, leverages AI in a responsible and ethical way to detect nuance and obfuscation, has clear policies updated regularly and enforced without exception, and an ability to harvest E-Comms data from any source. Any time.