Bad actors in financial institutions are nothing new, banks have been accruing fines for poor conduct that run to the billions of dollars. Regulators are working hard to bring in new legislation to curb such behavior and it is getting personal.
In March 2017 former investment banker, Christopher Niehaus was fined £37,198 by the Financial Conduct Authority (FCA) for using WhatsApp to share confidential client information. That was before the weighty MiFID II directive came into force at the beginning of the year. Articles 9 & 16 of the directive expressly cover the recording of all client trading communications. So, we can expect more fines for these conduct of business obligations.
This meant when firms were preparing for MiFID II, a strong onus was placed on them (although already standard for the vast majority of financial institutions) to ensure all relevant voice communications are recorded and available for retrieval for up to seven years. Also, individual conversation threads are required to be reconstructed upon request from the regulator, which makes time-stamping of communications essential.
What complicated matters for many firms were the introduction of the EU General Data Protection Regulation (GDPR) in May. Both MiFID II and GDPR have conflicting requirements but come with similarly hefty fines for non-compliance.
MiFID II vs. GDPR
Under MiFID II, communication surveillance requirements increased massively. Monitoring and recording employee communications now provide the evidence needed for compliance purposes, whilst also protecting businesses and their employees in the event of any regulatory investigation.
GDPR then in some ways contradicts MiFID II by putting power in the individual’s hands over what firms can do with their personal data. It supports an individual’s right to privacy and embodies principles around consent for the storage of personal data and the right to erase it. Such consent must be freely given. Personal data should only be kept for as long as necessary, and only when it relates to business communications.
Compliance with Contradictory Regulation
Both MiFID II and GDPR have required firms to overhaul significant areas of their operations, processes, and controls. Specifically, processes and policies based on communication recording. However, worryingly, a recent survey conducted by TeleWare of 2,000 UK employees revealed that 40% of financial services firms do not have effective processes in place to capture, record, and consequently retrieve information relating to business communications. Leaving firms open to significant regulatory fines for non-compliance.
Regulators are looking for capture and Data Recording across all forms of communication – email, fixed line, mobile, instant messaging, video, and face-to-face. Whilst in the office, this is relatively easy to control however outside, this can be more of a challenge, especially where employees may be working from multiple locations and devices.
The solution for compliance with Article 16 of MiFID II could lie in employees’ hands – literally. The growth in ‘bring your own device’ (BYOD) in recent years has been driven by convenience and cost. But the management of hardware has created complications for compliance teams and IT alike. Installing a mandatory recording solution can ensure compliance, but the solution needs to consider employees’ private and business use to satisfy both MiFID II and GDPR.
Capturing Cross-Channel Communication Effectively
When it comes to mobile communications data recording, firms have two options if they want to show they’re being compliant; SIM-based recording or app-based recording.
The SIM-based recording provides arguably the most compliant and frictionless means of recording calls and SMS. With SIM recording, no user intervention is required to maintain compliance or to upgrade to the latest version of the recording software. This method of recording is most appropriate with a business-supplied device because it can demonstrate compliance for all communications for the work-related subject matter.
The app-based recording provides greater flexibility for users who have the requirements to record selected communications. Calls and SMS made and received using the app will be recorded, whereas those made using the native dialer and messaging app on the device will not. App-based solutions will work across multiple mobile networks as well as BYOD deployments.
MiFID II – a Blessing In Disguise?
Whilst communications data recording is a necessity for financial firms, it shouldn’t just be about meeting the requirements of a regulator: it also has its benefits. Recording and analyzing conversations can help firms to improve productivity as well as improve customer experience, reduce business risks, enhancing training and development.