Investment firms pay millions in fines for Whatsapp use
Financial institutions must store their communications. Some employees fail to do so. Eight financial institutions pay a fine of 63 million US dollars.
(Image: NLPD CC BY-SA 3.0)
Financial institutions have allowed their employees in the USA to use services such as Whatsapp, LinkedIn, Facebook Messenger or SMS on personal devices for business communication. In doing so, the companies are circumventing compliance regulations. As a result, eight investment banks now have to pay a total of 63.1 million US dollars in civil penalties. This was announced by the US Securities Exchange Commission (SEC) on Monday.
To prevent market manipulation, money laundering, customer cheating and other malversation, financial institutions are obliged to store their communications for a considerable period of time. This is the only way to ensure that their conduct can be investigated by the authorities at a later date. In the view of the US authorities, not storing conversations with colleagues or customers is tantamount to concealing one's own misconduct.
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In addition, US civil procedure law allows parties in court proceedings to inspect each other's internal documents, including communication records (so-called discovery). If employees use private devices whose use is not recorded by the employer, this undermines the protective measures.
Who's who in the financial sector
Unfortunately, this is apparently widespread in the industry. Deutsche Bank, Credit Suisse, UBS, Barclays, Bank of America including Merryl Lynch, Citigroup, Goldman Sachs and Morgan Stanley each had to pay a fine of 200 million dollars in 2022; the smaller firms Jefferies and Nomura got away with 80 million dollars each, Cantor Fitzgerald with 16 million. JP Morgan was already fined 200 million dollars in 2021.
Now it is the turn of eight other investment banks, whose employees secretly exchanged information with each other or with clients. The investment banks have basically admitted to the facts of the case and accept the penalties – no wonder, as they are getting off much lighter. Blackstone will pay twelve million dollars, KKR (Kohlberg Kravis Roberts) eleven million, Charls Schwab ten million, Apollo Capital, Carlyle and TPG Capital 8.5 million each and Santander four million. PJT Partners got away with 600,000 dollars because this company filed a voluntary disclosure. The authorities give it credit for this.
The misconduct identified by the SEC by no means only affects ordinary employees, but also middle and senior management. The companies must now carry out internal audits and verify compliance with the regulations. Further violations could be significantly pricier.
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