Scrutiny of Off-Channel Communications Capture, Archive, and Surveillance

Most firms are aware that off-channel communications have garnered significant attention from regulators over the past couple of years. But why? This article will delve into the recent buzz around off-channel communications and how your firm can prepare for the increased regulatory scrutiny.

What are off-channel communications?

Off-channel communications refer to electronic messaging platforms outside of traditional, monitored channels like company email systems. This includes apps and services like WhatsApp, Signal, Bloomberg messaging, and social media platforms. While convenient, these methods of communication pose substantial risks for compliance and regulatory oversight.

Why the increased regulatory focus?

Financial regulators, including the U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), have ramped up their scrutiny of off-channel communications. This comes after discovering widespread use of these channels within large financial institutions, including among senior management, that were not correctly archived and included in the firm’s surveillance efforts.

The key concerns in the enforcement actions included:

1. Books and Records requirements: Financial firms are mandated to keep accurate and complete books and records. Off-channel communications, if not properly recorded and archived, can lead to significant gaps in these records, impeding investor protection.
2. Pervasiveness of violations: The widespread use of unmonitored communication channels at all organizational levels, including senior management, has alarmed regulators. This indicates a potential cultural issue regarding compliance within firms.
3. Global impact: This is not just a U.S. issue; international regulatory bodies are also increasingly focusing on off-channel communications, reflecting its global significance.

How can my firm remain compliant?

Maintaining compliant communications and an effective archive and surveillance program are essential to mitigate regulatory and reputational risks. Here are a few steps you can take to improve your firm’s archive and surveillance program.

• Assess current communication practices: Firms need to evaluate which communication channels are being used internally and externally. This includes identifying unofficial communication channels that employees might be using despite company policies.
• Review and update policies: Based on the assessment, firms should decide which channels to permit and implement strict policies to control and monitor their use. Policies should clearly outline the approved, compliant communication methods and the protocols for archiving these communications.
• Implement technology solutions: There are numerous technology solutions available that can help firms monitor, archive, and ensure compliance of off-channel communications. Implementing these solutions is crucial to mitigate risks and adhere to regulatory requirements.
• Training and certification: Continuous training for employees on compliance policies and the proper use of communication channels is essential. Regular certifications (many firms require quarterly attestations) can help reinforce these practices and keep compliance top of mind.
• Review and disciplinary measures: Firms should have a robust disciplinary framework to address non-compliance. This includes consistent enforcement of penalties across different levels and departments to maintain a strong culture of compliant communications.

The role of technology

Technological solutions play a pivotal role in a firm’s communications surveillance program. Firms can deploy software to archive and monitor communications across various communications platforms, allowing employees to use their communication channels of choice while ensuring the firm meets regulatory standards for compliant communications. This proactive approach not only aids in compliance but also helps prevent potential violations.

Conclusion

The financial sector is at a crucial juncture regarding off-channel communications. With increasing regulatory scrutiny, it’s imperative for firms to adopt comprehensive strategies that include policy updates, technological integration, and consistent training. By doing so, they can not only protect themselves from hefty fines and enforcement actions but also foster a culture of compliance in communication that upholds the integrity of financial markets.

Watch out on demand webcast

Our books and records and surveillance experts recently held a webcast to discuss this topic in-depth. Watch the webcast on demand for more information about the regulatory focus on off-channel communications and what your firm can do to avoid regulatory scrutiny.

Watch on demand

How we help

Global regulators are turning up the scrutiny around books and records. Firms need to ensure their eComms surveillance program meets these regulatory requirements for compliant communications and industry best practices.

ACA's eComms offering, integrated within our ComplianceAlpha^® RegTech solutions platform, provides a comprehensive, end-to-end program for capturing, archiving, and monitoring employee communications across a wide array of channels. Not only does it capture data, but it also enhances the efficiency and clarity of monitoring electronic communications. This empowers users to identify risks, detect misconduct, and ensure policy compliance, protecting firms from regulatory fines and reputational damage.

For questions or to discuss how ACA can help you strengthen your firm’s eComms surveillance program, increase efficiencies through technology, and ensure your regulatory obligations are met, reach out to your ACA consultant or contact us here.