Jody Houton

Risks of misconduct may be heightened or increased by staff working from home, according to the Financial Conduct Authority (FCA).

In its most recent newsletter on Market Conduct and Transaction Reporting Issues, the UK financial regulatory body shared its concerns that alternative working arrangements may make it more difficult for firms to record telephone conversations and electronic communications. 

The FCA also mentioned the increased likelihood of staff using unmonitored and/or encrypted communication applications, such as WhatsApp, to share potentially sensitive information. 

According to the report, “Use of such apps present challenges and significant compliance risks, since firms will be less able to effectively monitor communications using these channels.”

In the WFH era, with traders and their compliance counterparts working in isolation, it has never been more important to utilize compliance and conduct surveillance solutions that can identify potential compliance breaches across as many data types and channels as possible, including new and popular non-corporate channels, such as WhatsApp and WeChat.

“It is important for firms to proactively review their recording policies and procedures every time the context and environment they operate in changes. We expect firms to have a rigorous monitoring regime, commensurate to the increased risks, where in-scope activities may be conducted outside the controlled office environment,” the report stated.

The COVID-19 pandemic has only exacerbated wrongdoing at large financial institutions, as many remote employees feel ‘nobody is watching,’ which is why senior leadership must understand the reality of misconduct within their ranks and move to address it decisively.

Erkin Adylov, CEO of Behavox

Ever since the pandemic radically changed how firms do business, there is a real risk that companies that do not invest in recording and monitoring controls will have impaired and inadequate monitoring and surveillance capabilities. The FCA has warned companies that if they do not have the technology to protect their business in a remote setting, then they may be unable to gather evidence to resolve disputes with clients over transaction terms, etc.

In summary, the FCA reassured UK firms that although there is no specific restriction on the technologies or apps firms can use for communications, they must understand the FCA recording obligations and have effective policies, controls and oversight to ensure that these are met.

Click here to learn more about how Behavox Compliance enables enterprises to identify and mitigate risk of non-compliant behavior such as collusion, insider trading and market manipulation before it causes large fines, brand damage and high profile incidents.