US Banks Face Multi-Million Dollar Penalties Over Use Of Personal Messaging Platforms
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US regulators have been imposing multi-million dollar fines against banks for unofficial use of communication platforms such as iMessage and WhatsApp. The latest banks to be slapped with the fine are BNB Paribas and Wells Fargo.
US banks face multi-million dollar penalties
The US Securities and Exchange Commission has imposed charges against 11 institutions. The charged banks include the Bank of Montreal and Mizuho Financial Group, with the SEC claiming that these banks engaged in “widespread and longstanding” failures in maintaining and preserving electronic communications.
The companies will be forced to pay penalties of $289 million. Wells Fargo has been one of the worst-hit units, with the company facing a penalty of $125 million. Besides the SEC, the Commodity Futures Trading Commission (CFTC) has also imposed fines against the same firms, including the Bank of Montreal and Wells Fargo, with penalties totaling $266 million.
These are not the first of their kind charges to be imposed against US banks. In September last year, the SEC imposed fines against other firms such as Bank of America, Citi, and Goldman Sachs, with the total fines reaching nearly $2 billion.
These financial institutions were investigated after traders and brokers used personal messaging platforms to discuss the terms of investments, set up client meetings and conduct other businesses.
The use of WhatsApp and other personal messaging platforms, such as iMessage, does not conform with the regulatory requirements. However, these platforms became increasingly used after a shift to the working-from-home model amid the COVID pandemic. This usage is now attracting the attention of regulatory agencies.
The firms that faced these penalties said that from at least 2019, their employees had communicated with their employers using iMessage, Signal, and WhatsApp. The firms also failed to maintain and preserve most of these off-channel communications while violating federal securities laws.
SEC cracks down on unregulated messaging platforms
So far, the SEC has handed out more than $1.5 billion worth of penalties, and the director of the division of enforcement at the SEC, Gurbir Grewal, said that more companies would face similar fines. Gurbir opined that some brokerage platforms and investment advisers had reported the violations and improved their internal procedures and policies.
The deputy director of enforcement at the SEC, Sanjay Wadhwa, noted that failures in record keeping, such as the ones highlighted in the deficiencies posed by these banks, undermined the regulator’s ability to achieve effective regulatory oversight. In the statement, Wadhwa also said that registrants that failed to comply with the regulatory requirements would be at risk of enforcement action being taken against them.
The statement published by the SEC also noted that the firms scrutinized regarding the use of private messaging platforms had admitted to failing to abide by the record-keeping provisions under the federal securities laws. These firms were already putting measures in place to monitor off-channel communications by employees.
