Steve Haworth, CEO of TeleWare, the communications technology business
Libor has been rumbling on in the financial services industry for almost a decade now. It was brought back to the fore recently when a historic call recording from 2008 was uncovered. Implicating the Bank of England in the Libor rate rigging scandal. This highlighted two things. Firstly, no organisation or individual is too big or too important to escape regulatory scrutiny. Secondly, communications monitoring plays a key role in maintaining standards across the industry.
Recording and analysing calls and instant communications has become increasingly important in the financial services industry over recent years. Thanks to an ever-attentive regulator in the form of the Financial Conduct Authority. Businesses are waking up to the positives and understanding that monitoring and recording communications can provide the evidence needed for basic compliance purposes. And can also protect businesses and their employees in the event of any regulatory investigation.
With incoming regulation demanding more comprehensive monitoring, recording and storage of communications, firms need to ensure this is made a priority. And not just a choice.
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BYOD & the changing communications spectrum
The days of simply recording a conference call for tick box compliance are long gone. The full communications spectrum must be monitored, recorded and stored as stipulated by the regulator. Phone calls, conference calls, Skype, SMS, instant messages, social media and even face to face meetings must be recorded. With the recordings securely stored in a format which is easily accessible should a regulator come knocking. This includes time stamping and logging recordings to easily reconstruct a sequence of events, if required.
Monitoring and recording the full spectrum of modern day communications provides context around individual recordings. In the recent case of the Bank of England and Libor, the 2008 call recording was just that – one single, isolated call. The media didn’t present us with any further information relating to communication which came prior to or after this call. And therefore, no context. The regulator will want to know what preceded this specific phone call. Where the conversation went next? It will require clear evidence in the form of audio files, screen grabs and minutes from subsequent meetings. All this of course with clear corresponding dates and times.
It then goes without saying that, whilst a great initiative in many industries,bring your own device (BYOD) should not be actively encouraged in financial services. Firms should look to maintain ownership and access to all mobile devices used by employees. Firstly, to prevent confidential information falling into the wrong hands. And secondly to deter any wrongdoing. Under the incoming MiFID II, firms will be required to provide traders with company owned mobile devices.
There’s no hierarchy in compliance
To be effective, any communications monitoring programme must be made imperative at all levels of seniority.Demonstrated from the top down to ensure business wide buy-in. Communications monitoring is not, and should not be seen to be,intrusive. It is not designed as a spying effort by the business. Rather a process which can help ensure regulatory compliance, protecting both customers and traders. At the same time as delivering huge value in terms of training, quality control and business efficiency.
Communications monitoring should be understood as part and parcel of working in a regulated industry.
Tackling MiFID II with tech
MiFID II (Markets in Financial Instruments Directive II) is due to be implemented on 3rd January 2018. Amongst other things, this wide-reaching directive stipulates that all communications that are intended to lead to a transaction must be recorded and stored for five years, with a possible extension to seven years. This needs to be made available on demand to a regulator. With sometimes as little as 24 hours’ notice.
To prevent the need for expensive, cumbersome data centres and stores, many firms should weigh up the benefits of moving their data storage to either a private or third party owned cloud. If they haven’t done so already. With cloud, firms have the reassurance that their data is being securely held – encrypted, ideally –and will be able to retrieve it in a timely fashion if presented with a subject access request.
In partnering with relevant technology businesses, financial services firms will have access to solutions to monitor and record mobile calls, SMS, Skype conversations, IM and calls made and received over a cloud based phone line.Cloud-based management portals will then provide easy search functions to find relevant recordings using timestamps, participants and even specific words or phrases.
Regulation can be time consuming, confusing and a frustration to firms. However, it is vital and it is not going away. Technology exists to support compliance and ease the burden. Firms would be wise to invest for the future.