Lawyers have warned City firms to “dust off” their communication training handbooks amid fears that regulators could ramp up scrutiny of the use of WhatsApp in UK financial services.
US regulators have been probing traders and dishing out fines over the use of encrypted messaging services like WhatsApp, sparking fears that UK firms could soon face the same treatment from regulators.
In a statement to City A.M., an FCA spokesperson said it had “reminded firms” that electronic communication used for activities that fall within its scope must be “recorded and auditable”.
“We have previously taken action when information has been inappropriately shared via encrypted message,” the spokesperson said.
The watchdog has cautioned firms previously over the use of encrypted messaging apps like WhatsApp, Signal and Telegram, telling the City in 2021 to steer clear of such apps when business shifted to remote working through lockdown.
Regulators have also acted in the past, fining investment banker Christopher Niehaus £37,198 for sharing confidential client information over WhatsApp.
Lawyers are now warning firms to tighten their guardrails in the UK amid fears that the watchdog could soon begin ramping up enforcement.
“The FCA is on the ball, having recently secured insider dealing convictions for two bankers who used burner phones to transmit inside information,” Simon Morris, a financial services Partner with law firm CMS, told City A.M.
Phil Spyropoulos, financial services Partner at Eversheds Sutherland said firms may want to “dust off the policies and training they prepared in 2017/18” and remind employees of the “potentially significant consequences of failing to meet the regulator’s expectations.”
“Firms are likely to have implemented measures on their devices and technologies to ensure recording takes place. However, it was always acknowledged that private devices could be used without their knowledge or consent,” he added.
Some have warned that the use of the apps is becoming increasingly hard to police, as traders rub shoulders with those at other firms and interactions on encrypted channels veer from personal conversations into professional information.
“Specialisms in the financial services industry mean that many traders know their opposite numbers socially and may have worked alongside them at previous employers,” Matthew Nunan, partner at law firm Gibson Dunn and former Head of Department for Wholesale Enforcement at the FCA, told City A.M.
“Long term client relationships also develop and can straddle business and social interactions. Consequently it can be easy for a trader to cross the line inadvertently or carelessly, with chats that start off socially on WhatsApp but then go on to include business content.”