Communications Compliance in the Age of Coronavirus

With most employees of financial firms sequestered at home during the Coronavirus pandemic, everyone’s talking about the “new normal” for work practices that will emerge. Traders and other front-office staff are usually tied to the multiplicity of expensive and complex institutional-grade applications on their desks. But while some talk a big game about their preparedness, no one can claim to be completely ready, since there are technical challenges that prevent this from being a viable long-term alternative.
 
Today, technology can enable financial professionals to operate from home in a way that it could not (not to mention, was never envisaged) during events such as 9/11 in 2001 or Hurricane Sandy in 2012. However, accessing applications via virtual private networks and mobile devices, the controls that monitor those apps for compliance purposes are not yet as advanced and flexible. They were, after all, designed primarily for use within an institution, rather than at home. And arguably, while staffers are working from home, leaving them relatively unmonitored, these compliance tools become even more important.
 
My colleague Hamad Ali’s recent article Covid-19 Reveals Need for Better Comms Plug-Ins for Traders highlighted how traders could benefit from better integration between their voice communications and trading systems. But there’s more that the communications platforms used by traders can do to ensure compliance during this Covid-induced period of working from home.
 
One problem is that banks’ capability to monitor anything beyond the audio aspect of a videoconference via Zoom, Skype, Microsoft Teams, or other platforms is severely limited. 
 
“With more than 95% of traders working from home and VPNing into their banks’ core systems from home, supervisory controls need to be in place at home. All calls—voice, Zoom, or whatever—need to be recorded, and that’s just not happening,” says Mark Whiteman, CEO of compliant communications monitoring technology provider Citycom Solutions. “Nobody has a solution for managing the visual aspect of a videocall… and that’ll take a long time.”
 
So why is this an issue if firms can record and transcribe the audio conversation for their records and regulatory compliance? Simply put, a trader could be saying one thing, but their body language could be saying something else. Or even less subtly, they could be signaling something, or even holding up a written sign, which—though blatant—can’t be captured by firms’ existing solutions.
 
“Before Covid, traders were racked up in offices, there were cameras everywhere, their keystrokes were monitored…. Everything was under the banks’ control,” Whiteman says. “Now, that control has swung towards the employee. How do you replace the banks’ eyes and ears at home?”
 
While not a complete solution to the problem, one action that can give some insight into a trader’s actions is to monitor the metadata associated with any communications, and compare it to similar activity prior to the Covid-19 lockdown.
 
“We can analyze the number of calls a trader has made, both pre- and post-lockdown, who was on a call, how long it lasted, and how that activity has changed—for example, where those calls are going to compared to before?” Whiteman says. “If a trader is making tons of money but there is no evidence of them making phone calls, whereas they were making lots of calls before, the regulator would expect you to intervene.”
 
Ultimately, it would be nice to think that traders could be trusted implicitly. And for the most part, traders take their responsibilities seriously and are maligned by a small percentage of bad apples. So the compliance solutions designed to protect investors whose money is in play are as much about validating those good actors as they are about identifying and policing the bad actors.
 
While firms could, in theory, insist that any traders working from home install various kinds of intrusive monitoring tools, they would likely infringe on civil rights and privacy protection regulations. For example, how do you monitor someone while they’re away from their workstation, going to the bathroom, or texting or calling friends and relatives? Or, if someone else in a household is overheard and recorded on a trader’s compliance devices, does that other individual have a reasonable expectation of privacy? So rather than trying to install the same kind of “eyes and ears” in someone’s home that one might find on a trading floor, firms may be better off trying to leverage systems that they already control, and where users already have zero expectation of privacy—the mechanics of a trader’s phone calls (i.e., the metadata) rather than just the content of those calls.
 
“Banks need to agree on a suite of control products to record activity at home—and they’re a long way away from that. So this is an interim step where they can strap on a Band Aid,” Whiteman says. In the interim, he adds, “This is when you have to roll the dice culturally and trust your employees to be responsible.”