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Off-Channel Communications: More than just Words

Image of David Moehle, co-founder of ClientWindow for the Off-Channel Communications: More than just Words blog post by CliwntWindow

In the ever-evolving landscape of financial services, off-channel communications have emerged as a critical area of concern. These unofficial channels, such as messaging apps like WhatsApp and WeChat, pose unique challenges for compliance, record-keeping, and risk management. But does using these apps actually have a real-world impact on financial services firms?  

The Rise of Off-Channel Communications

Over the past decade, the adoption of messaging apps has skyrocketed. The pandemic and remote work arrangements further accelerated this trend, blurring the lines between personal and business communication. Employees now seamlessly switch between official channels, (such as their company email, company chat platforms and monitored phone calls) and off-channel platforms, like WhatsApp, complicating the monitoring and tracking of business-related messages.  

The issue is, it’s so easy to do. Everyone uses WhatsApp, clients love the fast, personal service they get when they can quickly message their financial services team. Similarly, team members can shoot off quick replies and provide an attentive service, even when away from the office and very busy. But, these conversations are not compliant.  

Regulatory Imperatives

US Regulatory Landscape

The US has seen the biggest crackdown on off-channel communication so far, so it is worth considering this impact first. It shows in stark reality that the US Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) mean business and are willing to go to bat against Wall Street.  

For many years, the SEC has been warning about using WhatsApp and similar platforms, it has long mandated financial institutions need to retain documentation of all business communications. Failure to comply with these record-keeping requirements has resulted in substantial penalties. The very latest round of so-called WhatsApp investigations saw 16 financial firms agree to pay more than $81 million in fines after a probe found their employees used personal text messages for business purposes. This only adds to the $2.5 billion penalties imposed since 2021 by the SEC and CFTC. Plus, the Department of Justice (DOJ) has also incorporated off-channel communications policies into its evaluation of corporate compliance programs, extending expectations beyond financial institutions to the broader corporate community.

The FCA’s Stance

The Financial Conduct Authority (FCA) in the UK has been closely monitoring off-channel communications. Whilst it has handed out fines, they are not yet in the league of its US counterparts. But, and this is a significant but, since the latest round of SEC fines, the FCA has announced greater scrutiny and a crackdown. It has warned that firms need to impose a, ‘culture of compliance,’ and the or else implications of this statement are clear. The regulator has also stepped up its enquiries, meeting and quizzing a wide selection of City firms, including Deutsche Bank, Citigroup, and JP Morgan. As firms adapt to remote and hybrid working arrangements, the FCA emphasises the need to consider data security risks. Since 2021, the FCA has been outspoken about its view of using WhatsApp by the financial service sector – clearly stating it is deemed ‘off-channel’ and not compliant as it cannot be monitored, data cannot be stored correctly and it leads to, ‘heightened risks of misconduct.’

It's clear the real world impact is coming and firms needs to be prepared.

What can you do?

The irony is, that all of the off-channel communications issues can quite easily be solved. There are communications tools and RegTech platforms out there which ensure compliance to regulations without impacting customer service. For example, ClientWindow seamlessly connects business email to a client’s WhatsApp. It works in the background to provide smooth communications between the two platforms without any real change to the users but still meeting compliance requirements.  

Ultimately, the penalties for non-compliance are no longer a mere cost of doing business—they are substantial and far-reaching.  

Financial firms must adapt swiftly, aligning their practices with regulatory expectations. The FCA’s vigilance underscores the need for robust policies, technology investments, and ongoing employee education. As the financial services industry navigates this complex landscape, proactive measures will be critical to maintaining trust, compliance, and reputation.

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In the ever-evolving landscape of financial services, off-channel communications have emerged as a critical area of concern. These unofficial channels, such as messaging apps like WhatsApp and WeChat, pose unique challenges for compliance, record-keeping, and risk management. But does using these apps actually have a real-world impact on financial services firms?  

The Rise of Off-Channel Communications

Over the past decade, the adoption of messaging apps has skyrocketed. The pandemic and remote work arrangements further accelerated this trend, blurring the lines between personal and business communication. Employees now seamlessly switch between official channels, (such as their company email, company chat platforms and monitored phone calls) and off-channel platforms, like WhatsApp, complicating the monitoring and tracking of business-related messages.  

The issue is, it’s so easy to do. Everyone uses WhatsApp, clients love the fast, personal service they get when they can quickly message their financial services team. Similarly, team members can shoot off quick replies and provide an attentive service, even when away from the office and very busy. But, these conversations are not compliant.  

Regulatory Imperatives

US Regulatory Landscape

The US has seen the biggest crackdown on off-channel communication so far, so it is worth considering this impact first. It shows in stark reality that the US Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) mean business and are willing to go to bat against Wall Street.  

For many years, the SEC has been warning about using WhatsApp and similar platforms, it has long mandated financial institutions need to retain documentation of all business communications. Failure to comply with these record-keeping requirements has resulted in substantial penalties. The very latest round of so-called WhatsApp investigations saw 16 financial firms agree to pay more than $81 million in fines after a probe found their employees used personal text messages for business purposes. This only adds to the $2.5 billion penalties imposed since 2021 by the SEC and CFTC. Plus, the Department of Justice (DOJ) has also incorporated off-channel communications policies into its evaluation of corporate compliance programs, extending expectations beyond financial institutions to the broader corporate community.

The FCA’s Stance

The Financial Conduct Authority (FCA) in the UK has been closely monitoring off-channel communications. Whilst it has handed out fines, they are not yet in the league of its US counterparts. But, and this is a significant but, since the latest round of SEC fines, the FCA has announced greater scrutiny and a crackdown. It has warned that firms need to impose a, ‘culture of compliance,’ and the or else implications of this statement are clear. The regulator has also stepped up its enquiries, meeting and quizzing a wide selection of City firms, including Deutsche Bank, Citigroup, and JP Morgan. As firms adapt to remote and hybrid working arrangements, the FCA emphasises the need to consider data security risks. Since 2021, the FCA has been outspoken about its view of using WhatsApp by the financial service sector – clearly stating it is deemed ‘off-channel’ and not compliant as it cannot be monitored, data cannot be stored correctly and it leads to, ‘heightened risks of misconduct.’

It's clear the real world impact is coming and firms needs to be prepared.

What can you do?

The irony is, that all of the off-channel communications issues can quite easily be solved. There are communications tools and RegTech platforms out there which ensure compliance to regulations without impacting customer service. For example, ClientWindow seamlessly connects business email to a client’s WhatsApp. It works in the background to provide smooth communications between the two platforms without any real change to the users but still meeting compliance requirements.  

Ultimately, the penalties for non-compliance are no longer a mere cost of doing business—they are substantial and far-reaching.  

Financial firms must adapt swiftly, aligning their practices with regulatory expectations. The FCA’s vigilance underscores the need for robust policies, technology investments, and ongoing employee education. As the financial services industry navigates this complex landscape, proactive measures will be critical to maintaining trust, compliance, and reputation.

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