JPMorgan has been slapped with $200 million in fines after the company reportedly allowed employees at the company’s Wall Street division to use the WhatsApp messaging platform to discuss business matters in the course of their work duties in an alleged violation of federal record-keeping laws.
The fines were handed down by two separate United States banking regulators. The Commodity Futures Trading Commission issued a $75 million fine for permitting “unapproved communications” concerning JPMorgan’s business matters since 2015 — and potentially, even earlier.
JPMorgan has also reportedly agreed to pay a fine to The Securities and Exchange Commission (SEC) totaling $125 million, issued after the company publicly admitted to “widespread record keeping failures.” A SEC spokesperson indicated that JPMorgan failed to preserve WhatsApp messages, resulting in violations of its regulations and federal laws.
Banks and financial organizations such a JPMorgan are subject to stringent regulatory oversight which mandates the preservation of communications and messages between banks, brokers and their clients. Message preservation is considered essential in order to verify that the financial organizations are not violating anti-trust or anti-fraud laws, among others.
The SEC indicated that individuals throughout the company — including senior management — used the WhatsApp messaging platform to discuss “sensitive business matters.” JPMorgan did issue a mandate to its financial advisors and traders to preserve all business-related messages on personal devices, according to reports by Bloomberg.
On the heels of $200 million in fines, JPMorgan has decided to perform software upgrades and they’ve hired compliance consultants to conduct a thorough review of the company’s training and policies surrounding message preservation, among other issues.
Regulatory Compliance, Personal Smartphone Devices and Business Messaging Apps
This most recent round of fines handed down to JPMorgan for allowing the usage of WhatsApp for business messaging is the latest event in a series surrounding regulatory compliance and companies which are struggling to find a balance when it comes to the usage of personal smartphones and tablets. The issue of requiring (and enforcing) data preservation is rather complex when it comes to personal devices, which have become far more commonplace since the start of the COVID-19 pandemic.
To complicate matters further, many financial organizations, banks, brokerage firms and traders have begun to use encrypted messaging apps such as WhatsApp, posing additional challenges to message preservation. Unlike messages sent over email or via in-built messaging apps within a company-owned ERP or CRM platform, regulatory agencies such as the SEC are struggling to conduct surveillance of communications that are sent via third-party messaging apps on personal devices.
In fact, the usage of third-party messaging apps on personal smartphone devices was at the center of a recent trading scandal. CNBC reported, “That workaround picked up in popularity after two of the industry’s biggest trading scandals of the past decade, involving manipulation of Libor and foreign exchange markets, hinged on incriminating messages preserved in chatrooms, resulting in multibillion-dollar fines for banks.”
There was also a 2013 scandal where traders from several different banks conversed in private chat rooms to “fix” currency rates in a conspiracy to maximize profits. As a result of that foreign exchange scandal, a total of five banks — including JPMorgan — agreed to pay over $5 billion in fines.
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