On Tuesday, a tier one bank was fined $5.5 million by the CFTC for record keeping failures. While this may seem like small change for a large financial firm, there is more to the story than meets the eye.
Only in September of last year, the tier one bank in question agreed to pay the SEC and CFTC a grand total of $200 million as it admitted that its traders had used previously banned instant messaging apps, such as WhatsApp, to discuss business. This is in violation of record keeping regulations. This fine was included as part of a bigger crackdown by the SEC and CFTC when they fined 11 Wall Street firms a massive $1.8 billion for failures in communications monitoring back in 2022.
This same financial firm had been fined around $1 million back in 2019 for recording failures. In this instance, the bank failed to record the phone lines of a trading and sales desk for 20 days in 2014. After receiving a cease-and-desist order for their actions, it was found that on multiple occasions in 2020, the bank again failed to fully record and retain thousands of mobile device calls due to vendor software failures.
It is evident from this week’s fine that the CFTC will not back down on its enforcement, even if the firm has been under scrutiny before and has paid its previous fines. Commenting on the penalty, Director of Enforcement at the CFTC, Ian McGinley, said, “As this case demonstrates, the CFTC will continuously pursue swap dealers that fail to meet their recording obligations and there will be consequences for violating CFTC orders, including increased penalties. He continued, “We are committed to holding swap dealers accountable when they fail to comply with their regulatory obligations and fail to abide by obligations imposed by prior CFTC orders.”
Beyond the fact that this particular tier one bank has been hit with multiple fines for their record keeping failures, yesterday’s enforcement by the CFTC is significant for another reason as well. Whereas nearly all of the recent comms-related fines handed out by North American regulators have centered around messaging platforms like WhatsApp, the decision to impose fines tied to voice communications could be a warning sign that regulators are widening the scope of their investigation. If that proves to be the case, financial firms will have an entirely new set of challenges that they will need to overcome in order to avoid the next wave of regulatory fines.
SteelEye’s fully integrated offering delivers an efficient, modern, and easy-to-use compliance record keeping solution for MiFID II, SEC, CFTC, and FINRA regulations.
SteelEye’s Communications Record Keeping and Surveillance platform captures communications data from a wealth of eComms, vComms, and traditional channels and stores records in a compliant, immutable format, in line with regulations. It thereafter applies advanced surveillance algorithms and intelligent lexicon searches to identify early warning signs of misconduct and market abuse.
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