- Chief Compliance Officer and VP of Legal Affairs, Arrow Electronics
By 
Aaron Nicodemus2022-09-28T18:39:00
In an enforcement sweep against off-channel electronic communications at financial institutions regulators warned was coming, 11 banks, investment firms, and their affiliates will pay a total of more than $1.8 billion in fines for “widespread and longstanding failures” in monitoring, maintaining, and preserving electronic communications by employees.
The Securities and Exchange Commission (SEC) fined the firms more than $1.1 billion total, while the Commodity Futures Trading Commission (CFTC) levied another $711 million in penalties Tuesday. The agencies concluded that, collectively, the firms did not reign in off-channel communications by employees from 2018-21.
Specifically, the two regulators found systemic use of off-channel electronic communications by company employees on business-related topics conducted on personal cell phones, messaging apps, and other channels. These messages were not captured, recorded, and stored by the firms, as required by the SEC’s and CFTC’s recordkeeping, books and records, and supervision requirements for market participants.
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The Securities and Exchange Commission and Commodity Futures Trading Commission have combined to levy about $2.8 billion in penalties (so far) against firms and their affiliates in response to recordkeeping failures regarding employee use of off-channel communications for business purposes.
The Securities and Exchange Commission and Commodity Futures Trading Commission have indicated they will be more forgiving to financial services firms that voluntarily self-report recordkeeping violations and take remedial actions before being asked to do so.
Stockholder lawsuits have emerged as the latest aftershock from the regulatory crackdown against banks and financial services firms for allowing off-channel business communications by their employees.
Three former executives of Chicago-based Outcome Health, a healthcare technology company, were sentenced for misleading an auditor, clients, lenders, and investors about a scheme to sell $45 million in overbilled advertisements.
A home health company operating in Indiana, Ohio, and Texas agreed to pay nearly $4.5 million to settle allegations it filed false claims by giving sports tickets and other kickbacks to assisted living facilities in exchange for referrals.
Crypto-friendly Silvergate Bank will pay a total of $63 million penalties to California and the Federal Reserve Board to settle charges that its anti-money laundering program failed to properly monitor more than $1 trillion worth of customer transactions.
