- Chief Compliance Officer and VP of Legal Affairs, Arrow Electronics
By 
Aaron Nicodemus2023-08-09T15:10:00
The Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) have made it clear they are serious about violations of off-channel communications rules by issuing massive fines against some of the world’s largest banks and investment firms.
The wave of enforcement actions likely has not yet crested. But the regulators have indicated they will be more forgiving to firms that voluntarily self-report violations and take remedial actions before being asked to do so.
The list of institutions hit with significant penalties by the SEC and CFTC for “endemic failures” in compliance related to monitoring, recording, and retaining the business communications of employees reads like a who’s who of international finance. Bank of America/Merrill Lynch was fined $225 million in September 2022, along with Goldman Sachs, Barclays, Citi, Credit Suisse, Deutsche Bank, Morgan Stanley, and UBS. JPMorgan Chase was also fined $200 million in December 2021, while Wells Fargo equaled that total as part of a new wave of penalties announced Tuesday.
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The new messaging on use off-channel communications for business should be clear: What was done before is no more. It cannot continue. The stakes are too high.
Establishing a set of policies and procedures to prevent employee use of nonauthorized electronic communications to conduct business is relatively straightforward. The hard part is monitoring compliance.
Firms monitoring employee use of off-channel communications for business purposes face numerous obstacles. How much is enough, in the opinion of regulators? How much is too much, in the eyes of employees? Determinations must be made as regulators crack down.
Purported “testimonial and review” service Rytr agreed to stop selling its program that used artificial intelligence to create fake content as part of a consent order with the Federal Trade Commission.
Bank of America avoided a monetary penalty in agreeing to settle charges with the Treasury Department’s Office of the Comptroller of the Currency but was ordered to shore up previously disclosed deficiencies in its Bank Secrecy Act/anti-money laundering (BSA/AML) and sanctions compliance programs.
Aviation maintenance services provider AAR Corp. will pay nearly $56 million to settle charges that it violated the Foreign Corrupt Practices Act when it paid bribes to government officials in Nepal and South Africa.
