Dirty jokes and NSFW GIFs. Snaps of unsuspecting colleagues on the trading floor. Screenshots of confidential client positions.
All that — and, on occasion, even legally dubious information — is increasingly being trafficked over the new private lines of Wall Street: encrypted messaging services like WhatsApp and Signal.
From traders to bankers and money managers, just about everyone in finance is embracing these apps as an easy, and virtually untraceable, way to circumvent compliance, get around the HR police and keep bosses in the dark. And it’s happening despite the industry’s efforts to crack down on unmonitored communications, according to conversations with employees at more than a dozen of Wall Street’s most recognisable firms.
Just this week, a former Jefferies Group banker was fined in the UK for sharing confidential data on WhatsApp.
In many ways, the development reflects a cultural shift. At big banks and small shops alike, rowdy trading desks and the boys-will-be-boys ethos are no longer tolerated, at least publicly. But the widespread use of encrypted apps is also raising a deeper concern: It could enable reckless behaviour that’s all but impossible to police and lead to abuses like the chat-room scandals involving Libor manipulation and currency rigging.
“You’re really able to operate outside of the bank,” said William McGovern, a former SEC branch chief and senior lawyer at Morgan Stanley who now works at law firm Kobre & Kim. “We have seen in our investigations that the ground is shifting under everyone, and technology changes are driving a lot of it.”
Rules, regulations
The rules are clear. Financial firms need to keep records of all written business communications, no matter how innocuous, according to the Securities and Exchange Commission and the Financial Industry Regulatory Authority. Asset managers are bound by similar regulations.
Representatives for Wall Street banks, including those at Goldman Sachs Group Inc., Bank of America Corp. and Citigroup Inc., say they have various policies in place to prevent unmonitored communications and unauthorised access to confidential information. They routinely check emails and chats on company devices, restrict personal phones and messaging services on trading floors and require employees to sign agreements prohibiting unmonitored communications for work. In January, Deutsche Bank AG banned text messages and apps such as WhatsApp and Apple Inc.’s iMessage on company phones globally to improve compliance standards.
Across finance, the nearly two dozen employees who spoke with Bloomberg say those policies are routinely ignored and the use of personal phones for work is a fact of life. No one would speak on the record for fear of losing their jobs.
When asked about the widespread use of unauthorised apps, SEC spokeswoman Judith Burns declined to comment.
Big Brother
A big reason more and more Wall Street types have turned to messaging apps is because they are tired of having every written word — work-related or not —ingested into vast, Big Brother-like databases and scrutinised for tone and taste in ways that strike many as overbearing. They’ve learned even the slightest misinterpretation can land them in hot water — not only with compliance, but with prosecutors on the lookout for financial crimes.
Some clients also prefer those apps to communicate. Ignoring those messages would be bad for business (not to mention how awkward it can be to try and steer conversations back onto monitored systems). Many clients are friends, and vice versa.