Wells Fargo and BNP Paribas are among the latest banks to face multi-million dollar penalties imposed by US regulators for the use of unofficial communication tools such as WhatsApp and iMessage by their employees.
The Securities and Exchange Commission (SEC) has charged 11 firms, including Bank of Montreal and Mizuho Financial Group, for “widespread and longstanding” failures in maintaining and preserving electronic communications. These firms will collectively pay penalties amounting to $289 million, with Wells Fargo units receiving the largest fine of $125 million.
Additionally, the Commodity Futures Trading Commission (CFTC) has imposed penalties totaling $266 million on some of the same firms, including Wells Fargo and Bank of Montreal units, for similar violations.
These recent settlements follow SEC actions in September, when fines totaling $1.1 billion were issued to firms like Bank of America, Citi, and Goldman Sachs. The investigations revealed that traders and brokers were using personal messaging services to discuss investment terms, client meetings, and other business matters. Such use of services like WhatsApp for bank-related communications contravenes regulatory requirements. The shift to remote work during the pandemic saw an increase in the use of these unofficial channels.
From at least 2019, the firms acknowledged that their employees frequently communicated using iMessage, WhatsApp, and Signal about work-related topics. Most of these off-channel communications were not maintained or preserved, violating federal securities laws.
The SEC has already issued over $1.5 billion in penalties, and Gurbir Grewal, director of the agency’s division of enforcement, has warned that more companies may soon be investigated. He emphasized that while some broker-dealers and investment advisers have self-reported violations and improved their internal policies, many others have not.
Grewal advised firms that have yet to take action, stating, “Self-report, cooperate, and remediate. If you adopt that playbook, you’ll have a better outcome than if you wait for us to come calling.”