NEW YORK–JPMorgan Chase has been hit with a $200 million fine to settle charges after two regulators found its Wall Street division allowed employees to use WhatsApp and other platforms to circumvent federal record-keeping laws.
The Securities and Exchange Commission said JPMorgan Securities agreed to pay $125 million after admitting to "widespread" record-keeping failures in recent years, while the Commodity Futures Trading Commission also said it had fined the bank $75 million for allowing unapproved communications since at least 2015.
SEC officials who spoke to reporters said JPMorgan's failure to preserve those offline conversations violated federal securities law and left the regulator blind to exchanges between the bank and its clients, according to CNBC.
“The move is the latest sign of an ongoing battle between regulators, banks and employees over the use of personal devices,” reported CNBC. “Policing the use of unofficial channels became even more pressing when most of Wall Street went remote during the coronavirus pandemic. Regulators in New York and London have ratcheted up enforcement of record-keeping rules recently as traders migrated to encrypted messaging platforms including WhatsApp, Signal or Telegram.
A Popular Workaround
“While phone conversations and messages on official company devices and software platforms are preserved, it's much harder for bank compliance departments to surveil communications on third-party apps,” the report continued. “That workaround picked up in popularity after two of the industry's biggest trading scandals of the past decade, involving manipulation of Libor and foreign exchange markets, hinged on incriminating messages preserved in chartrooms, resulting in multibillion-dollar fines for banks.
At JPMorgan, the practice of going offline to communicate was firm-wide, and even the managers and senior personnel responsible for compliance used their personal devices to communicate sensitive business matters, the SEC said.
On top of the fine, JPMorgan agreed to hire a compliance consultant to review the bank's policies and training, the SEC said. The bank had already begun upgrades to employees' software to improve compliance, the SEC said.