Several US banks have been fined by regulators for violating laws related to communication within their organizations. It has been reported that apps such as WhatsApp, iMessage, and Signal are prohibited from being used by bank employees for communication.
However, many banks in the United States have been violating this law, with many of their employees using the banned apps in making company plans and communicating with clients. So United States regulators hit Wells Fargo and other smaller banks in the country with a combined penalty of $549 million. This comes from many banks failing to keep track of electronic communications between their employees.
The Securities and Exchange Commission and Commodity Futures Trading Commission are the two regulators involved in the fines and penalties. Apparently, the SEC issued a whopping $289 million in fines against 11 firms.
Several companies were fined for not keeping electronic records of their employees' communications, while four banks were also fined $260 million for the same offence by the Commodity Futures Trading Commission.
Last Ditch Effort
According to the regulators, banks in the USA were fined after consistent warnings to move away from secure messaging apps like Signal, WhatsApp, or iMessage. Their hunt for banks disobeying the rules started in 2021, with companies like JPMorgan Chase, Goldman Sachs, Morgan Stanley, and Citigroup being victims of the raid from US regulators. Additionally, the fines that the US regulators have issued since 2021 against banks in the USA are up to $2 billion.
According to Sanjay Wadhwa, deputy director of enforcement at the SEC, in their press release, "Today’s actions stem from our continuing sweep to ensure that regulated entities, including broker-dealers and investment advisers, comply with their recordkeeping requirements, which are essential for us to monitor and enforce compliance with the federal securities laws."
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SEC's Actions Based on Investor Protection
According to part of the SEC's press release, their recent clampdown on banks in the USA is part of their efforts to secure investors. Banks fined for using WhatsApp and other third-party messaging apps were necessary to prevent issues from coming up in the future. That's the reason why the SEC decided to fine banks.
"Compliance with the books and records requirements of the federal securities laws is essential to investor protection and well-functioning markets. To date, the Commission has brought 30 enforcement actions and ordered over $1.5 billion in penalties to drive this foundational message home. And while some broker-dealers and investment advisers have heeded this message, self-reported violations, or improved internal policies and procedures, today’s actions remind us that many still have not," Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, said.
Affected Banks
Wells Fargo is the bank that was affected the most. They received approximately $200 million in fines from the regulators. That's quite huge, but their spokesperson said they were happy to put the matter behind them.
French banks BNP Paribas and Societe Generale took a $100 million fine each. On the other hand, the Bank of Montreal received about $60 million in penalties. Japanese firms, such as Mizuho Securities and SMBC Nikko Securities, were affected. Also, investment banks, including Houlihan Lokey, Moelis, and Wedbush Securities, were hit by the fines.