Especially during the pandemic, the use of private communication services at banks has increased significantly.
(Photo: dpa)
New York, Frankfurt Using WhatsApp and personal email accounts for business purposes could become very expensive for Deutsche Bank and other major Wall Street banks. Because institutions such as Bank of America, Citigroup, Goldman Sachs, Morgan Stanley, Barclays and Deutsche Bank are about to reach an agreement with the US Securities and Exchange Commission and the derivatives regulator CFTC, as reported by the Wall Street Journal.
As a result, there are fines of up to 200 million US dollars per institute. Jefferies Financial and Japanese bank Nomura also approached an agreement, albeit with significantly smaller payments. The authorities planned to announce the settlements by the end of September. A spokesman for Deutsche Bank declined to comment. The SEC and CFTC could not be reached for comment over the weekend.
Deutsche Bank had already prepared for a corresponding fine: In the second quarter alone, it had made 165 million euros in “provisions for lawsuits with regulators” in the investment bank, which meant a considerable part of the WhatsApp investigations by the SEC and the CFTC .
In July, it became known from financial circles that the ten board members of Deutsche Bank wanted to forgo EUR 75,000 each of their variable remuneration because of the misconduct. The entire board had earned around 66.5 million euros in 2021, of which around 40 million euros were attributable to bonuses. The sum was distributed among eleven people because there were personnel changes in the committee.
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The step is primarily a symbolic gesture. Because in view of the impending total fine of up to 200 million euros, the 750,000 euros that the board of directors is waiving would only cover a fraction of the damage.
Lengthy investigation comes to an end
This is the end of a large-scale investigation that has kept regulators busy for months. SEC and CFTC rules require financial institutions to archive and monitor the written communications of their employees. This is to ensure that compliance regulations are observed.
However, WhatsApp and other messenger services such as Signal allow messages to be deleted after they have been read. The background to the strict regulations are the experiences from the Libor scandal, in which dealers from several major banks, including Deutsche Bank, had manipulated important reference interest rates. The illegal collusion was organized via chat messages.
In addition to concerns about compliance violations, the authorities also fear possible security gaps that could arise through the mixing of business and private apps as well as business and private devices and give hackers access to sensitive systems.
Industry experts suspect that the penalties could also be particularly high so that they have a deterrent effect. Payments over $100 million have been a rarity in recent years.
However, since customers also value communication via chat messages, Deutsche Bank in the USA is already testing the Movius messenger app for employees, which is to be installed on devices used for business purposes. Unlike WhatsApp, the messages are archived to meet compliance regulations.
It is considered likely that sooner or later this application will also be used outside of the USA. According to industry experts, this app is also popular with other US institutes.
JP Morgan Chase: Payment of 200 million dollars
America’s largest bank, JP Morgan Chase, agreed to a $200 million fine in an out-of-court settlement in December. According to the SEC, more than 100 employees across all ranks communicated via WhatsApp. Tens of thousands of messages were not properly archived. The SEC is also set to investigate whether money managers have broken the rules to a similar degree, the report said.
The German financial regulator Bafin is also investigating WhatsApp use by Deutsche Bank employees. According to insiders, managers of the bank and its fund subsidiary DWS have regularly communicated outside of the official channels in the past.
More: Deutsche Bank moves away from key targets for 2022