HSBC is disabling texting capabilities on company-issued phones following a regulatory crackdown on the use of unauthorized communication methods, Bloomberg reported Tuesday, citing unnamed sources.
Work phones will be unable to send or receive text messages, sources told the wire service. They are already unable to use WhatsApp, the digital messaging app at the center of hundreds of millions of dollars in fines regulators have hit big banks with since last year.
“Banks use a wide range of approved channels to communicate in compliance with regulatory obligations,” a spokesperson for the bank told Bloomberg. “HSBC, like many other banks, reviews and adjusts functionality on its corporate devices as needed.”
A small number of workers will still be allowed to text from their work phones, where texts are archived, the sources told Bloomberg. Personal devices are not included in the ban, they said.
HSBC found itself in regulators’ crosshairs earlier this year over its failure to monitor the use of unauthorized messaging apps that led to recordkeeping violations. The Commodity Futures Trading Commission and the Securities and Exchange Commission fined the lender $30 million and $15 million, respectively.
The two regulators have fined dozens of financial institutions over the past two years on similar grounds. A $200 million settlement JPMorgan Chase struck with the SEC and CFTC in December 2021 perhaps put Wall Street banks and brokerages on notice that they risked similar fines over employees’ use of unapproved channels for what could be construed as business-related communications.
Eleven banks and brokerages, including Bank of America, Citi, Goldman Sachs and Morgan Stanley, paid the two agencies a combined $1.8 billion in September 2022 to settle recordkeeping violations.
“It’s time for Wall Street to stop waiting for an enforcement action before it changes its practices,” CFTC Commissioner Christy Goldsmith Romero said at the time. “Change can only happen if the banks’ C-suite establishes a culture of compliance over evasion.”
The SEC and CFTC have brought two waves of recordkeeping settlements in recent months — one in August against 11 more firms, including Wells Fargo, BNP Paribas and BMO, and a second, smaller fine last month against Interactive Brokers.
While the clampdown thus far has encompassed written off-channel communications, two sources with knowledge of the regulators’ investigations expressed concern to Reuters that future rounds of penalties could stem from recordkeeping failures related to Zoom and other conferencing technology.
"If client calls are held over Microsoft Teams, then [regulators] would expect these to be captured,” Matthew Nunan, a former head of conduct risk for Europe, the Middle East and Africa at Morgan Stanley. Nunan is now a partner at the law firm Gibson, Dunn & Crutcher.
“The issue is the ability of firms to record, retain and produce relevant business records, however they are made," Nunan said.
At least two major global banks are now recording Zoom calls, sources told Reuters.
"The way we work has evolved hugely over a very short period of time and firms need to make sure they are absolutely up to speed with the new exposures this brings," Claire Garrett, head of the financial institutions practice at Marsh, told the wire service.
