Data Archiving
The Rise of Electronic Communications
Now that’s a headline that wouldn’t have been relevant just 5 years ago. However, a recent legal ruling that went in favor of a suspected fraudster gives us cause for pause. This case underscores the importance of having clearly defined policies regarding electronic Communications (eComms). And how archaic and irrelevant the practice of enterprise archiving has become. There is a growing imperative for technology solutions that can adequately surveil eComms to identify, capture and report suspected market abuse. It is becoming more apparent that these days, Data Archiving just isn’t enough, here’s why. The verdict that exposed the fallacy of archiving
In the last few days of September 2020, the FCA received disappointing news of a verdict that they had been anxiously awaiting for more than 20 months: Konstantin Vishnyak was found not guilty of insider trading. Two years earlier, Vishnyak was apprehended by London Police. He was allegedly involved in committing insider trading offenses based on an investigation by the FCA into some suspicious transactions executed by the former banker. Prior to his arrest, he was employed at Russia’s VTB Bank and was communicating with some people of a dubious character using WhatsApp on his personal iPhone. As Vishnyak was being arrested, he deleted WhatsApp from his personal phone – in front of the London Police – and then proceeded to turn over both phones in his possession. He defended his decision as “personal” to “avoid embarrassment” versus a deliberate act to destroy evidence of his financial dealings. In court, his attorney argued that Vishnyak deleted the popular eComms app to protect himself and his family.
The rise of electronic communications
A 2016 report cites the ubiquity of eComms in the financial industry, which was echoed by Forbes in 2018. At the time, the data showed that 85% of bankers used social media and eComms apps daily to interact with their clients. The report also cited a staggering 423% increase y/y in the total amount of fines levied for non-compliance in reporting. Since the publication of that report, particularly in response to the onset of the global pandemic of 2020 and the mandated work-fromhome model, usage of eComms has increased substantially. Most notably, WhatsApp, direct messaging on Instagram and collaboration tools. Archiving remains popular, but, despite the new guidelines rolled out since that report, most firms remain unable to adhere to those regulations and cannot yet proactively or effectively detect fraud. Shining light on the darkness of archives
If 2020 has taught us anything, it is to “expect the unexpected.” Lockdowns and quarantine mandates are helpful with respect to controlling the spread of the virus, but they are exacerbating the challenges faced by compliance officers. Access to unprecedented levels of information and operations outside of a controlled environment has increased the temptation factor of committing financial fraud; a temptation that the old archiving platforms simply can’t deal with. The term, “archives,” is essentially a euphemism used to describe the cold, dark, lifeless place where “information goes to die.”
Where do we go from here?
One could successfully argue that FCA, FINRA and other financial regulatory agencies are likely to double-down on their efforts to pursue charges against all persons and organizations suspected of and proven to be guilty of tampering with or deleting critical evidence, including eComms, that is material to a financial investigation. What’s up for debate is how quickly financial firms will embrace a solution that captures, enriches and surveils encrypted messages like those traded on WhatsApp, even if they’ve been archived. In the ever-changing world of compliance where operational efficiency, automation and user experience are driving innovation and transformation, making more out of existing data is an emerging need that compliance organizations should take note of. If your eComms and other transaction data go to the archives “to die,” perhaps it’s time to rethink your surveillance strategy with respect to ease of access, comprehensiveness, contextual relevance and accuracy around detection.
https://www.shieldfc.com/