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Asset managers on alert after ‘WhatsApp’ crackdown on banks

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  • Demand for software to record, archive messaging on the rise.
  • Banks pay hundreds of millions of dollars in regulatory fines.
  • Continued remote working underscores risk of compliance missteps.

LONDON: Asset managers are tightening controls on personal communication tools such as WhatsApp as they join banks in trying to ensure employees play by the rules when they do business with clients remotely.

Regulators had already begun to clamp down on the use of unauthorised messaging tools to discuss potentially market-moving matters, but the issue gathered urgency when the pandemic forced more finance staff to work from home in 2020.

Most of the companies caught in communications and record-keeping probes by the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have been banks – which have collectively been fined or have set aside more than $1 billion to cover regulatory penalties.

But fund firms with billions of dollars in assets are also increasing their scrutiny of how staff and clients interact.

“It is the hottest topic in the industry right now,” said one deals banker, who declined to be named in keeping with his employer’s rules on speaking to the media.

Reuters reported last year the SEC was looking into whether Wall Street banks had adequately documented employees’ work-related communications, and JPMorgan was fined $200 million in December for “widespread” failures.

German asset manager DWS said last month it had set aside 12 million euros ($12 million) to cover potential U.S. fines linked to investigations into its employees’ use of unapproved devices and record-keeping requirements, joining a host of banks making similar provisions, including Bank of America, Morgan Stanley and Credit Suisse.

Sources at several other investment firms – described in the financial community as the ‘buy-side’ – including Amundi, AXA Investment Management, BNP Paribas Asset Management and JPMorgan Asset Management, told Reuters they have deployed tools to keep all communications between staff and clients compliant.

Spokespeople for the SEC and CFTC declined to comment on whether their investigations could extend beyond the banks, but industry sources expect authorities to cast their nets wider across the finance industry and even into government.

Last month Britain’s Information Commissioner’s Office (ICO), the country’s top data protection watchdog, called for a review of the use of WhatsApp, private emails and other messaging apps by government officials after an investigation found “inadequate data security” during the pandemic.

Good business for some

Regulations governing financial institutions have progressively been tightened since the global financial crisis of 2007-9 and companies have long recorded staff communications to and from office phones.

This practice is designed to deter and uncover infringements such as insider trading and “front-running,” or trading on information that is not yet public, as well as ensure best practices in terms of treatment of customers.

But with thousands of finance workers and their clientele still working remotely after decamping from company offices at the start of the pandemic, some sensitive conversations that should be recorded remain at risk of being inadvertently held over informal or unauthorised channels.

Brad Levy, CEO of business messaging software firm Symphony, said concerns about managing that risk had driven a surge in interest for software upgrades that make conversations on popular messaging tools including Meta Platforms’ WhatsApp recordable.

“Most believe the breadth of these investigations will go wider as they go deeper,” Levy said.

“Many market participants have retention and surveillance requirements so are likely to take a view, including being more proactive without being a direct target.”

He said Symphony’s user base has more than doubled since the pandemic to 600,000, spanning 1,000 financial institutions including JPMorgan and Goldman Sachs.

Symphony peer Movius also said its business lines specialising in making WhatsApp and other tools recordable have more than doubled in size in the space of a year, with sales to asset managers a growing component.

“Many on the buy-side have recognised that you can’t just rely on SMS and voice calls,” said Movius Chief Executive Ananth Siva, adding that the company was also seeking to work with other highly-regulated industries including healthcare.

Movius software integrates third-party communications tools such as email, Zoom, Microsoft Teams and WhatsApp into one system that can be recorded and archived as required, he said.

Amundi, AXA IM, BNPP AM and JPMorgan Asset Management all confirmed they had adopted Symphony software but declined to comment on the full breadth of services they used or when these had been rolled out.

Amundi and AXA IM both confirmed they used Symphony services for team communications, while AXA IM also said they used it for market information.

Amundi, BNPP AM and JP Morgan AM declined to comment on whether they thought regulators would seek to investigate record keeping at asset managers after enforcement actions against the banks were completed.

A spokesperson for BNPP AM said it had banned the use of WhatsApp for client communications due to compliance, legal and risk considerations including General Data Protection Regulation (GDPR).

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IT Conference: Shaza Reports A 25% Increase in Pakistan’s Exports

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“The Pak-US Tech investment conference will be a pillar for the IT industry,” stated Shaza Fatima Khawaja, Minister of State for Information Technology (IT).

In the United States, she was giving a speech at the 2024 Pak-US Tech Investment Conference.

Shaza Fatima stated that Pakistan’s exports have grown by 25% and that our goal is to reach $25 billion in exports in accordance with Prime Minister Shehbaz Sharif’s orders.

According to the State Minister, there has been progress in giving businesses a safe online environment.

In the global cyber security index, Pakistan has been assigned the same tier-1 rank as the United States and Japan, she said.

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The Pakistani government banned unregistered VPNs.

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The unregistered VPNs have been temporarily restricted for whitelisting purposes. Sources within the Pakistan Telecommunication Authority (PTA) classified unregistered VPNs as a ‘security risk’ for Pakistan, as they may provide access to ‘important information.’

The PTA has advised enterprises, including IT companies, software houses, freelancers, and banks, to register their IP addresses to guarantee ongoing VPN access and uninterrupted internet services for authorized customers. Registrants must disclose their intended purpose and delineate their commercial operations.

The PTA commenced the registration of VPNs in 2010, and to date, around 20,500 VPNs have been registered, according to sources.

VPNs are widely utilized globally to circumvent restricted content. In Pakistan, residents have employed VPNs to access the social media network X (previously Twitter), which has been prohibited for several months.

The government of Pakistan has declared that it will not remove the ban on X unless the platform officially registers within the nation.

Previously, to guarantee seamless commercial operations for software houses, contact centers, freelancers, and foreign embassies, the Pakistan Telecommunication Authority (PTA) initiated a one-window operation for the whitelisting of IP and VPN registrations.

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Australia will prohibit minors under 16 from using social media.

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The goal of the proposed bill, which will be presented to parliament next week, according to Prime Minister Anthony Albanese, is to lessen the “harm” that social media causes to Australian youngsters.

“This one’s for the parents… They share my extreme concern for our children’s online safety. Albanese expressed his desire for Australian families to understand that the government is on their side.

Although the specifics are still being discussed, the government has stated that there would be no exceptions for parental agreement and that the ban will not apply to youngsters who are currently engaged on social media. Social media companies will have to demonstrate that they are taking appropriate precautions to keep minors off of their sites. There are no consequences for users, and the eSafety Commissioner, Australia’s internet regulator, will enforce the rule.

The law will go into effect 12 months after it is passed, and it will then be reviewed. Though perspectives on whether a ban is the right course of action vary, many experts concur that social media can negatively impact adolescents’ mental health. Some others think that rather than teaching kids how to use social media sites like Facebook, Instagram, and TikTok securely, restrictions just postpone their introduction to these sites.

Age-verification procedures have encountered difficulties in other regions, such as the European Union, where similar limits have proven challenging. Major advocacy group Australia’s Child Rights Taskforce called the new law “too blunt” and asked the government to think about “safety standards” instead. In an open letter, the organization referenced UN recommendations for regulations that allow kids to interact with digital spaces in a secure way instead of limiting their access.

Some activists, however, are in favor of the ban, pointing to worries about kids being exposed to harmful content, false information, and cyberbullying. Currently, “excessive social media use is rewiring young brains within a critical window of psychological development, causing an epidemic of mental illness,” according to the 36Months initiative, which has amassed over 125,000 signatures. It contends that children are “not yet ready to navigate online social networks safely” until they are at least age 16.

Albanese stated that education alone is insufficient since it “assumes an equal power relationship.” This begs the question of whether the emphasis should instead be on educating kids how to manage the advantages and risks of the online environment.

“I don’t want to see some items that keep coming up on my system; I’m not sure about you. Let alone a 14-year-old who is so vulnerable,” he stated on Thursday. “These tech firms are really strong. These apps’ algorithms encourage users to act in particular ways.

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