US regulators have issued fines totaling $549 million to Wells Fargo and other smaller or non-US financial institutions for failing to maintain proper electronic records of employee communications.
The Securities and Exchange Commission brought charges against 11 firms.
It issued $289 million in fines due to long-standing and widespread lapses in record-keeping.
The Commodity Futures Trading Commission also fined four banks.
They were hit with a collective sum of $260 million for not maintaining records mandated by the agency.
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This marks the latest step to curtail the prevalent use of secure messaging applications like Signal, Meta’s WhatsApp, and Apple’s iMessage among finance professionals.
The crackdown began in late 2021.
It has seen settlements reached involving larger players such as JPMorgan Chase, Goldman Sachs, Morgan Stanley, and Citigroup.
The cumulative fines related to this issue now exceed $2 billion, according to the SEC and CFTC.
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Sanjay Wadhwa, Deputy Director of Enforcement at the SEC, said: “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.”
The firms admitted employees using other communication channels like WhatsApp to discuss business matters.
They also admitted not keeping records, a breach of federal securities laws.
Wells Fargo, a smaller player on Wall Street, faced the most substantial penalties, with fines amounting to $200 million.
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French banks BNP Paribas and Societe Generale were hit with $110 million each.
The Bank of Montreal was also fined $60 million.
The SEC also fined Japanese firms Mizuho Securities and SMBC Nikko Securities.
Boutique US investment banks, including Houlihan Lokey, Moelis, and Wedbush Securities were also punished for their activities.
Banks told to cease future violations
The banks were also instructed to cease future violations and engage consultants to review their policies.
The use of encrypted messaging platforms via third-party channels has raised concerns due to the inability to retain logs of interactions.
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This practice was widespread across various levels within the banking industry, including managers responsible for upholding regulations.
CFTC said: “Employees’ use of unapproved communication methods was not hidden within the firm.
“To the contrary, certain supervisors—the very people responsible for supervising employees to prevent this misconduct—routinely communicated using unapproved methods on their personal devices.”
