Financial authorities take aim at WhatsApp

Encrypted messaging services such as WhatsApp, Signal, Telegram or Zoom, whose use is banned at major investment banks, are in the sights of financial authorities in Europe and the US.

Use of encrypted messaging, grounds for dismissal

At major investment banks, the use of encrypted messaging services is in itself grounds for dismissal.

HSBC and Credit Suisse employees have recently paid the price: at HSBC, a London trader was fired after his personal smartphone was analyzed, while Credit Suisse dismissed a banker who used an unauthorized messaging application to communicate with his clients.

In both cases, no fraud or attempted fraud had been detected, but the mere use of these encrypted messaging systems was sufficient grounds for dismissal.

The big investment banks, such as HSBC and Credit Suisse, but also Bank of America, Goldman Sachs, Citi and Morgan Stanley, are under pressure from the financial authorities.

In May, the Securities and Exchange Commission (SEC) asked banks to seize over a hundred smartphones belonging to employees.

The aim was to check communications made via these encrypted messaging services, to determine whether transactional information had been circulated in this way.


American and European vigilance

Last December, US bank JP Morgan even had to pay a $200 million fine for failing to keep track of tens of thousands of messages exchanged by a hundred or so employees, notably via WhatsApp, between the beginning of 2018 and the end of 2020.

JP Morgan was ordered to pay $125 million to the Securities and Exchange Commission and $75 million to the CFTC, the US authority responsible for overseeing derivatives markets. The bank was also forced to lay off a trader and reduce the bonuses of a dozen employees.

European financial authorities are also on the lookout, and investigations similar to those of the SEC have been launched by Germany's Federal Financial Supervisory Authority ( BaFin) and the UK's Financial Conduct Authority (FCA).

In France, the two major investment banks Société Générale and BNP Paribas, which also have a presence in the USA, are subject to SEC supervision even outside the US.