06. Oct. 2022Fabian Grande

SEC fines of over $1.8b signify the need for innovation in banks’ client communications

Last week, 11 banks, including some of the largest global players, agreed to pay more than USD 1.8 billion in fines over charges of failures in record-keeping practices and what the US regulator SEC called “pervasive off-channel communications”.

According to the regulator, fines were imposed for allowing banks’ executives to discuss business via unapproved and unmonitored messaging systems, such as WhatsApp, when their chats should have been recorded and available to government authorities. The violations occurred from January 2018 to September 2021 and involved staff at different levels of seniority.

Those banks’ failure to preserve conversations violated federal securities law and left the regulator blind to exchanges between banks and clients. US federal law requires financial firms to keep meticulous records of messages between banking employees and clients so regulators can make sure those firms do not breach anti-fraud or anti-trust rules. As the US regulator moved ahead of the curve this time, we believe regulators in other regions, such as Europe and Asia, are likely to follow suit.

However, in an environment where clients are increasingly looking for a seamless digital experience, fully abandoning those messaging channels may not be a wise idea for the financial industry.

The growing popularity of encrypted messaging apps such as WhatsApp has led many financial advisors to rely on them as a form of workplace communication, especially following the Covid-19 pandemic and the move to working from home. It is our view that, over the coming years, mobile banking will remain a central theme of the financial industry, especially within the wealth management space. The pace of communication will only accelerate as wealth clients seek a more personal relationship with their banks.

Instead of banning social messaging apps, financial institutions should acknowledge their convenience and better enable their use between relationship managers (RMs) and clients, in an approach termed ‘conversational banking’. The concept aims to service clients on their preferred communication channels, while still fulfilling the expectation of strict compliance and security.



Banks and wealth managers should invest in built-in chat capabilities housed in a secure environment. In order to remain compliant, the RMs‘ endpoint of the messaging channel could be embedded into the safe banking environment so that the financial institutions are able to keep full control, transparency and auditability of the relationship managers‘ interaction with the client.

Not only will this ensure preservation of communications and avoid firms facing hefty fines in the future, but the seamless digital client experience as well as some additional features, such as client interaction analysis with natural language processing capabilities, will help increase efficiency in communications and strengthen client relationships.

Written by Fabian Grande
Fabian is a Group Product Manager and responsible for Avaloq’s Engage product line, comprising our mobile & web banking products. He has shaped Avaloq’s digital banking capabilities over the past years and is the originator of the Avaloq Engage App – a mobile workplace for relationship managers and the door opener to conversational banking technology for wealth managers. Before joining Avaloq in 2019, Fabian led major digital projects at Credit Suisse to create front office and compliance solutions in Zurich and Singapore.
Conversational Banking

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