JPMorgan has been fined $ 200 million for encrypted messaging applications

State law requires financial firms to keep careful records of electronic messages between consumers and customers.


JPMorgan Chase is paying a $ 200 million fine to two U.S. banking regulators to cover the cost of their Wall Street component allowing employees to use WhatsApp and other platforms to violate organization's record keeping rules.

The Securities and Exchange Commission said on Friday that JPMorgan Securities had agreed to pay $ 125 million after admitting "extensive" failure to keep records in recent years. The Commodity Futures Trading Commission also said on Friday it had fined the bank $ 75 million for allowing unauthorized communication since at least 2015.

SEC officials who spoke to reporters Thursday evening said JPMorgan's failure to keep those offline conversations violated state security law and left the regulator unaware of the transaction between the bank and its customers.

State law requires financial firms to keep careful records of electronic messages between consumers and customers so that regulators can ensure that those companies do not violate anti-fraud or dishonesty laws.

The move is a sign of the ongoing ongoing war between regulators, banks and employees over the use of personal equipment. Police use of illegal channels was particularly pressing when most of Wall Street went far away during the coronavirus violence. Administrators in New York and London have embarked on compliance with record keeping rules recently as vendors migrate to encrypted messaging platforms including WhatsApp, Signal or Telegram.

While telephone conversations and messages on the company's official machines and software platforms are kept intact, it is very difficult for banking compliance departments to monitor communications in third-party applications.

That approach began to gain momentum after two major trading scandals in the industry over the past decade, including Libor fraud and foreign exchange markets, relied on criminal messages stored on chat rooms, resulting in fines of billions of dollars in banks.

Traders at JPMorgan, Morgan Stanley, Deutsche Bank and other industries have been fired or put on leave because of irregularities in the practice. But the SEC order has indicated how full it is.

At JPMorgan, the practice of offline communication was strong, and even law-abiding managers and employees used their personal resources to address sensitive business issues, the SEC said.

The investigation into JPMorgan is ongoing, and the SEC has presented similar probes to firms across the financial world. JPMorgan instructed its retailers, banks and financial advisers to store work-related messages on personal machines earlier this year, Bloomberg reported in June. The messages included content in many discussions, including investment strategies, customer meetings and market monitoring, SEC officials said.

JPMorgan declined to comment beyond the official declaration agreeing to a settlement of both parties.

In addition to the fine, JPMorgan agreed to hire a compliance adviser to review bank policies and training, the SEC said. The bank has already started developing employee software to improve compliance, the SEC said.

"As technology changes, it is even more important for subscribers to ensure that their communications are properly documented and not made outside of official channels to avoid market scrutiny," SEC chairman Gary Gensler said in a statement.

Emphasizing the importance of diligent record keeping, Gensler recalled the scandal of foreign trade in 2013, when several leading bankers used private chat rooms with the names "Cartel" to create money laundering conspiracy to increase profits.

The five largest banks in the world, including JPMorgan, have finally agreed to pay more than $ 5 billion in joint sanctions and have agreed to a lawsuit to resolve the investigation.

"The obligations of the books and records help the SEC to carry out its important tests and consolidation work," Gensler said. "They build trust in our system."

Although SEC officials say the $ 125 million fine is the biggest record-keeping fine so far, the biggest threat to JPMorgan could be a reputation. According to JPMorgan, the world's largest Wall Street firm for profit, the SEC has issued a notice to the industry.

The announcement closes the week of Gensler's announcement, which on Wednesday issued a series of proposals aimed at monetizing the stock market and reducing the ability of trade executives to balance their companies.

Taken together, the proposals and the enforcement action suggest that the Biden nominee is in a hurry to draft and implement one of the most ambitious policy plans for decades.

Many investors see him as a leader the SEC needs to develop extended cryptocurrency regulation, protections around specialized companies, or SPACs, general public disclosure of public firms, and rules governing online retailer marketing and the “game” of securities trading.

The act of coercion also marks a milestone in the SEC's Director of Enforcement Gurbir Grewal, who has been warning for months that law enforcement is about to intensify.

Restoring public trust on Wall Street will require "strict enforcement of laws and regulations regarding required disclosure, misuse of non-public information, breach of record keeping obligations, and concealment of evidence from the SEC or other government agencies," he said in October.

In addition to his focus on Wall Street bookkeeping, Grewal also works on ways in which the SEC can prevent misconduct from happening in the first place, which he refers to as "preventative measures".

Specifically, Grwal said he plans to be aggressive about requiring guilty companies - JPMorgan, in this case - to admit their violations publicly.