What are eComms and why are they resulting in fines in the hundreds of millions of dollars for some of the world’s largest banks?

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What are eComms and why are they resulting in fines in the hundreds of millions of dollars for some of the world’s largest banks?

Join us in our latest Tech Law Talks podcast series as we explore the regulatory topic du jour: eComms.  What are eComms and why are they resulting in fines in the hundreds of millions of dollars for some of the world’s largest banks?  The answer is simultaneously simple and complex: rapidly changing technology means keeping up with the variety of eComms, or electronic communications, used by businesses and applying decades-old regulations to new functionality is more challenging than ever before.

The increasing focus on the proper surveillance and capture of eComms has raised eComms compliance to the top of many financial institutions’ priority lists.  With that renewed focus, a discussion has emerged about how to define what types of technology involve eComms and how to identify and track where eComms are emerging across the organization.  While it would intuitively seem to be rather straightforward to identify an eComm, it is actually much more challenging to pin down a definition.  And the regulations are often vague – declining to firmly define an eComm with the recognition that such definition may change with technological development.  For example, an eComm is not always interactive, but can be static postings.  An eComm is typically “written”, but “written” does not necessarily mean in words, with emojis, stickers, giphys, memes, pictures, and more being used for routine communication.  Real-time visual aids, like Whiteboards and polling, have now progressed in in development and use and have been recognized as eComms.  

There are also many practical implications to the renewed focus on eComms.  First and foremost, many emerging and changing technologies contain eComms.  Business units often want the latest and greatest technologies and functions, which usually include eComms, and these technologies and functions cannot be ignored. 

Second, while the regulations and regulators are quick to emphasize that the obligation to retain eComms is based on content and not technology or format, trying to retain eComms based on the content of the communication when millions or tens of millions of eComms flow through the organization every day, is infeasible.  Further, the content required to be retained depends on the type of regulated entity.  For example, broker-dealers need to retain communications related to the “business as such” for 3 years, Investment Advisers need to retain specific types of communications for 5 years from the end of the fiscal year, and swaps require “full, complete and systematic” records be kept for the life of the swap plus 5 years.  

Financial institutions must be proactive in their pursuit of eComms compliance.  The stakes are high, potentially in the hundreds of millions of dollars, and numerous financial institutions are currently subject to regulatory investigations.  Don’t be next. 

Learn more in our eComms compliance for financial institutions: What are eComms? podcast episode.