American supervisory authorities have imposed high fines on Deutsche Bank and numerous other banks because they did not store electronic communication with their customers at all or only inadequately.

This is due to the fact that bank employees, especially in the capital market business, exchange information with their customers via smartphones with services such as Whatsapp or Signal, and business and private life are then quickly mixed up, especially when working from home.

In addition, chats cannot easily be stored for years on many of these services and databases, which is often required by banks for business communication.

Hanno Mussler

Editor in Business.

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The US Securities and Exchange Commission fined 16 banks for insufficient documentation and storage of customer conversations with a total of 1.1 billion dollars.

The SEC imposed the maximum fine of 125 million dollars on eight banks: Deutsche Bank, the Swiss banks UBS and Credit Suisse and the British Barclays, as well as the four American houses Goldman Sachs, Morgan Stanley, Citi and Bank of America.

Waiver of bonuses

The US futures market regulator CFTC also imposed fines totaling $710 million.

Bank of America received the highest CFTC fine at $100 million, followed by Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, Morgan Stanley and UBS at $75 million each.

The largest US bank, JP Morgan, had accepted a fine totaling $200 million months ago.

The board of Deutsche Bank has announced that it will waive EUR 75,000 in bonuses due to cultural misconduct by employees.

Deutsche Bank claims it took action against employee misconduct as early as December, prior to the start of the regulatory investigation in the United States.

The use of private mobile phones for customer calls is prohibited.

A new program called "Movius" was initially made available to employees in the capital market business in the USA for their business smartphones in the spring.

It is designed to ensure Whatsapp messages are stored longer.

“Deutsche Bank has fully cooperated with the regulators on this industry-wide issue.

The bank has also introduced new technical solutions for text and chat messages that are easy to use and in line with legal requirements.

We will continue to expand these solutions,

According to reports, Deutsche Bank has already made provisions for the fine of the two US authorities totaling 200 million euros.

The fine that has now been imposed will not lead to any further impact on Deutsche Bank's business figures in the third quarter.

German supervisors are also taking a closer look

Other financial groups also admitted the facts presented by the SEC, as the authorities have now announced.

Accordingly, they acknowledged that their behavior violated the record keeping requirements of the federal securities laws.

The banks have begun implementing improvements to their compliance policies and procedures, they asserted.

Only recently, however, did the German banking supervisory authority, consisting of the Bundesbank and Bafin, initiate an investigation into the extent to which banks properly document and store communication with their customers.

Financial companies are also required in Germany to closely monitor communications related to their business to prevent inappropriate behavior.

As soon as official agreements are not made verbally but in writing, they must be stored in banks for longer than the three months specified by the German financial regulator Bafin in the minimum requirements for risk management.

If, for example, telephone calls are to be recorded, the European financial market directive MIFID II now assumes storage of up to 5 years.

The storage of documents is not regulated by "banking law".

However, both commercial and tax law require retention periods of at least six to ten years.

In addition, the banks would also have to observe statutes of limitations: At least 3 years after the end of the year and more if claims for damages should be pending here.

SEC: Trust damaged

However, this longer storage is not likely to take place if chats are exchanged via services such as Whatsapp, Signal or databases - as is increasingly the case in the home office.

Private and official content are also often mixed up.

This accelerated when banks and fund companies sent almost all of their employees to work from home shortly after the start of the Covid 19 outbreak.

"Finance is ultimately built on trust," said SEC Chairman Gary Gensler.

By failing to meet their record-keeping obligations, the fined market participants failed to maintain that trust, Gensler said.

In view of technological change, it is all the more important that bank employees communicate about business matters exclusively via official channels and that they document and store this communication.