The FCA has presented its findings on its multi-firm review into off-channel communications (those that take place outside of monitored, recorded channels a firm has permitted), with the aim of sharing actions firms have taken to improve their management of such communications with other firms. While the review focused on wholesale banks, the findings are relevant to all regulated firms in scope of SYSC 10A.
Method
The FCA surveyed eleven wholesale banks to determine their approach to off-channel communications. The sample firms provided the FCA with details of their off-channel communication breaches, Management Information (MI) and policy enhancements.
Findings
The FCA reviewed actions of the firms in relation to their off-channel communication frameworks, surveillance, third-party vendors (TPVs), MI, breaches and consequence management.
Some notable findings include:
- Overall, all firms in the sample had improved their processes over the past two years.
- Large firms adopted a single, global recording and monitoring policy covering multiple jurisdictions. Firms should ensure that such policies meet the UK standards.
- Training played a key role in reinforcing expectations, particularly where it targeted specific roles and included scenario-based sessions incorporating real examples from surveillance.
- Breaches occurred across all staff grades, and 41% involved individuals at the director grade or above.
- There was an increase in TPVs facilitating the monitoring and recording of different communication channels. The FCA reminds firms that regulatory responsibilities in relation to SYSC 10A cannot be transferred to third parties.
Next steps
The FCA directs firms to consider the following questions:
- Do employees fully understand their responsibility to record all relevant communications?
- Does leadership set a strong ‘tone from the top’ and encourage a ‘speak up’ culture for compliance with SYSC 10A?
- Are there any unreasonable barriers preventing staff from following the policy framework effectively?
- Does the firm effectively monitor third-party vendors to ensure expected performance and reliability?
- Is the firm’s surveillance model well-aligned with its business model?
- Where a global framework is in place, do UK senior managers have sufficient oversight of its implementation and results?
- Do accountable executives receive the right MI to oversee compliance and assess surveillance effectiveness?
- Where patterns of non-compliance emerge, do accountable Senior Management Functions (SMFs) take prompt corrective action?
The FCA has stated that it will continue to explore firms’ approaches to off-channel communications.
What firms should do now
The FCA’s review makes clear that record keeping standards are under the microscope. Firms need to ensure that their policies and procedures are embedded, senior managers are held accountable internally, and any vendor oversight is robust.
Cosegic can help with reviewing your record keeping/communications policies and make sure they are in line with the FCA’s expectations.
