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How to ensure you are recording the right communications

Part 1 of a 3-Part Blog Series on Compliance Assurance

In our last Blog Post, NICE’s Patrick Botz highlighted the key questions financial institutions need to ask to know if they’re ready to comply with today’s rapidly expanding financial communications compliance requirements. These questions centered on three main areas:

  1. How to ensure the right communications are recorded
  2. How to ensure you can prove compliance
  3. How to ensure you can retrieve, synchronize and share recorded communications related to transactions

Recently I sat down with NICE Financial Communication Compliance Marketing Director Arno Sybrandy, to delve deeper into the first topic area - How to ensure you're recording the right communications.

Is the regulatory landscape changing? And what does this mean in terms of ensuring the right people are being recorded?

Arno Sybrandy: In the past, financial institutions only had to record their trading floors. With MiFID II they will have to record everything. Any and all communications around trades will need to be recorded. That includes the pre-stage part of the trade. For instance if an advisor or consultant is giving advice on a trade, that will need to be recorded. Also, as the trade is being processed by administration, any back-office communications around the trade will need to be recorded as well. So regulatory changes now mean that recording is expanding far beyond the trading floor, to the front office, back office, and everything in between. Anything potentially having to do with the trade needs to be recorded.

The implication for banks is that they need to start thinking about where all of the conversations around trades take place, and plan accordingly. Which departments? Which employees?

The good news is – technology can help. Whether inbound or outbound, pre-, during- or post-trade, front-office or back office, fixed or mobile – NICE COMPASS can help banks capture and manage the full spectrum of communications. It provides a central location to capture and analyze all communications for trade reconstructions. And it’s easy to research where the trades came from, who provided advice, which trader transacted the trade, and which individual in the back office processed the transaction. Since all this information is captured and managed on the same recording system, it’s much easier to do investigations and trade reconstructions.

I understand also that MiFID II also imposes stricter regulations for the types of communications that must be recorded and monitored? How can firms ensure they’re in compliance?

Arno Sybrandy: That’s true. Under MiFID II, firms must ensure that all conversations for all regulated employees are being recorded, to protect against fraud and manipulation during communications. So now, in addition to thinking about where conversations around trades take place, they also need to consider how those conversations take place, in other words on which devices. In the past, maybe they recorded trading turrets and desk phones, but now they also need to ensure they’re recording mobile phones. It’s no longer sufficient for a firm to simply tell traders they are not allowed to use their mobile phones. The onus is now on the financial institution to ensure these communications are being recorded. Fortunately, NICE Trading Recording integrates with virtually every compliance mobile provider, as well as leading mobile carriers around the world, to make mobile recording seamless.

What about recording quality? Is that more critical under the new regulations?

Arno Sybrandy: Definitely yes. As I stated above, MiFID II explicitly states that firms must record all conversations, so firms can no longer get away with saying a call was either not recorded, or poorly recorded, due to some technical glitch or failure. That would be unacceptable to regulators, even more so under MiFID II. So it’s very important that firms make sure all interactions around trades are being recorded, and that they’re doing so in a quality way. Typically, if one recording is bad, others will follow suit, and a whole day’s or week’s worth of recordings could be useless. If this goes unnoticed until the moment a call is requested by a regulator, it’s too late.

NICE COMPASS addresses this problem by performing technical quality checks as it’s recording. It looks for excessive noise, silence, and other attributes to assign a quality score to each call. If the score falls below a certain threshold, the application automatically initiates a real-time alert to a system manager, so any unforeseen issues can be quickly resolved.

What about timely response to regulators?

Arno Sybrandy: MiFID II raises the bar on this as well. In the past, when there was an investigation, IT managers had all the time in the world to look for a call. But MiFID II now says that requests from regulators must be fulfilled in a timely manner. This will put huge time pressures on compliance managers.

Thankfully, NICE COMPASS offers a centralized search engine that compliance managers can use to find calls for any trade or transaction, using rich metadata, like trade or trader IDs. You can search for all calls for a trader during a specific period, regardless of whether those calls were handled at the trader’s desk, turret, or on his mobile phone.

What about new modalities, like Skype for Business and Cisco Spark?

Arno Sybrandy: This is a new trend we’re seeing. I know of at least two large global banks that are now using Skype and Cisco unified communication platforms for trading communications, and we expect many more to follow suit. Again, MiFID II requires that firms record everything, including these new modalities. For the purpose of recording and monitoring, NICE Skype for Business Recording treats these new communications platforms just like any other device type.

How can financial firms learn more?

Arno Sybrandy: Below are some links to resources that compliance and IT managers can explore to learn more on this subject.

 

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