As the FT notes in an email this morning:
As Brooke Masters writes in this week's column, governments and companies have long known they must capture important communications for litigation and regulatory purposes — and yet Citibank, Morgan Stanley and other Wall Street banks have been hit with fines of $200mn apiece for failing to preserve text and WhatsApp conversations on bankers' personal phones.
It is absurd that no-one seems to have thought about the risks of bankers using their own devices, even after working from home during the pandemic made supervision much more problematic.
I agree with this argument. Of course, these banks should have kept records, including of actions taken on private phones. And of course, they should have been fined for not doing so. Record keeping is at the core of accountability.
But, let's recall that our courts have found that this standard does not apply to our government, where the very obviously dodgy actions of ministers have not been documented for reasons never properly explained.
I dislike the risk of corruption in banks. I dislike it even more in government.
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There are a few things I want to say about this. but they might be compromising so I will send you a Whatsapp… Oh, wait, that’s not private anymore. Let’s meet for a coffee instead – or are they bugging the cafe? Perhaps, a sly meeting in the park “Tinker, Tailor, Soldier, Spy” style?
No, seriously, this is a difficult issue.
First, everyone I know in the banking industry is pleased to have all their communications recorded. They are rarely ever looked at/listened to and if they are it is usually to clear up confusion over a transaction. However, they are also the first (and often only line of defence) if there are accusations of wrongdoing. Taped calls and e-mail trails have kept several friends/acquaintances out of trouble/jail over the LIBOR rigging scandal. (Incidentally, the one key call between BoE Deputy Governor Tucker and Barclays CEO Diamond that cost Diamond his job and Tucker the Governorship was not recorded – if it had have been I suspect a huge amount of time and effort all round could have been saved). The point here is that the vast majority of bankers are happy to have anything and everything recorded and stored as long as they are confident that they will only be used when appropriate.
Second, crooks will always find a way to communicate away from prying eyes/ears. Tracking their comms will make it harder for them but in the end we know they will find a way. Ultimately, it is only “by their fruits ye shall know then” and this is where enforcement should be beefed up (unusual price movements to indicate insider trading etc.).
Third, what expectations can an individual have of privacy when communicating with family and friends – and what if those family and friends are clients/competitors/colleagues. Many years ago the US Treasury trader at the firm I worked for was married to her counterpart at another big firm. How do you police that?
Overall, I think the rules (in finance) are as good as they can be. Record all you can and make the presumption that erasure (or failure to record) is a sign of guilt…. and that is what the fines are about as banks discover (to their cost) what is expected…. and then respond. (Eg. a 35 year Morgan Stanley veteran was dismissed instantly for just using Whatsapp… even though the contents were totally innocuous).
On your point about our politicians, I agree. Perhaps they should be held to the same standards as banking.
Your last point was my point
Makes me think of the Good Law Project. They have challenged the government on numerous occasions, but Johnson was allowed to get away with saying he had lost his phone with the Whatsapp messages on it.
https://goodlawproject.org/news/just-how-successful-are-we/
It seems the secret service also didn’t.