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JPMorgan has fined $ 200 million for allowing workers to use WhatsApp to bypass government agencies

JPMorgan Chase has agreed to pay $ 200 million to two U.S. banking agencies that will allow workers to use WhatsApp and other platforms to bypass state records.

JPMorgan Securities has agreed to pay $ 125 million after admitting “widespread” record violations in recent years, the SEC said Friday. The bank was also fined $ 75 million by the Commodity Futures Trading Commission for allowing improper communications since 2015.

SEC officials said JPMorgan’s refusal to record offline conversations violated U.S. securities laws and made regulators forget about customer exchanges.

In order for regulators to ensure that companies are not circumventing fraud or antitrust laws, financial firms must maintain detailed archives of electronic messages.

A protracted dispute between regulators, banks and employees over personal devices continues. When the coronavirus pandemic broke out, Wall Street went mostly dark. Trading in encrypted messaging apps such as WhatsApp, Signal or Telegram has prompted the regulatory authorities in New York and London to tighten the recording standards.

While official business devices and software platforms store phone calls and SMS, third-party apps are more difficult to monitor.

Incriminating messages from chat rooms have been used in two of the industry’s biggest trading scandals of the last decade, involving manipulation of the Libor and currency markets, culminating in billions of dollars in fines for banks.

This practice has resulted in the firing or suspension of traders at JPMorgan, Morgan Stanley, Deutsche Bank, and others. But the SEC regulation revealed its ubiquity.

The SEC said JPMorgan’s practice of going offline to communicate is widespread, with even compliance managers and executives using personal devices to convey important corporate concerns.

Apart from recognizing agreements with the two agencies, JPMorgan declined to comment.

The SEC said JPMorgan had also agreed to hire a compliance advisor to evaluate its policies and training. The bank has already started updating the employee software, the SEC said.

To prevent market oversight, registrants must ensure that their contacts are properly recorded and not conducted outside of formal channels, SEC chairman Gary Gensler said in a press release.

Gensler cited the 2013 foreign exchange crisis, when traders from many large banks conspired to manipulate foreign exchange prices to maximize profits.

To end the investigation, five of the world’s largest banks, including JPMorgan, agreed to pay over $ 5 billion in fines and pleaded guilty.

SEC audits and enforcement processes are made easier with book-and-record requirements, Gensler said. “They strengthen our system.”

The $ 125 million fine is the SEC’s largest ever fine, but the bigger risk for JPMorgan is its reputation. The SEC has warned the sector by targeting JPMorgan, the world’s largest Wall Street company by revenue.

This is a huge win for SEC director Gurbir Grewal, who has been warning of stronger enforcement for months.

“Robust enforcement of laws and regulations regarding required disclosures, misuse of non-public information, record-breaking breaches, and obfuscation of evidence by the SEC or other government agencies,” he said in October.

Grewal also focuses on methods the SEC could use to prevent wrongdoing in the first place, which he describes as “prophylactic” tactics.

Grewal has stated that he will proactively urge guilty companies – like JPMorgan – to openly admit their violations.

“When firms fail to adhere to record-keeping, as JPMorgan has done, they directly undermine our ability to protect investors and maintain market integrity,” Grewal said in a statement Friday.

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