Compliance changes very quickly, especially in the digital arena, and regulations are moving as quickly as they can to follow the technology wherever it may lead.
This past year was an eventful one for digital communications governance. Hundreds of millions of dollars in additional fines were imposed by regulators and law enforcement in the United States, with the focus expanding from banks to include broker-dealers, investment advisers, and credit rating agencies.
And the US wasn’t alone in targeting this area, with the United Kingdom’s Prudential Regulation Authority sanctioning a bank, and Ofgem (the UK’s energy regulator) fining a firm for failing to capture wholesale energy trading communications.
Last year’s crystal ball was remarkably accurate, with unified communication and collaboration (UCC) tools cementing their position into the bedrock of the modern workplace. Communications compliance has become a board-level priority, and recordkeeping fines imposed by regulators have expanded beyond US banks.
Digital Communications Governance solutions provide methods to monitor and enforce corporate governance and regulatory compliance across a growing number of communications tools available to employees.
— New Gartner market category, July 2023
For 2024, Theta Lake has again looked into its crystal ball and tapped into its industry and regulatory insights to predict what financial services firms can expect in the coming year regarding digital communications compliance:
1. Regulatory focus will continue to widen to encompass all aspects of communications compliance. The $2.6 billion-plus in fines imposed in the last couple of years were mostly due to failures in capturing communications. There are already signs that regulators are expanding their oversight, imposing fines for wrongly deleted data, an inability to locate information, and poor supervision. Firms need to enhance all aspects of their information management and communications compliance, specifically their ability to respond to regulatory requests for information.
2. It’s not just a WhatsApp issue. The consequences of unmonitored communications will continue to trouble firms, with 74% of firms reporting that employees are likely still using unmonitored communication channels. Regulators will scrutinize all types of communication, requiring firms to capture everything from voice to in-meeting chat, including contextual elements like emojis, GIFs, reactions, deletions, and more.
3. The death of the desk phone. At least, the single-function desk phone for making and receiving calls is on its way out. The industry is rapidly shifting to cloud-based UCC phones, which integrate voice, SMS, chat, video, and collaboration features across multiple devices and locations. This transition will necessitate updates to compliance methods to ensure centralized data capture, search, and supervision.
4. Compliance archives will become increasingly unified. Firms have expressed dissatisfaction with their existing archiving tools, with 98% of firms voicing frustration. Siloed archiving and voice recording systems struggle with timely record capture and retrieval. This inefficiency will drive firms to unify their archives to meet supervisory needs and track communications across platforms.
5. Senior individuals will face sanctions. Firms and their senior management should have no illusions—fines for communications compliance failures are not going away. The regulatory discourse is increasingly swift, emphasizing zero tolerance and putting the spotlight on the C-Suite. Already, firms have taken action against senior individuals through clawbacks, demotions, and dismissals. In 2024, communications compliance will be a board-level discussion, with 40% of firms already addressing it at the board level.
6. Generative AI will revolutionize workplaces. Currently, 18% of firms view generative artificial intelligence (Gen AI) as pivotal to their future operations. As real-world implementations yield significant cost savings, this trend will only grow. The expanded use of Gen AI will create new channels of communication requiring robust capture strategies, as productivity gains lead to increased content and communications with new retention and supervision demands.
7. AI will enhance risk detection and review. The broader implementation of AI will allow firms to spot risks and manage the surge in communications beyond traditional detection methods. With mounting regulatory demands for transparency, organizations must be able to demonstrate the rationality of their AI models and outcomes, ensuring a human context remains in the decision-making loop.
8. Reconciliation will be a key compliance priority. Proving that a firm has captured all relevant communications—and possesses the supporting evidence to validate these records—will be vital for regulatory compliance. This capability will reassure the 74% of firms facing challenges in accessing and retrieving communications.
9. The unintended consequences of disabling UCC features will become costly. Many firms are disabling essential UCC features due to inadequate compliance tools. This leads staff to resort to unmonitored communication channels and diminishes the return on investment in UCC systems, as they are paying for features that remain inactive.
10. “Data is the new oil.” This well-known saying resonates as more organizations seek control over their data to harness its value. Issues related to data consolidation and the need to mitigate migration costs and dependencies on third-party providers persist. However, with direct control over data, AI tools can extract invaluable insights for compliance and risk management—without this control, firms risk underutilizing their priceless asset.
As we navigate through the future, anticipating the trajectory ahead will be crucial for not just survival but prosperity in a landscape characterized by constant regulatory scrutiny. By staying attuned to incoming trends and challenges, both firms and regulators can better mitigate risks and embrace potential opportunities. It’s evident that 2024 is poised to be a pivotal and transformative year for digital communications compliance and governance.