Regulation mandating the recording of all mobile communications leading to a financial trade has had far reaching implications for financial firms across the globe – and not just in the UK and the US where the regulators were the first to move.

In November 2011, the UK Financial Services Authority (FSA), now the Financial Conduct Authority (FCA), introduced a regulation stating that all financial institutions’ mobile communications must be recorded. The US-based Dodd-Frank Wall Street Reform followed the UK’s lead with a similar directive in early 2013.

The rulings on either side of the pond are similar, although the FCA regulation is applicable only to UK financial institutions, whereas the extraterritoriality nature of Dodd-Frank means that foreign banks must comply with the new regulations if they wish to continue to trade with the US.

Another important difference is that the US regulations currently only apply to firms engaged in SWAPS trading, and they require all mobile communications to be tagged and archived in such a way as to make them identifiable by transaction and counterparty and readily retrievable.

Becoming compliant has been a huge undertaking and represents a huge investment for CIOs. There have been privacy concerns, too, as traders have looked on the recording of their mobile communications as encroaching on their private space.

Unexpected wins

In a bid to buy time, many banks initially opted to comply by policy – that is, by simply banning the use of mobile phones for trading altogether. But slowly they have started to abandon this policy in favour of a more proactive approach.

And as the technology required for compliance has matured, firms have begun to realise unexpected wins from reviewing their systems and practices. New technologies are helping them make more channels available to more customers more flexibly and compliantly as well as upping their game in terms of best practice. They are also beginning to see that they can leverage the intelligent search tools required for mobile recording to gain business insights from the ‘Big Data’ captured – which will ultimately help them make better and more informed decisions that will give them competitive advantage.

Given the different nature of the rulings in the US and the UK, it is likely that different strategies will emerge to address compliance requirements. In the UK, a SIM-based approach, which involves inserting a new SIM into the trader’s mobile phone that can record relevant conversations, has won the day. Cloud storage has also come to fore as a means of archiving the recorded data. While it is too soon to say which technology will offer best practice in the US, more firms are currently using on premise data storage because of the more stringent archiving and retrieval requirements.

Repercussions

The repercussions of this new wave of regulation are being felt all over the globe. The largest banks in the US have up to 3000 legal entities worldwide and Tier 1 banking customers have interests in 52 countries around the globe, although in practice, says Truphone’s Paul Liesching, providing mobile recording capability in 13 of these geographies will meet 97.5 per cent of major Tier 1 banks’ requirements on average, with Australia, Canada, Hong Kong, Japan, Switzerland and the EU and being lead amongst them.

Asia Pacific and the other countries in the EU are likely to be the next jurisdictions to follow the lead of the US and the UK. Meanwhile Australia, which currently has no regulation requiring mobile recording, is actively looking to up its game to the level of the US and the UK to make it a more attractive go-to place for finance.

One thing is certain: it is too late to turn back the clock. A big challenge now confronting the markets is the consumerisation of technology and how to reconcile 'Bring Your Own Device' (BYOD) with the need to record mobile communications. Technologies like Skype and instant messaging are easy and cost effective collaboration tools that have already been adopted by consumers – and there will undoubtedly be continuing pressure for businesses to find a way to put a compliant wrapper around them so that they can be used in trading environments.