The wide adoption of WhatsApp in the financial sector is increasingly evident. As such, most industry regulators such as the Financial Conduct Authority (FCA) and Securities and Exchange Commission (SEC), and Financial Industry Regulatory Authority (FINRA) have tightened up their oversight efforts to ensure that no firms or individuals are using this platform to manipulate and rig the market.
FINRA, for instance, has warned investors to be wary of stock promotions (pump-and-dump scams) sent through WhatsApp as these messages could be coming from scammers looking to bait unsuspecting investors.
Here are five significant cases of non-compliant use of WhatsApp in the financial services industry that led to hefty fines and criminal charges for the following financial firms and individuals.
1. Fraudsters Use WhatsApp to Steal Banking Information
Every now and then, authorities warn WhatsApp users to ignore messages that prompts them to disclose their bank account details in order to continue their usage of the popular messaging app.
In July 2017, WhatsApp users received a fake messagewarning them that their “trial service” of the app is almost over, with a link to an alleged customer portal where users are asked to provide their banking details. According to Action Fraud, U.K’s fraud and cybercrime reporting centre, the scam is a “clever” tactic since the older users of WhatsApp “could easily think that the app has gone back to its subscription model” – a year after Facebook took over and made the service free for every user.
From November 2017 to January 2018, a gang of Taiwanese con artists have also successfully lured out hundreds of thousands of dollars by hijacking the accounts of WhatsApp users in Hongkong.
These con artists posed as the targets’ friends and claimed that their WhatsApp accounts were disabled and had to be set up again. They then told the targets that a verification code would be sent to their mobile phones, which they then instructed to send back over to them – not knowing those verification codes, were in fact, for their own accounts.
According to police reports, the scammers then used the hijacked accounts to buy point cards for online games on their behalf or transfer money into their own bank accounts.
2. Former-New York Director Using WhatsApp Jailed for Taking Bribes
Navnoor Kang, former portfolio manager at New York’s state retirement fund who was indictedin December 2016 for accepting at least US$ 180,000 of bribes from two bond salesmen – includinga US$ 17,400 watch, vacations, prostitutes, and drugs – was sentenced to 21 months in prison in July 2018.
Kang took bribes from Deborah Kelley, a former managing director at broker-dealer Sterne Agee, and Gregg Schonhorn, a former vice-president at broker-dealer FTN Financial Securities Group. In return, according to prosecutors, Kang steered state pension business to the two firms where the bond salesmen were employed.
According to the indictment, Kang and Schonhorn used WhatsApp in hopes of keeping their communications from being monitored by law enforcement authorities.
3. Ex-Jeffries Banker Fined For Boasting on WhatsApp
In March 2017, Christopher Niehaus, former managing director in the Investment Banking division at the global investment banking firm Jeffries, was fined £37,000 ($46,000) for sharing confidential information via the popular messaging app.
According to the FCA, Niehaus breached their standards and regulation by sharing confidential client information in a series of WhatsApp messages between January and May of 2016. The information was shared with both a personal acquaintance and a friend, who was also a client of the firm.
Niehaus resigned from Jeffrieswhile on suspension, pending the completion of the company’s disciplinary process. The FCA reduced his financial penalty from £53,140 ($68,000) as a result of Niehaus’ cooperation and agreement to settle at an early stage in the settlement process.
Conclusion
These cases only prove that financial companies that allow their employees to use WhatsApp should be implementing clear policies and the right business text message archiving solution that does not only capture and record mobile SMS but also flags suspicious WhatsApp messages as well.
TeleMessage’s WhatsApp Archiver is a unique enterprise messaging platform tailor-made to solve WhatsApp compliance and regulation issues by allowing financial firms to capture and archive WhatsApp messages. This platform works exactly like the standard WhatsApp application, ensuring that employees will still be able to send work-related communications easily and quickly and that you remain compliant with various WhatsApp regulations as well.
The benefits of using WhatsApp Archiver in your business include:
- Archive all WhatsApp communications
- Use WhatsApp to communicate with customers, employees, and stakeholders
- Search, track and retrieve WhatsApp messages in the corporate archive
- Deposit WhatsApp messages with any email archiving vendor
- Full administration and reporting
The TeleMessage WhatsApp Archiver is the latest addition to our mobile archiving products that securely capture content from mobile carriers and mobile devices for a variety of ownership models (BYOD, CYOD, and employer-issued). With our multiple archiving methods, you can always find the right tools or blend for your requirements:
TeleMessage offers cross-carrier and international mobile text and calls archiving for corporate and BYOD phones. Contact us today to try our mobile archiving products.
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