[HN Gopher] JPMorgan hit with $200M in fines for letting employe...
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JPMorgan hit with $200M in fines for letting employees use WhatsApp
Author : hassanahmad
Score : 127 points
Date : 2021-12-18 14:52 UTC (8 hours ago)
(HTM) web link (www.cnbc.com)
(TXT) w3m dump (www.cnbc.com)
| vmception wrote:
| I don't actually like this dual agency enforcement action at the
| same time, when Gary Gensler at the SEC was also chair of the
| CFTC several years before.
|
| Its really clear that he is coordinating this and making it more
| likely to stick by splitting each cattle prod between the
| agencies.
| rp1 wrote:
| This would be more convincing if you had specific reasons,
| unrelated to the enforcement, that JPM shouldn't be punished
| for this.
| vmception wrote:
| no, I don't, I think Gary Gensler is uniquely dangerous and
| that the oversight is inadequate. Its not about JP Morgan.
| Its about him exercising his craftily accumulated power.
| Would have totally flown under my radar if it was just the
| SEC for now, or just the CFTC for now. But the simultaneous
| thing rings the alarms for me.
| rp1 wrote:
| Normally people say that power is being wielded dangerously
| when the power is used to do something disagreeable. Simply
| enforcing the law correctly doesn't seem dangerous to me.
| aftbit wrote:
| More perceptive people separately consider the means and
| goals. Just because power is currently being used in a
| way that you agree with does not imply that the power is
| not dangerous. See "nothing to hide, nothing to fear" and
| "think of the children" as distractions to keep people
| complacent while excessive power is accumulated. After
| that, the excuses become unnecessary and the power can be
| used for any goal, aligned or unaligned with the people.
| rp1 wrote:
| You still haven't given an example of how coordinating
| the two agencies can lead to a bad outcome. If all that
| can be done is enforce the law, then there is no issue.
| You keep implying something extra-legal can be done
| through the coordination, but aren't providing any
| specifics.
| vmception wrote:
| oh, context is important then. those agencies are
| bullies. many times they operate under broad and
| ambiguous fraud/compliance statutes that don't
| specifically codify the infraction they disagree with.
| this puts all market participants in a constant guessing
| game with them, some more than others. so its Christmas
| and they want a kickback before the end of the year,
| whatsapp bro? send the money to our Miami field office,
| kthxbai.
| Barrin92 wrote:
| that's a feature and not a bug because a regulatory
| agency without leeway and too strict formal requirements
| in reality has no ability to deal with actors who know
| how to maneuver around them and is toothless.
|
| That market participants don't know how far an agency can
| go is equivalent to Israel's nuclear policy, little bit
| of ambiguity and uncertainty has a deterrent effect. And
| if anything given how routinely market participants still
| abuse every little trick they can regulators aren't scary
| scary enough.
|
| And no offense but you've got "fintech, commodities and
| digital assets" in your bio, are you by any chance making
| money off some underregulated crypto scheme and have been
| at the receiving end of regulatory action?
| vmception wrote:
| Hahaha good catch, no, have not been sanctioned by a
| financial regulator :) like, I would be defensive about
| that but its a routine question every financial
| institution asks during onboarding or account creation
|
| I've felt similarly about these agencies long before I
| brushed against their purview
| wfh wrote:
| (do not work in finance so excuse the dumb question but) if there
| is this requirement for all employee communications to be tracked
| for compliance purposes, how are/were face to face meetings
| recorded? Or just chatting in the corridor? Is that not allowed?
| nata79 wrote:
| They're required to keep minutes from face to face meetings for
| compliance. Of course people still talk informally but they
| need to know to constraint what they talk about in those
| circumstances. This likely was triggered because some employees
| were using whatsapp to evade compliance checks on topics that
| should have been regulated.
| throwaway_2009 wrote:
| The headline here reads a bit like "person takes mask off to eat
| a sandwich".
|
| Obviously people use messaging software with their colleagues.
|
| The correct solution is to design systems in which that isn't an
| issue. If you need to monitor what people are saying at all times
| then you have far bigger problems.
| ourmandave wrote:
| JPMorgan has been fined 191 times for over $35B since 2000.
|
| https://violationtracker.goodjobsfirst.org/parent/jpmorgan-c...
|
| "Oh, $200M? Yeah just stack it over there with the others. 'k thx
| bye."
| walrus01 wrote:
| a few months ago somebody in NYC asked me if I felt unsafe
| temporarily living in a certain part of Harlem.
|
| my response was, paraphrased: "no, you want to know where the
| actually dangerous criminals are? down near wall street/broad
| street/beaver street".
| sidpatil wrote:
| Title from article: "JPMorgan hit with $200 million in fines for
| letting employees use WhatsApp to evade regulators' reach"
| johnhenry wrote:
| Without the regulation part, the titles makes it seem like an
| easily dismissible bureaucratic issue.
| [deleted]
| simplezeal wrote:
| In my last trip to South Asia I was surprised banks using
| WhatsApp to request identification documents.
| xwolfi wrote:
| What matters is to they keep record of these whatsapp requests,
| not that they use whatsapp. If they screeshot all the chats one
| by one print them and airmail them to the SEC in postcard
| format, this is still ok. Saying "oh snap we dont know why we
| traded 5M of this just before a market moving event because we
| lost employee communication" is not ok.
| raymondh wrote:
| Accountants, traders, executives, bankers, etc all have strict
| rules designed to avoid the appearance of impropriety. However,
| it seems that members of congress are held to a much lower
| standard.
| tibbetts wrote:
| I'd be pretty embarrassed if I was JPMorgan and I hadn't profited
| at least ten times that much from illicit private messaging.
| Aunche wrote:
| If you were profiting from from private messaging, it would
| either be at the expense of your employer or your client. Even
| if the second case, JP Morgan is taking on reputational risk,
| so at the very least they wouldn't encourage it.
| dundarious wrote:
| JP Morgan is _notorious_ for profiting at the expense of
| their clients, even to the extent of calling clients names in
| internal communications when they're selling them "solid
| investments" that they know are junk. They've been charged
| with 5 felonies in the last 7 years or so, always with
| deferred prosecution agreements and multi-year probation, but
| enforcement is still rather weak, considering the net profit
| they've been able to achieve from those actions. And I don't
| think it's unreasonable to assume that is only the tip of the
| iceberg.
|
| It's a large organization, sure, but at this point one has to
| ask just how much they "wouldn't encourage it" or how much do
| they actually institutionally discourage it.
| gruez wrote:
| What type of illegal activities were they doing that generated
| $2B in profits over 2 years?
| overcast wrote:
| Insider trading, market manipulation, every trick possible?
| tibbetts wrote:
| I certainly don't know. Maybe they didn't, in which case it's
| embarrassing.
| LatteLazy wrote:
| Ten times 200m would be 2bn. JPMs revenue is 36bn. So you have
| to make over 5% of the companies whole revenue just from your
| WhatsApp account.
|
| And that's just revenue. If the profit margin on your deals was
| 20% (pretty whopping for banking services) you'd need to bring
| in 10bn in revenue. That would mean doing maybe $1tn worth of
| deals.
| jeidz wrote:
| Does this mean that WhatsApp is secure or that this particular
| agency didn't care enough to break the encryption?
| avsmithy wrote:
| No, they were fined because bankers must only communicate via
| channels that are monitored. By using whatsapp, they bypass all
| the internal and external audit/compliance teams.
| malshe wrote:
| The SEC is pretty much a nobody when it comes to 3-letter
| agencies. See how Elon Musk challenges them publicly and all he
| got in return was a slap on the wrist.
|
| On a related note, the major issue with the SEC as highlighted
| by every knowledgeable commenter is that they have a revolving
| door shared with the same banks and organizations they are
| supposed to monitor. People leave SEC and join Goldman Sachs or
| JPM and then when new administrators come in they rejoin the
| SEC. It's corruption at an unprecedented level.
| xwolfi wrote:
| He got much more than a slap on the wrist, he go removed from
| his chairman incestuous position from Tesla. It's the first
| red flag of bad governance when the CEO is also the chairman
| (others are to have the board full of family members and
| overly paid sycophants, I let you google who s on Tesla
| board).
|
| This will eventually be the starting point of a very slow
| reform at Tesla, so not a bad deal.
| shukantpal wrote:
| > See how Elon Musk challenges them publicly and all he got
| in return was a slap on the wrist.
|
| Publicly challenging them is not illegal or even bad so that
| seems reasonable.
| bidirectional wrote:
| If WhatsApp encryption can be broken, there is no way the
| agencies capable of doing so would share it with the lowly SEC.
| That would be a top level state secret.
| paganel wrote:
| On top of that I assume that the NSA (mostly) still has a
| PRISM-like programme in place, it would be foolish to assume
| otherwise. More exactly I do think that they (NSA and some
| other agencies) still have direct access to the servers of
| Google, MS, Facebook and Apple.
|
| But I 100% agree with you, such lowly use-cases like the SEC
| chasing some bankers don't register on NSA's (and similar
| agencies') radar, it's only money, after all, I think they're
| more interested in dealings involving power itself.
| gruez wrote:
| unknown. seems like they were being punished because their
| employees used whatsapp for business communication, not that it
| was discovered the employees used whatsapp and did something
| illegal
| cameronh90 wrote:
| I work in finance and, for compliance reasons, we've been trying
| to stamp out employees using WhatsApp but it is basically
| impossible.
|
| No matter how much we threaten disciplinary action in our
| handbook, people still use it, they just hide it more. Obviously
| we have no way of proving it, but we can see people doing it when
| the office is open. The financial regulator says we should use
| technology to reduce WhatsApp use - but given it's happening on
| personal phones, I'm not sure what we're supposed to do.
| Obviously nobody would accept company spyware on their personal
| phone.
|
| Is there some solution to this issue that I'm missing?
| throwaway_2009 wrote:
| Lobby to change the rules because they're ridiculous, or
| develop a method that makes it impossible for them to get
| caught?
|
| It just makes no sense to me on the face of it. What do you do
| if they have a chat in the pub after work, bug the table?
| salawat wrote:
| Why exactly is WhatsApp a problem?
|
| After further reading I'm torn. This feels like regulatory
| overreach. The only measure I can think of is supplying a
| company phone and doing everything possible to encourage people
| to only use their personal phone for non-business work.
|
| This is up to and including being tolerant of personal use of
| company phones within reason.
|
| Otherwise, you're hosed. There's really no way to comply.
| Strangely enough, I'm both in favor of, but abhor this type of
| regulation.
|
| Yes. White collar insider trading needs this type of draconian
| control to chart info flow...
|
| Yet yeeech! It makes me want to puke. I do not envy you.
| Godspeed.
| lhnz wrote:
| No doubt widespread and certainly not a good idea for oversight,
| however, the insinuation that all usage was due to employees
| wanting to avoid oversight isn't correct. Particularly during the
| pandemic, employees were forced into communicating using
| messaging software and many prefer to communicate using software
| with a good user experience.
|
| The messaging software used within banks (e.g. Symphony) is
| really awful and it is particularly bad when you're no longer
| able to speak to clients in person.
|
| They should improve the messaging software they use, on top of
| getting everybody to do the training for the 100th time, etc.
| lordnacho wrote:
| I've worked in finance for a long time, I don't buy this line.
| People are getting told all the time that they need to use
| certain tools, they know what the rules are. You can't just set
| up your own line to clients just because it's convenient.
|
| It's not like everyone is doing illegal stuff just because they
| can set up WhatsApp either, it's just it's been drilled in so
| many times, there's no excuse.
| tata71 wrote:
| Your experience is anecdotal, and I have anecdotal experience
| directly to the contrary.
|
| Laws don't stop people who don't know, don't understand,
| don't care, or some combination.
| sdenton4 wrote:
| It's the responsibility of the multi-billion dollar
| financial institution to ensure that their employees know
| the rules via regular trainings. This isn't mysterious.
| lordnacho wrote:
| Sorry but what is anecdotal about this? It's well
| documented that there are rules that people are told.
| blitzar wrote:
| > Laws don't stop people who don't know, don't understand,
| don't care, or some combination.
|
| There is litterally zero opportunity to not know or
| understand. The only reason to flout the rules is if you
| are either stupid, hate getting paid your bonus or straight
| up want to be fired.
|
| Annecdoteally, I have personally been involved with
| multiple firings of people for breaking these rules. Not a
| single one is emplyable within the finance industry as a
| result.
| shukantpal wrote:
| > Laws don't stop people who don't know, don't understand,
| don't care, or some combination.
|
| So what? That doesn't take away from the credibility of the
| insinuation.
| mrcode007 wrote:
| The rules in finance are clear. On top of that, every year
| you have to certify and confirm that you followed them.
| Willingly certifying to the contrary on a legally binding
| document has serious consequences. Sometimes to the tune of
| $200M...
| maxbond wrote:
| I'd be interested to hear your counter anecdote.
| tomp wrote:
| No, it's correct. There's no reason to use WhatsApp, and all
| reason not to use WhatsApp, except if you want to avoid
| oversight.
|
| Working in finance, _in general_ , isn't "good user
| experience". Compliance manuals (reread yearly!), compliance
| training (e.g. anti-money laundering even for employees that
| have _no_ contact with any cash, bank accounts or clients),
| trading oversight /restrictions, ... But people do it because
| it is (might be) worth the money.
|
| "All communication must be recorded" is the least of these
| nuisances. People who avoid it are doing so willingly, for a
| reason.
|
| Edit: Also, judging by the title, this is next level bad:
| JPMorgan "letting" means they _knew_ and didn 't do anything
| against it (e.g. fire employees or report them to the
| authorities). Normally the punishment for these kinds of things
| is severe, you can easily get "cannot ever work in finance
| again" by the regulator.
| xwolfi wrote:
| The argument the SEC presented however is that it hindered
| investigations which means it was extreme. There s no excuse
| dropping an email with the details of the communications out of
| channel was impossible, even by hiding the fact it was out of
| channel: after all you could meet the client on premise and
| discuss the same things with no record and everyone would agree
| an email memo should be shared.
|
| Here it feels like it became completely normal to take decision
| completely out of record, and with no way to trace who said
| what when, no way to defend themselves out of suspicion, which
| is why we keep records in banks in the first place.
| DisjointedHunt wrote:
| This is incorrect. When you work in a heavily regulated
| industry such as Finance, everyone knows the basic requirements
| of official record keeping and process. The industry has a long
| history of being hit with "slap on the wrist" type fines for
| things exactly like this ie, using unofficial tools and
| software to communicate.
| hellbannedguy wrote:
| Old slick Jamie Diamond knew exactly why his guys were using
| Whatsapp.
|
| "Federal law requires financial firms to keep meticulous
| records of electronic messages between brokers and clients so
| regulators can make sure those firms aren't skirting anti-fraud
| or antitrust laws."
|
| I'm shocked they were doing this since 2018.
|
| Diamond probally wishes he had this tech when he was an
| apprentance.
| brendoelfrendo wrote:
| One of the big things I was told repeatedly while working for a
| financial institution is that the appearance of impropriety is,
| in many cases, _just as bad_ as actual impropriety, and this is
| why. Oh, you avoided oversight because you wanted to have a
| better connection with your client? Well, too bad: everyone is
| now assuming the worst because assuming anything less is how
| people get away with the worst.
|
| And, frankly, it's hard to assume positive intent. These are
| bankers, they should know this. If they knew it and did it
| anyway, then yeah, I'm glad they got hit by the fine and I
| don't really have any sympathy for the blight of bad chat
| software.
| lhnz wrote:
| I agree that you can't discern the difference between the
| appearance of impropriety and literal impropriety and
| shouldn't try to.
|
| My point is that the existence of fines and non-stop training
| courses drilling in the correct messaging software to use to
| all employees doesn't end this behaviour. Do we increase the
| punishments or require more training courses to be taken?
| Will that have any effect?
|
| I'm suggesting that if we really care about reducing
| impropriety we should also improve the software in use.
| acdha wrote:
| The fines are what will make the software improve. Someone
| was slacking on that for years but now they have to pay
| enough that they could have lavishly staffed an entire
| company if they could use something like Teams.
| OnlineGladiator wrote:
| You're assuming they didn't make more than $200 MM by
| evading regulations. I'm willing to bet they made
| significantly more than this and will continue to operate
| profitably as that is their business. This fine is barely
| 1% of their quarterly profits.
| acdha wrote:
| I was responding specifically to this thread, which is
| not assuming malice but was arguing that bad software
| incentivized using WhatsApp. In that case, licensing or
| building anything would be cheaper.
|
| If this was done for malice, I agree that the fine would
| have minimal effect.
| OnlineGladiator wrote:
| Fair point. My mistake.
| acdha wrote:
| No worries -- I certainly wouldn't rule out malice from
| them but in this case general IT mishaps seems entirely
| plausible.
| xwolfi wrote:
| No I think it's never that simple. I would agree they
| shot themselves in the foot and it s fair game to assume
| as much, but in reality it was a sentiment of systemic
| impunity laced with laziness, most likely.
|
| This also means that since financial crime most arises
| out of opportunity rather than genetic predisposition,
| this would eventually have let to it if it had not
| already. The fact the SEC discovered it during
| investigations doesn't sound very good in that regard.
|
| And a lot of non finance people always dismiss fines
| because they sound small vs the whole group profit, but
| damn 200 mil it s a team entire year of profit and it
| would fuck me to hear the bank had to give it back
| because assholes couldnt get bothered to transcribe
| whatsapp into emails at the very least.
| OnlineGladiator wrote:
| I hear these arguments over and over again. 'The fines
| are significant and surely it won't happen again!' And
| yet, the same things keep happening over and over and
| over again.
|
| Please point me towards some examples where these types
| of fines actually changed how companies do business,
| because as far as I can tell they keep getting fined for
| the same things over and over again and they keep making
| record profits!
|
| I can dig up examples where banks are fined hundreds of
| millions when they made billions. Why should I believe
| this is any different?
| ByteJockey wrote:
| Does this mean that we're training bank employees that "If
| something looks bad, you might as well do the actual bad
| thing because the punishment is the same"?
|
| Could this have the effect of actually increasing incidents
| of bad behavior?
| xwolfi wrote:
| No, it has the opposite effect on me, a bank employee, to
| immediately report everything weird because even if I do
| nothing wrong, want banks to behave legally, and have never
| personally traded a stock in my life, the appearance of
| impropriety is just as bad as actual dishonesty.
|
| Never did it make me think I could just as well front run
| clients with a secret account since forgetting to disclose
| an old account I never used was bad too. I declared late
| that old account and apologized instead, for instance.
|
| I think these rules are, like all rules, also mostly to
| draw responsibilities in case of trouble: they do nothing
| to prevent a criminal to crime, but once the crime is done,
| he cant claim he did everything by the book if the book was
| so clear.
| known wrote:
| "It takes 20 years to build a reputation and five minuted to ruin
| it. If you think about that you'll do things differently"
| --Warren Buffett (b. 1930)
| spaetzleesser wrote:
| The beauty of the financial and many others ( see oil, tobacco,
| cable, health ) industry is that they have a bad reputation but
| still manage to be politically favored. Once you have achieved
| the status where your broad reputation doesn't matter as long
| you keep political leadership in check you really have won the
| game.
| [deleted]
| anadem wrote:
| An issue here may be that the people involved may think it's
| better to look clever than to be hide-bound
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