Banks Like Deutsche And Barclays Are Cutting Bonuses Of Employees For Using Unapproved Communication Channel WhatsApp in 2023.

Banks Like Deutsche And Barclays Are Cutting Bonuses Of Employees For Using Unapproved Communication Channel WhatsApp.

Several employees of Deutsche Bank would never have expected that using WhatsApp for business communications would result in salary reductions.

An industry-wide investigation discovered that employees were abusing the messaging system (WhatsApp), and as a result, the Bank was fined more than $2 million.

Following a thorough investigation into whether bank employees used prohibited communication channels, several global lenders paid fines to the Securities and Exchange Commission and the Commodities Futures Trading Commission totaling more than $2 billion.

Deutsche Bank is cutting the bonuses of the found-guilty employees as a punishment for the aforementioned workforce.

According to the Bank, the concerned employees broke corporate rules by using gadgets and messaging programs that were not authorized by the bank. As a result, their variable pay will be drastically reduced. Depending on the severity of the breach, they might be subject to disciplinary action, but their performance review and chances of getting promoted could also suffer.

The reduction will also have an impact on the prior year’s variable compensation.

In a statement, Deutsche Bank stated that they have a plan in place for handling the fallout from their decisions. Depending on the volume and caliber of the infractions, there will be an effect on performance reviews, individual remuneration, promotion, and disciplinary proceedings.

Investment bankers at Deutsche Bank are already expected to get a smaller bonus pool than they did the previous year. According to a survey, variable pay in the department that counsels businesses on acquisitions and issues financing and equity may decrease by 40%. The trading unit, which did significantly better than the other units, would probably receive a bonus boost of roughly 10%.

It was revealed that Barclays would deduct 500 million pounds from its 2022 bonus pool, in part as retaliation against employees who used WhatsApp and other messaging services. The British bank and US regulators also agreed earlier this year.

With 348 receiving more than €1 million in 2022, Barclays gave its highest-earning bankers multimillion-pound rewards.

Profits at Barclays’ investment bank fell last year, with fees plummeting 46% as a result of a decline in demand for stock market floatation and merger and acquisition transactions during the recession.

Deutsche Bank employee allegations

In case allegations of unlawful conduct, such as fraud or insider trading, occur, banks frequently investigate the talks workers have on earlier modes of communication (phone calls, emails, and instant messaging), and they preserve records.

Nonetheless, because messages are encrypted from beginning to end, more recent texting services like WhatsApp have proven problematic.

As the pandemic spread and more employees worked from home, concerns arose about how businesses would adhere to the rules regarding the retention of such recordings. Thereafter, the SEC’s inspections division issued a warning urging businesses to think about stepping up their record-keeping efforts.

This year, Deutsche Bank specifically included WhatsApp in a statement to staff, advising them not to erase any business-related communications from the app from their phones, according to sources. In the note, the bank’s anti-money laundering division reminded personnel that deleting those texts is against the corporate policy as well as American law.

To oversee the process, the German lender stopped WhatsApp and text messaging on company phones in 2017, but three years later, according to the wire service, deployed software enabling the platform.

The use of the app reached the highest levels of the organizational structure at Deutsche.

According to a person with knowledge of the situation, Deutsche’s board decided to impose the same fine on all board members to avoid singling out any particular person for using messaging services inappropriately and to instead send a “signal” to the supervisory board.

Other senior executives had to take a compensation cut last year due to the same problem. To solve the problem, new software has just been released.

Texting on private apps can cost fines for some firms

In a thorough investigation into how major financial institutions failed to keep an eye on staff communications on illegal messaging applications, US regulators struck settlements with a dozen banks.

To prevent unethical behavior, finance businesses are expected to meticulously monitor interactions affecting their business. Businesses began sending employees home quickly after the Covid-19 epidemic began, further taxing a system that was already under strain due to the proliferation of mobile messaging apps.

Bank employees often utilized WhatsApp and other text messaging services to talk with one another and others outside the bank between the years of 2018 and 2021, according to regulators, as opposed to using their work emails or other formal channels of contact.

Although it is customary for banks to keep correspondence on official emails, doing so is more difficult when the exchanges take place on private messaging platforms.

The firms’ conduct likely prevented the Commission from having access to these off-channel communications in multiple Commission investigations by failing to retain and preserve required records relevant to their activities.

The SEC discovered that numerous managing directors and employees at Goldman Sachs overseeing junior employees frequently used so-called off-channel text messaging services on their personal devices.

In general, severe fines for failing to keep accurate records have been hard to come by. The most recent significant SEC penalties for such behavior before the JPMorgan case was just $15 million against Morgan Stanley in 2006 for failing to deliver emails during examinations into initial public offerings and analyst research.

The largest CFTC fine was assessed against Bank of America, totaling $100 million, followed by fines of $75 million each against Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, Morgan Stanley, and UBS. Cantor Fitzgerald received a $6 million penalty, Nomura $50 million, and Jefferies $30 million.

As part of their adherence to industry norms, banks have historically insisted on archiving their business correspondence to make sure authorities may access them in the future if necessary. This approach has been hindered by the quick growth of private messaging services beyond the control of banks. 

Edited by Prakriti Arora