NEW RULES, NEW SOLUTIONS.
New rules, introduced under the Dodd-Frank Act, require that financial institutions record their mobile communications, including calls and texts. Here, Paul Liesching, Senior Vice-President of Truphone Mobile Recording, explains the new regulations and how firms can meet the challenges.
What exactly are the new Dodd-Frank regulations and which institutions are affected?
The mobile recording rule, introduced under the Dodd-Frank Act, applies to swaps traders and swaps participants. It requires institutions to record not just trading-related phone conversations, but also text messages, instant messages and email, and retain this data for 12 months. The regulations came into force on 31st March this year, but the deadline was then extended until 21st December this year. We believe about 275 US organisations are affected, but the interesting thing about the Dodd-Frank Act is that it’s global in reach. So, some Tier 1 banks will need to record users in 30 countries around the world, which is a very unique challenge. In the US, we believe 50,000-70,000 mobile phone subscribers could be covered by the Act.
How do mobile recording regulations compare in the rest of the world?
Rules governing the mobile recording of transactions in equities, bonds, derivatives and financial commodities have been in place in the UK since November 2010. The UK moved first and became a test bed for mobile recording, then the US legislated and now Asia-Pacific is picking up on the ripples of that wave. We’re anticipating a mobile phone directive to be included as part of MiFID II, while Japan has just legislated and market interest in Singapore, Australia and Hong Kong is growing.
What challenges face institutions implementing mobile recording rules?
Probably the biggest one is cultural resistance. The mobile is very personal: you take it on holiday; it sits on your bedside table; you run your life on it. So individual privacy and confidentiality are issues particularly in the US, where revelations that the government is recording citizens’ conversations have been controversial. But the fact is that on any trading desk, traders are using a plethora of communications media – phones, computers, squawk boxes – and all content is recorded. And the employee knows it’s recorded. Mobile recording is just the next step. Once people use the technology for a week or two, they embrace it. At one Tier 1 bank we took on in 2012, for example, mobile usage did drop when recording was introduced. Within about a year though, usage had increased ten-fold: people tried it, it worked and confidence grew.
What options are open to institutions to ensure compliance with mobile recording rules?
The seemingly cheapest option is to manage by policy and stop traders from using mobiles for transactions. Obviously that limits productivity though, which is why in-network recording services such as Truphone Mobile Recording are a better solution. They let you continue to use your phone as normal, with no loss of functionality or productivity.
Other solutions, such as application-based recording, or tying mobile compliance to fixed line compliance through the corporate PBX, are sensible. But these compromise the user experience. Calls get interrupted or delayed and the technology is cumbersome to use, creating a distance between users and their contacts. If there’s one lesson we’ve learnt, it’s that it’s end-users who matter most. If they don’t like a technology, they won’t use it.
The UK made all the mistakes, so nobody else has to. Even so, we see the same solutions offered in the US today that failed in the UK three years ago.
So what solutions do work?
Our solution is a tried and tested, purpose-built service which records voice and SMS traffic seamlessly and delivers a first-class user experience. It is built on Truphone’s unique centrally controlled globally distributed mobile network. Calls connect quickly with no interruptions and users enjoy the same experience overseas as they do in the UK. If I go to the US, for example, my SIM recognises my location on touch-down, assigns me a US number, gives me a local US experience and charges my employer local US rates. I’m no longer roaming. Connectivity and data connection times are the same as for a local user and I project a local presence to my contacts.
Because we have a global footprint, we can offer this local service in Australia, Hong Kong, Germany, the Netherlands and Poland as well as the UK and US. We can also record incoming and outgoing calls in 150 countries and incoming calls in an additional 50 countries.
We also record and store all voice and SMS data in our secure managed cloud, or on-site using a bank’s existing recording architecture if preferred, and can retrieve data quickly. That means clients can answer any transaction enquiries from US regulators within the 72 hour deadline, a difficult job if data is held in different silos. Apart from productivity gains, lower costs and the knowledge they can meet regulatory demands, banks also benefit from dealing with one supplier and handling one bill.
How secure and reliable is this new technology?
So far, we’ve been security-assessed by 60 financial institutions in tests sometimes taking up to six months, including two months of penetration-testing or active hacking. We also employ two world-renowned security companies to assess and attempt hacks into our systems. To date, we’ve had no breaches in any of our four storage environments, two in the UK and two in the USA, which are setup so that if anything fails in one, we swap all traffic over to another. We will be launching a further two recording and storage environments in APAC by the end of the year.
How secure is Truphone as a company?
We are one of the largest venture capital-backed telecoms organisations in Europe funded by some of the world’s most powerful, resourceful, savvy industrial investors (Ed: Roman Abramovich and Alexander Abramov have been publicly named as backers). They have completely endorsed our business plan and the reason we have their complete backing is they recognise that what we do is fundamentally game-changing. Our patented intellectual property and the investment required to try to replicate the technology are also massive barriers to entry for new competitors. In addition, our recent partnership with BT to market our mobile recording service in the US only strengthens our client base – which already includes 50 financial institutions, including four Tier 1 global banks.©Best Execution 2013