Did you know a tenth of HSBC’s workforce is in compliance? Or that the average corporate fine from the U.K.’s financial industry regulator increased nearly seven-fold from 2010 to 2013? Meanwhile, similar trends are being seen in the U.S. and around the world.
The regulatory clampdown is happening at the same time that technology is transforming our world. Just this month, New York State’s top financial regulator granted the first license to a Bitcoin exchange, giving it bank-like status. This is technology literally throwing down the gauntlet to our monetary system.
Social media is another case in point. Communication has suddenly in a few short years shifted online and into the public forum. But regulated financial firms face complicated limits on what they can say and which of their employees can say it. These old regulations are challenging as social media tools impact behavior. For example, if employees are endorsed by clients and peers on LinkedIn in an innocent manner, that may be viewed as a testimonial and therefore influencing a client/customer’s decision—which in turn breaches policy. Such breaches of policy are out of the company’s control.
Unsurprisingly, firms have themselves also made numerous mistakes with this new medium. JP Morgan Chase cancelled a Q&A on Twitter after it descended into a tirade of anti-company abuse. A well-intentioned idea went awry because the channel (Twitter) was not used effectively. Human error also creeps in: none other than the CFO of Twitter publicly tweeted plans about a company purchase. The message was apparently intended to be a private direct message—a mishap so common it has its own name: a “DM fail.” Meanwhile, even everyday tasks like archiving, retweeting, or managing testimonials (such as those LinkedIn endorsements) impose significant compliance burdens. The challenge for financial services to adapt to this breakneck technological change is intensified by the tough regulatory landscape.