Rogue Traders can be the thorn in the side of any major financial organisation, so banks should be enlisting all the latest technology in order to catch them wherever they can, including evidence revealed within both their landline and mobile voice communications. Now to be fair if a trader wants to have a conversation on a pay-as-you-go mobile phone there is very little that the powers that be can do to prevent a fraudulent trade. But if an organisation has voice recording in place at least they can tell the press that they have made best efforts to monitor and record their traders activities.

In the wake of the banking and financial crisis, any hint or whiff of corruption will be thrust into the spolight quicker than you can say ‘here we go again’ and therefore managing risk is at the top of every financial institutions agenda. If they can win the PR battle then perhaps they can win back public support, or at least their tolerance.

Top 6 rogue traders in recent years:

Nick Leeson – $1.3 billion
John Rusnak – $691 Million
Mr. Copper – $2.5 Billion
Liu Qibing – $200 Million – $1 Billion (unconfirmed)
Brian Hunter and Amaranth – $6.5 Billion
Jerome Kerviel – $7.1 Billion

Several providers have published press releases putting forward the case for their solutions, including our own mobile voice recording solution I should add, but how does a potential customer navigate the minefield of new technology, especially when you aren’t sure if the sales and marketing guys are leading you down a blind alley?

Firstly customers should know that this technology is very new and therefore there are few case studies to reference. Therefore my advice is to trial several solutions before committing to any particular supplier. Only by comparing potential network delays to call connections across providers can you get a feel for the differences in connection times and user experience. There are several methods by which mobile phone calls can be voice recorded and so you will need to consider the following attributes of each solution:

1. Full compliance capability vs on demand recording capability
2. Costs – monthly charges, set up costs, investment in any additional hardware
3. Ease of search and retrieval of voice recordings
4. Call connection times
5. Number/ Range of compatible phone models that it can be used with
6. Resilience and storage capabilities

For a little more navigation of the technology available within the realms of BlackBerry mobile voice recording in particular feel free to read our mobile voice recording white paper.

There is plenty of time for organisations to make up their minds on which solution would best suit their employees, so my advice is to get trialling now to make the most informed final decision on the right mobile voice recording solution for you.

The FSA is set to launch its own investigation into Goldman Sachs with regards to the transaction known as Abacus 2007-AC1 undertaken 3 years ago.

Goldman Sachs have stressed that it had lost $90m on the transaction and insisted that its actions were “entirely appropriate”.

The truth will only be found in documentation recorded during the time of the transaction. In the US regulation states that all voice and data communications are to be recorded including emails, IM messages and SMS texts.

As regulation stands in the UK, only landline conversations referring to transactions are required to be recorded and stored which may make the FSA’s task more difficult.

If after the currently imposed 3 month consultation period the FSA decides to remove the current exemption clause to regulation, financial institutions such as Goldman Sachs will have no choice but to include mobile voice and data recording in the UK.

It will be very interesting to see how the US and UK investigations compare…

Many financial institutions and large corporates already voice record incoming and outgoing phone conversations, but the majority of voice recording equipment is kept on an organisation’s premises which leaves the organisation in a vulnerable position.

The next generation of voice recording solution is here and available now. By being situated within carrier networks, whether landline (e.g. Kingston Communications, BT, COLT, ntl:Telewest) or mobile (e.g. O2, Vodafone and Orange) resilience is substantially increased. Technology is available now which ensures that should your offices be affected by fire, flood, power cut or other disruption affecting your telecoms equipment, incoming and re-routed calls can be voice recorded and stored safely and securely in a cloud-based solution.

Voice recording phone calls is a strong deterrent against unlawful trading or for quickly identifying the truth of who said what in a particular conversation. For more information about the solutions currently available for landline and mobile voice recording click here.

Each European Country included in the EEA is summarised in terms of regulation requirements and length of time in which to introduce those particular requirements.

This consultation comes hot on the heels of the UK’s FSA consultation which came out a month ago and it strikes me that, like it or loathe it, more stringent regulation is coming across the continent, and maybe even further afield (the U.S. already have regulation in place) to ensure that all communications for both voice and data made from a mobile phone within the financial sector (including smartphones, iPhones and Blackberry smartphones) will have to be recorded and stored for a certain amount of time.

They key paragraph relating to the proposed regulation is as follows:

Mobiles and electronic communications
44. The recording requirements currently imposed by Member States with regard to recording mobile conversations appear to fall into two broad categories (Annex 2). Firstly, the majority of Member States who currently impose the broadest level of telephone recording obligations also require that mobile phones be recorded where client orders are received this way. Secondly, a number of Member States either; require traders to apply for special authorisation to trade via a mobile phone; prohibit the reception by traders of orders via mobile phone outside of a company mobile phone; or allow a special recording exemption to client orders received on a mobile phone. In Germany, most investment firms prohibit traders to trade via mobile phone. The UK FSA is currently consulting on removing its current exemption for conversations on mobile phones. CESR believes that a recording requirement should be technology neutral and apply to all ways of making/receiving telephone calls and electronic communications.

Feel free to contact me for further information.

This would be an extremely backward step for organisations to take in my opinion. Will there be an outcry from BlackBerry/ smartphone users in the UK? In the U.S. financial institutions have resorted to this for a while to comply with the Federal Rules of Civil Procedure (FRCP).

FRCP Rule 26(a) requires an exhaustive search for and identification of sources of discoverable electronically stored information (ESI), including email, voice, and video content. In the case of email, this disclosure may require references to email that may be stored on backup tapes, employee PCs, and/or BlackBerry devices. In addition, the Financial Industry Regulatory Authority (FINRA), SEC, and National Association of Securities Dealers have strict regulations governing the preservation of electronic communications.

The FSA in the UK is considering implementing similar regulations and have gone to consultation on this in the last 2 weeks.

But the technology is available now for organisations to achieve voice recording compliance both on landlines, smartphones and BlackBerry devices, therefore enabling a more mobile workforce. In addition, should the main offices and landlines be affected by any business interruption, traders will be able to continue working compliantly from their mobiles from any other location.

Simply blocking mobile device usage to comply with FSA regulations is both short-sighted and backward, especially when the technology is available now to enable mobile voice recording.

The FSA’s proposal would mean that around 16,000 mobiles would have to be recorded which would cost firms around £11m for set up and on-going costs of around £18m.

These average costs were determined as follows:

1. One-off costs were made up of “the purchase of software/ hardware, telecommunication system design and installation to record, store and retrieve taped records.” According to the firms who were surveyed, the average cost per line is quoted as £700.

2. On-going costs consist of maintaining recording equipment, storage and retrieval. The average cost per line is quoted as around £1,200 per year.

Around 60% of firms which were surveyed for this consultation said that if the exemption was removed, they would ban the use of mobile phones for business/ trading purposes as a cheaper option, a rather short-sighted and backward step in my opinion, particularly when the costs can be lower than those quoted.

Feedback on the proposed measures is invited by the 14th June and the FSA then plan to release a policy statement for the fourth quarter.

1. Voice recording equipment is kept in the organisation’s offices
The difference in vulnerability between a secure data centre / telephone exchange and a privately rented/ owned office building is substantial. Exchanges and data centres are built to provide major protection against floods, fires, theft etc. but is your office based telecoms equipment quite so well protected? What’s more, the circuit between your voice recorder/PBX and the core PSTN network is at its most vulnerable between your offices and the local exchange. Therefore should anything happen to the cable, whether stolen for copper or cut due to roadworks, you have no way of receiving incoming calls or indeed for voice recording them!

2. Only business landline calls are recorded whilst conversations held over business mobiles are ignored
Voice recording of landline phones is easy to implement: add a voice recorder to your PBX and make sure you have some means of storage and retrieval of the voice recordings. But why aren’t organisations also voice recording conversations made by employees using their business mobile phones? Well to date the technology has been limited and expensive to say the least. But times change and the technology is available now for a fraction of the previous price.

So while you think that your organisation is voice recording all your phone calls, all of the time, you may not be as comprehensively protected as you thought!

Take a look around your organisation and work out how many of your valuable employees work remotely at least some time. When they are not in the office do they look for the nearest available landline to make their business calls? I would suggest that the majority would turn to that essential accessory, their mobile phone, particularly as it is easier to use the work mobile than it is to claim back money spent on personal home landline phones.

If your organisation’s business continuity plans include a large proportion of your staff relocating back home or another remote location where they will be continuing to work using secure data access and their mobile phone, how will you replicate the call recording you currently have set up in the office?

There are many good reasons for including the voice recording of mobile phone calls, just as there are for recording landline phone calls, several of which you can find in my top ten reasons for voice recording mobile phone calls.

In terms of Business Continuity, being able to retrieve information that is exchanged between employees/ customers/ suppliers when under the threat or pressure of a business disruption, can be extremely valuable when the dust has settled and the enquiries begin into who did what and what decisions were made.

Do you think Mobile Voice Recording is a necessity for Business Continuity within your organisation?

The new solution is aimed at organisations who need or want to voice record phone calls made by their employees on their smartphones, particularly when they are working away from their deskphones.

It may be that an organisation currently voice records all landline calls but does not have the capability to voice record calls made on mobile phones.

Recording calls is the best way to retain evidence of who said what to whom and avoids lengthy investigations when there are disputes or customer complaints, saving organisations time and money.

For more information on GemaTech’s smartphone voice recording solution visit our website.