With Traders Far From Offices, Banks Bring Surveillance To Homes
In this open-ended era of working from home, the financial industry is taking unprecedented steps to police bankers and prevent wrongdoing. With Traders Far From Offices, Banks Bring Surveillance To Homes
Traders at firms like Barclays Plc must certify they work in separate rooms to housemates. Morgan Stanley bankers are using laptops where every key stroke is recorded. Lenders including NatWest Group Plc are requiring daily location updates from traders and recording video calls.
With fresh lockdowns sweeping Europe this weekend, including Londoners being banned from mixing with other households indoors and Parisians under curfew, such remote monitoring seems here for the long haul.
The pandemic has already forced compliance officials at banks and trading firms to navigate a steep learning curve since March when they cobbled together a patchwork of measures for the first government-mandated lockdowns. Regulators, who early on had to relax some monitoring rules to enable traders to work from home, now expect kitchen tables to be as closely monitored as trading floors.
“Going forward, office and working from home arrangements should be equivalent,” Julia Hoggett, director of market oversight at the U.K.’s Financial Conduct Authority, said at a City & Financial Global conference this week. “This is not a market for information that we wish to see be arbitraged.”
The stakes for the banks are high. Insider trading, manipulation, and improper use of own accounts are all elevated risks when dealers are home alone.
After a decade trying to rebuild trust lost in previous trading scandals, firms have to show they have not forgotten the lessons. In the five years to September 2017, banks forked out $375 billion in conduct fines, according to a report by industry panel FMSB.
With offices around the world set to stay sparsely populated under tightening Covid-19 restrictions, the challenge of monitoring remote staff is here to stay. In the U.K. where about 1.1 million work in finance, government officials have urged office staff to work from home for as long as six months.
Things have improved since the first few chaotic weeks, when unprecedented market volatility triggered an avalanche of warnings that in some cases made enforcement impossible. Trade surveillance alerts increased over 600% for some global market participants in the first three months of the year, at the onset of the pandemic, according to data from Greenwich Associates.
“There were some weeks of chaos in some firms,” said Danielle Tierney, senior advisor for market structure and technology for Greenwich in New York. “Many firms simply were not able to comply with the rules.”
More muted markets and a refinement of remote compliance measures helped stem the tide of red flags since, with firms recalibrating their alerts and transferring staff to clear backlogs while introducing a slate of measures to police home offices.
Firms are logging every conversation and sifting corporate emails for troubling language. At many banks including NatWest, traders can only place orders if the request from the client is coming from an authorized device.
Taped phones and restricted bathroom breaks are common, while the head of a trading desk of a U.S. bank in London, who didn’t wish to be named, has requested that his team write every trading move into a recorded chat.
“If you are trading electronically, then it must be through authorized communication channels that can be retained and audited,” said Adam Palmer, partner at ACA Compliance Group, which specializes in compliance for buy-side firms.
While some of the processes simply port over existing office practices into the home environment, remote working has also created unique headaches for compliance, including young traders working from their kitchen tables with roommates from different banks and couples who can’t help but overhear their partner’s work calls.
“Most banks have adjusted to the working from home from a business continuity perspective, but there are still problems on the compliance side,” said Erkin Adylov, founder of Behavox Ltd, which sells machine-learning programs to detect misconduct.
The physical absence from the office also raises cultural challenges.
“Work suddenly seems further away and rules and regulations that we need to follow seem less important,” said Evert Bekker at Capco, a consultancy that operates in the financial services industry.
And then there’s the threat from household technology. A recent report by Capco raised concerns that Amazon’s Alexa and Google Nest represent a growing security risk if staff work from home. Some firms have curbed employee use of untested communication channels including Zoom in a bid to ensure work talk is monitored.
With no vaccine in sight spending on surveillance technology is set to soar to about $1.5 billion globally next year, according to an estimate by Greenwich. But oversight will only go so far.
“At the end, it’s down to integrity and conduct,” said ACA’s Palmer.
Wall Streeters Hunker Down For Many More Months Working At Home
All across Wall Street, the reality is sinking in: Vaccines or no vaccines, offices and trading floors will stay mostly empty for months to come.
Even as the U.S. embarks on its ambitious vaccination campaign, New York’s finance industry, like the rest of the city, is bracing for a long, difficult winter. Hopeful summer plans to bring bankers and traders back to their Manhattan offices have been upended by a relentless rise in new coronavirus cases and dire warnings of more to come.
“I’m in the office now,” Stephen Squeri, chief executive officer of American Express Co., said last week from the firm’s headquarters in lower Manhattan. “But we’ve got the majority of our organization going to be working from home probably until at least June of next year. And we’ll see what happens then.”
Goldman Sachs Group Inc. and Morgan Stanley have already seen employee presence in their headquarters start to thin out over the course of the last month. At JPMorgan Chase & Co., staffing levels have hovered around 20% in New York for much of the fall, but executives expect more people to work from home as the December holidays approach.
Bank of America Corp., for its part, stopped increasing the number of invitations for staff to return to its area offices in recent weeks.
The banks’ plans were outlined by people familiar with each lender’s thinking on the matter, and representatives for the companies declined to comment.
The pandemic has left the metropolis and many of its swaggering signature industries confronting an uneasy future. Covid-19 has killed more people in the New York area than in any other U.S. city, and Mayor Bill de Blasio warned on Monday that a full-scale shutdown may lie ahead.
“The governor said we should prepare for the possibility for a full shutdown — I agree with that,” de Blasio said. “We need to recognize that that may be coming, and we need to get ready for that now.”
Financial institutions have kept a close eye on every dribble of news about the coronavirus vaccines from Pfizer Inc. and Moderna Inc., with some even advising groups on how to distribute the shots globally. Lenders’ lobbyists in Washington have also begun advocating for bank tellers and other front-line workers to have early access.
Still, with the Centers for Disease Control and Prevention recommending that the first shots go to health-care workers and those in long-term care facilities, many lenders have started to accept the idea that most workers might not be vaccinated until mid-2021 at the earliest.
“There are a lot of our colleagues that would come back to the office tomorrow if it’s safe,” Bank of America CEO Brian Moynihan said last week. “So once the vaccine is in, we’ll adjust to see how that all works.”
Over the summer, top real estate owners began pressuring many of New York’s biggest employers — including Goldman Sachs and BlackRock Inc. — to speed up the return of workers. Their argument at the time: It was safe to do so, and the city’s shops and restaurants couldn’t last much longer.
Some responded to landlords’ urging. Blackstone Group Inc. has brought back the majority of its investment professionals. The firm is testing people frequently.
But, a few months in, firms that took a more measured approach to repopulating their towers now look prescient.
At Citigroup Inc., for example, an internal survey in September showed 30% of New York-area employees wanted to return to the office in some fashion. The firm never saw that many return on any given day throughout the fall.
As last month’s Thanksgiving holiday approached, the firm jumped ahead of rivals in locking down New York offices, largely limiting entry to necessary personnel.
“We absolutely like to have our people in when we can have them in, but we’re not going to put them at risk,” CEO Michael Corbat said at a Bloomberg event this month. “We’ve been in the phase of tapering back.”
In some cases, it’s workers themselves who have used the rapidly approaching holidays as an excuse to cut back on commuting. One JPMorgan managing director who’s been taking the train to the bank’s Manhattan tower from Westchester said he’s planning to work remotely for the week before Christmas to reduce the risk of infecting family members over the holiday.
Such plans are creating a vicious cycle for other employees, who would rather stay home because there isn’t enough of a critical mass at the office to make coming in worthwhile. One support worker lamented that his meetings are all happening on Zoom anyway, so he doesn’t see any benefit in risking going to the office.
“Most people are working from home,” Lee Olesky, CEO of trading platform Tradeweb Markets Inc., told investors last week. “We have sell-side trading desks that are back at the desk in the office, but largely our buy side is still remote.”