Banks ignore UK's mobile phone regulations

Mon Mar 17, 2014 9:19am EDT

LONDON, March 17 (IFR) - UK regulators are turning a blind eye to rules on mobile phone recording introduced more than two years ago after concluding that technology may not yet be widely enough available to implement the requirements, according to technology providers.

The Financial Services Authority enacted new rules in 2009 requiring financial institutions to record all "relevant" communications their employees held on mobile phones. However, warnings from the industry that the technology was not advanced enough caused the FSA to postpone introducing the rules until November 2011.

Analysts have estimated that since then as few as 33% of firms are in compliance. Large banks and those with operations in a number of jurisdictions are understood to be the ones having most difficulty recording staff conversations. Banks approached the FSA in early 2012, arguing that the technology on offer made compliance impossible for many.

The FSA was replaced by the Financial Conduct Authority last year. While it has not issued a formal exemption or grace period, no bank has been fined for non-compliance.

"Nobody has come to market yet with a rock-solid solution that the FCA is comfortable with," said Rik Turner, a senior analyst at financial services technology firm Ovum. "We know a lot of institutions have made pilot schemes so they can go to the FCA and say: 'Look, we are doing everything we can, but that's about it'."

Bankers themselves reacted with some confusion and uncertainty as to whether or not their mobiles were being recorded. Some said they were not aware of their phones being monitored, and others said they thought only fixed lines were recorded.

Recording mobile phones is usually done in one of two ways. The first is by using an application, where a bank would put monitoring software on a phone's operating system. This approach has drawbacks as the software needs to set up a second call and send it to a recording server, which can cause voice delays of a few seconds and cause problems on a trading desk that relies on speed.

IT departments also face difficulties implementing this method when bankers use different types of phones and operating systems.

The second approach is to use a broader network and SIM card-based system, via a mobile network operator. However, the cost of putting this in place can be astronomical, according to analysts, and there have been security concerns. In December 2011, one unidentified bank found it was able to access a rival institution's recording that was using the same network, according to Ovum.

Banks in the UK have been obliged to record fixed-line calls made by bankers since 2009, mainly to tackle market abuse and misconduct and help the FSA monitor, investigate and prosecute such cases.

Officials from telephone recording firms say a solution may still be years away.

"Fixed line is no problem, but mobile is a totally different beast," said Carl Nancollas, channel manager at Storacall, a firm that specialises in phone recording and has invested considerable time in finding a workable product for mobiles. "It's been a nightmare, to be honest. We've not found a solution yet that is reliable or cost-effective. But eventually something will come up with all the demand for it. I'm surprised that the mainstream networks haven't been working on this."

The FCA confirmed to IFR that there have been no enforcement cases to date.

"All relevant firms have had to implement systems to comply with our rules and the technology has been working successfully for a number of years," the FCA said in a statement to IFR. "We expect all firms to be compliant. There are a number of technology firms that have designed systems specifically for this, most notably Vodafone."

(This article is from the latest issue of the International Financing Review, a Thomson Reuters publication: www.ifre.com )

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