Within the compliance teams of financial services, a significant piece in the communication puzzle is conduct and culture. Beyond simple financial risks – those presented by insider trading or market manipulation, for example – risks also exist within non-financial misconduct, whether it be bullying, discrimination, sexual harassment, or others. This risk is, of course, not exclusive to financial services – bad culture and, by extension, bad conduct can exist within all organizations.

Recently, communication surveillance has been utilized to monitor risky messages and to potentially lessen such incidents – sending a clear message to employees that bad behavior will not be tolerated. But should employers jump two feet into surveillance to manage and prevent these incidents, or should they take a more trusting approach by setting clear guidelines and managing situations as they arise?

Compliance specialist Global Relay’s 2024 report explores non-financial misconduct and ethics. 79% of respondents (the majority working within compliance) stated that they are using communications surveillance to identify conduct and culture risks. The result was higher in the US (83%) – which is not surprising given that US regulators are cracking down with a ‘zero tolerance’ approach, driven partly by frustration around the lack of progress in enterprises controlling off-channel communications.

Both US and UK regulators have started to request information from companies about the number of non-financial misconduct incidents recorded, and the outcomes of those incidents. Enterprises can no longer bury their heads in the sand – they need to be aware of all incidents of bad behavior via communication channels and demonstrate they are taking action. Emma Parry, Senior Advisor on conduct, culture, and risk stated, “There is an increasing realization in the industry of the need to be more predictive and proactive around misconduct and the role poor culture can play.”

Surveillance for Wellbeing and Culture

The purpose of monitoring communication in businesses is twofold. First, identifying and reacting to bad culture is essential for employee wellbeing. This is all part of the business culture. A positive culture attracts and retains good people, creates a strong working environment with good outcomes, and flows into client interactions. As Global Relay wrote in their own blog, “Like a stream, culture flows through to clients who interact with an organization – a healthy culture inspires belief in personnel, which sets the tone for good behavior and encourages productivity. This is then exuded externally and contributes to a firm’s ultimate success.”

Great people may exist in a culture – but that does not guarantee they will always behave themselves on communication platforms. A business can set clear guidelines and codes of conduct – but how can they ensure they are being adhered to and anyone in breach of them receives some form of disciplinary action? As Global Relay asserts: “strong policies, thorough training, surveillance, and – when necessary – disciplinary action, are all proponents of a well-functioning firm.” Financial firms are particularly mindful of this need, given the strong regulations imposed on them by the FCA and other global regulatory bodies.

Is Surveillance the Answer

To tackle these issues, RegTech solutions have emerged that are underpinned by behavioral science and social network analysis. But as Emma Parry notes, they come with the cost of licenses and integration, as well as in the resources and ongoing capacity to analyze and assess the resultant data. As a result, she claims that firms are increasingly leveraging their existing surveillance platforms – and teams – to pinpoint poor culture while also using the same platforms to monitor for potential market abuse and to support formal investigations. Global Relay’s report demonstrates that surveillance is very much part of the business agenda.

Global Relay’s blog highlights that more action is expected in this area. As regulators crack down on communication behaviors, firms will need to be able to turn over information as soon as it is required – and that includes evidence of bad communication cultures. Regulators and lawmakers are emphasizing that the culture needs to be filtered down from the top of organizations. Director of the Securities and Exchange Commission’s (SEC) Division of Enforcement Gurbir Grewal has said, “Are the leaders in an organization supporting a culture of compliance? Are they emphasizing both the need to stay within the lines and the importance of doing so?”

Conduct and culture reflect the wider ethos of businesses. While we hope positive culture fosters positive behavior, regulators will increasingly not accept a ‘fluffy’ approach with unclear training, boundaries and disciplinary actions. Regulators deal in data, compliance and laws – and modern businesses need to ensure they are towing the line. Companies like Global Relay help put compliance at the heart of business to make sure yours doesn’t get caught short.

Find out more at Global Relay.



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