Blog Series: Fighting Market Abuse in the Age of AI: Trends, Threats and Technology
In today’s hyper-connected world, financial firms face a rising tide of off-channel communications—messages, calls and file shares happening outside approved systems. From encrypted apps like WhatsApp, WeChat and Signal, to personal email accounts, collaboration platforms such as Teams and Slack, and even social media channels like TikTok and Reddit, business-critical conversations are increasingly taking place in environments regulators (and firms) can’t always monitor.
This surge has created significant blind spots, leaving firms exposed to recordkeeping failures, insider trading and market manipulation. High-profile episodes like the 2021 GameStop and AMC short squeezes highlighted the power of off-channel coordination, where retail investors used Reddit and Discord to influence trading activity.
The Regulatory Response
Regulators worldwide are closing in. In the U.S., the SEC, CFTC and FINRA insist that all business communications—including those on off-channel platforms—must be captured and retained. Non-compliance has already led to billions in penalties, including $393 million in 2024 alone for WhatsApp-related recordkeeping lapses.
Across Europe, the FCA and ESMA emphasize monitoring social media and encrypted apps, while in Asia-Pacific, agencies like MAS, ASIC and the SFC are enforcing similar standards. The message is universal: if it’s business-related, it must be monitored and recorded.
Why Bans Don’t Work
Simply banning off-channel communications is not enough. Employees often bypass official tools for speed and convenience, and overly strict restrictions can push activity underground, making surveillance even harder. Instead, firms must embrace a “compliant enablement” approach.
Effective Strategies Include:
- Omni-Channel Recording: Centralize all communications—Teams, WhatsApp, Zoom, emails, calls—into a unified repository for easier auditing and policy enforcement.
- Mobile Capture & Surveillance: Integrate mobile messaging and voice calls into compliance systems using store-and-forward technology to meet recordkeeping standards.
- Multi-Channel Archiving: Ensure all communications are captured and archived in a way that is WORM-compliant, secure and searchable.
- Holistic Surveillance: Correlate trade data with structured and unstructured communications to detect suspicious activity, including channel-switching and off-channel collusion.
- AI-Powered Insights: Use machine learning and NLP to analyze large volumes of messages, identifying red flags, unusual sentiment or insider-risk language.
- Social Media & Influencer Oversight: Monitor both internal and public channels, using analytics to spot potential market manipulation and ensure influencer activity is compliant.
- Policy & Culture: Maintain clear guidelines on approved platforms, conduct mandatory training and enforce policies consistently.
Firms that combine technology with a culture of compliance can meet regulator expectations while allowing employees the flexibility needed to communicate efficiently.
In our next blog in the series, we’ll explore Trend #3: Crypto’s Meteoric Rise and Mainstream Adoption, diving into the challenges and risks that come with cryptocurrencies moving from niche assets to mainstream investment vehicles—and how regulators and firms are adapting surveillance strategies to this new landscape.