Crackdown on the WhatsApp rogue traders
Inside deals fear over rise in secret texts
BANKING giants are scrambling to keep track of messages on WhatsApp as concerns grow it could make insider trading easier.
It’s feared the mobile phone app and others like it will help rogue staff keep their conversations secret – undermining efforts to clean up the City.
There has been a massive crackdown on illicit behaviour since the Libor scandal, when employees conspired to rig the markets using internet chat groups with names such as ‘the Cartel’.
Most large banks record every text, email and phone call made by traders on their work phones and computers. Many even use ‘supercomputers’ to scan all this information for swearwords or tell-tale phrases which suggest illegal activity. And from next year, international rules will toughen monitoring requirements even more.
But the rise of encrypted apps makes the process far harder.
Messages are delivered immediately, allowing criminals to cash in on secret knowledge almost straight away, and they are protected from prying eyes by unbreakable codes.
‘Everybody wants that trade today – they don’t want to wait for it – it has to be instant,’ said Oliver Blower of banking surveillance firm VoxSmart. Messaging apps offer a secure way to share confidential information, whether it is news of a big deal which has yet to be revealed to the market or secret attempts to fix prices.
Although bankers are forbidden from using their personal phones for business, it is still common as this allows conversations to be hidden from prying eyes.
Many staff are given work mobiles which they never use for fear of falling foul of the rules, a process known by compliance staff as ‘top drawer-ing’ – because the device sits switched off in their top desk drawer. Instead, they use messaging apps on their own phones to chat about what they’re buying and boast of profitable trades.
Bond dealers at one big Wall Street bank used WhatsApp to organise a party after big bets on the Brexit vote paid off, according to Bloomberg.
There are other rumours of a WhatsApp group set up by staff at a large hedge fund to swap market details.
For even more furtive exchanges, traders prefer Signal – which deletes messages within five seconds – and Telegram, which has been used by Islamic State terrorists because of its ultra-high security settings.
A spate of investigations recently has thrust the problem into the limelight.
In December, New York investment manager Navnoor Kang was charged with allegedly accepting £139,000 in bribes from a pair of bond traders in exchange for sending business their way.
His spoils are said to have included a £13,500 watch, sex with prostitutes and cocaine – and it is claimed that the gang used WhatsApp in a bid to avoid detection. And in the UK, Jeffries trader Christopher Niehaus, 49, was fined £37,000 by the Financial Conduct Authority earlier this year for boasting about deals on the messaging service.
Some lenders are also seeking to regulate WhatsApp itself.
Blower’s business has developed a system which will record the app’s messages on phones owned by banks.
This was developed last year and he now has half a dozen major clients using it.
Blower said: ‘You’re starting to see a recognition that this is a problem.’