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What Are Off-Channel Communications?

Blog what are off channel communications
Blog what are off channel communications

What Are Off-Channel Communications?

What Are Off-Channel Communications?

Off-channel communications refer to business-related communications sent and received through platforms or devices that are not approved per a firm’s compliance policies. Depending on the policies of a financial institution, prohibited communications platforms could include personal devices, text messages, social media and chat applications like WhatsApp, Signal and Telegram. These differ from approved channels, which are captured, retained and supervised by the company to ensure compliance with regulatory requirements.

Financial Services Regulations Around Off-Channel Communications

Regulatory bodies like the SEC, CFTC, FCA, and FINRA have stringent recordkeeping rules that require financial firms to capture all employee communications related to business matters. Failure to comply with these regulations can result in significant fines and enforcement actions. To adhere to these rules, firms must implement comprehensive policies, training programs, and supporting technologies to ensure all business communications are properly captured and supervised.

Common Off-Channel Communication Risks

Violations often occur when employees use unsupervised personal chatting and messaging apps for business communications. A lack of retention policies and oversight can lead to compliance breaches, especially if electronic communications are used without the firm’s knowledge. Non-compliance can lead to financial penalties, reputational harm, and employee terminations. 

Best Practices for Managing Off-Channel Communications

To manage off-channel communications effectively, firms should establish clear policies on approved communication channels. Implementing capture, search and supervision/surveillance solutions and retention procedures is crucial, as is training employees on compliance to prevent unauthorized communications. Once approved communication channels are established, companies must adopt capture tools that ingest written electronic communications like email, chat, and SMS as well as, voice and visual data from approved sources, and send that data to an archive for retention.

Supervising Employee Off-Channel Communications

As part of SEC, CFTC, and FINRA supervisory obligations, firms must supervise e-comms and many firms are using compliance technologies with AI/ML capabilities to facilitate oversight. These tools enable IT and compliance teams to search, manage and review communications of regulated employees. 

The Future of Off-Channel Communication Regulation

As regulatory requirements evolve, new norms for the expectations for the capture and supervision of electronic communications will emerge. The increasing use of AI-generated communications applications, video, productivity tools, and other interactive platforms will influence regulatory compliance perspectives and impact the expectations for capturing an increasingly diverse array of e-comms data.   

Stacey English

Stacey English is Director of Regulatory Intelligence for Theta Lake. She has over 25 years' experience in financial services regulation and technology as a former regulator at the now FCA and as a risk and compliance practitioner in global banks and insurers. She formerly led Regulatory Intelligence for Thomson Reuters providing regulatory and industry insight to financial services firms. Stacey is also a qualified accountant, a published author on conduct and accountability and an Honorary Fellow of Cambridge Judge Business School providing expert guidance on regulation. Linkedin

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