Are You Ready to Produce Data from Off-Channel Communications Platforms?

Versatility and dynamism have become hallmarks of the modern work world. Financial services professionals navigate an intricate web of communication channels, swiftly adopting cutting-edge technology and adjusting to the fluidity of these channels. However, with regulatory bodies such as the SEC and the DOJ keeping a watchful eye on infractions related to off-channel communications, many firms face the complex challenge of managing these risks.

The Rise of Off-Channel Communications

Off-channel communications refer to the unofficial or unapproved digital platforms utilized for business-related interactions. Regulatory bodies are increasingly concerned about potential misconduct through these channels and emphasize robust control over approved communication tools. Notably, the DOJ's concerns stem from potential preservation issues that obstruct investigations as personal devices and third-party messaging apps become more prevalent.

During a recent Exterro and Smarsh webinar on off-channel communications, a panel of industry experts, including Robert Cruz, Vice President of Regulatory and Information Governance at Smarsh, Brad Harris, Vice President of Solutions at Exterro, and Matt Kelly, Editor and CEO at Radical Compliance, identified three key factors driving the rise of off-channel communications:

• rapid technological evolution
• client preferences
• individuals' attempts to evade oversight

The current influx of remote and hybrid work models has compounded the challenge, making traditional monitoring and compliance more difficult.

Developing a Strategy for Managing Off-Channel Communications

Given the broad range of communication tools available, companies must adapt their strategies to this evolving landscape. While prohibiting unauthorized tools may seem like a viable solution, it could negatively impact employee morale and client communication. Instead, firms must find a balance between employing technology solutions and developing a culture that emphasizes the importance of using approved business communication channels.

As the digital communication landscape broadens, firms must shift their focus to collaborative technologies that merge multiple functions — increasing the complexity of supervision. Firms should not only consider communication apps but also other tools such as project management and ticketing systems.

Strategies for managing off-channel communications should include adopting technology to monitor communications, educating employees, and developing a corporate culture that stresses the importance of compliance and appropriate use of communication tools.

Issues Compounding the Challenge of Off-Channel Communications

Interestingly, Exterro surveys of federal judges reveal an increase in data spoliation issues. This finding underscores the challenges that legal and compliance teams face in preserving data and responding to regulatory, privacy, and discovery requests. Effective tools and strategies for data collection and preservation are essential.

In 2023, the DOJ updated its Evaluation of Corporate Compliance Programs (ECCP) to stress the importance of managing off-channel communications. This calls for corporations to show diligent management of off-channel messaging risks. Clear communication of policies to employees and effective consequence management practices, such as financial penalties for policy violations, are necessary.

In light of generative AI’s integration into communication platforms, firms need to embrace this technology and its potential benefits for litigation and regulatory responses. Moreover, companies must take proactive steps to address off-channel communications risks, which include clear policies on acceptable communication tools, IT surveillance, and employee awareness of policy violations.

While firms need to be innovative and forward-looking, it is equally important to ensure compliance with regulatory requirements. Simultaneously, being too rigid in processes and collaboration technology may inhibit progress. The key lies in striking a balance and ensuring that permitted channels improve internal and external communications while remaining compliant with legal and regulatory requirements.

To learn more about solving this challenge, download our new whitepaper, Tackling the Challenges of Off-Channel Communications.

Remember, this article is for informational purposes only and does not provide legal advice. Always consult with your attorney regarding your compliance with applicable laws and regulations.