Work from Home

Work from Home: Environment Ripe for Fraud and Mistakes, Study Finds

A research study conducted by Smarsh has found that the rapid shift to work-from-home models in response to the global COVID-19 pandemic creates significant regulatory and reputational risks due to the lack of oversight for those new channels.

Capturing the responses of more than 100 compliance professionals representing financial services firms totaling more than $1.3 trillion in assets under management, the survey found about 70% of respondents shifted primarily to remote-work models.

Within that group, 86% have moved more than three-quarters of their workforce to a remote model, introducing major concerns about cybersecurity risks and employee supervision challenges in an environment ripe for fraud and mistakes.

Stephen Marsh, Founder and Chairman of Smarsh, said: “Our findings underscore that financial services organizations have adopted digital communications and collaboration platforms like Zoom and Microsoft Teams at a far more significant scale and speed than commonly assumed. The pandemic has accelerated digital communications trends that are positioned to remain part of the long-term industry landscape, regardless of what happens in the public health arena this year and beyond. Given the incredible growth in volume and variety of digital communications content, firms need to make sure that they have extended their retention and oversight efforts accordingly. Those that fail to do so are much more vulnerable to risk.”

“Firms are facing an urgent need for much more comprehensive supervision of the broadest possible array of digital communications and collaboration tools. Regulators have made it clear that failure to do so will trigger significant fines and penalties. As a result, financial services companies have two choices: They can break their budgets by hiring entire new departments of compliance professionals to conduct more manual supervision, or they can adopt the latest technologies to conduct cost-efficient, highly scalable supervision of digital communications that helps them more effectively meet regulator expectations”, Marsh added.

Regarding conference tools, only 22% have established oversight programs, which suggests a compliance gap between company policies and procedures and firms’ regulatory obligations. The gap is only likely to widen, the research concludes.

The majority of respondents (63%) lacked confidence they could satisfy examiner demands for communications data from digital meetings solutions platforms even though business communications from these digital platforms is fair game for regulators.

In 2020, CMC Markets launched a shares basket focused on the work from home theme as the pandemic was the driving force for the paradigm shift.

FlexTrade’s Shane Remolina published an article exploring such shift within the trading industry, the opportunities and challenges, as well as how mature is remote work technology.

According to FINRA, broker-dealers have not lost productivity despite the new work-from-home reality, but teleworking is not working for the poor, women, and the young, said the IMF.