City bosses have seen a spike in sexist, discriminatory and unlawful behaviour since thousands of finance workers started working from home due to the ongoing coronavirus pandemic.
Surveillance companies that help banks, funds, private-equity and trading firms track employee behaviour, told Financial News that firms have seen a rise in misconduct amongst remote-working staff.
The reports of misbehaviour come as regulators brace for more market abuse cases as the virus exposes gaps in systems suddenly tasked with tracking thousands of employees scattered throughout London.
Behavioural analytics firm Behavox, which is backed by Softbank Vision Fund 2, said its clients saw an 18% increase in alerts generated by the platform to flag dodgy behaviour when their staff began homeworking in March compared to the month before.
“They could comfortably be sitting in their bedroom or in their home office and be chatting away with their colleagues without being noticed,” Behavox’s chief executive Erkin Adylov said.
“[This] is encouraging these cliques or these kind of buddy networks, where people are frivolously using sexist, racist and discriminatory language that wasn’t there before.”
The financial services industry – among the world’s most heavily regulated – has long used surveillance software to track employee phone calls, texts, trading activity and behaviour. Such technology is now taking on a new prominence as compliance workers battle to keep up with worker communication from afar.
SteelEye, a data analytics firm that has 55 clients in the finance sector, said firms using its surveillance software had seen a spike in “language that could be deemed as harassment” or “completely inappropriate for a professional environment”, according to its chief executive Matt Smith.
SteelEye clients also saw a “massive increase” in alerts flagging possible insider dealing and market abuse in the first few weeks of the lockdown, said Smith.
The CEO of a third surveillance software provider, who spoke on the condition on anonymity, said that weeks into the crisis the “psychological impact of the Covid lockdown was now starting to take effect” and the “stresses of a prolonged period of homeworking could bring out the worst in people”.
Firms like SteelEye and Behavox can’t access information within client surveillance systems, people with knowledge say, but clients can share examples of behaviour picked up by their software.
Mark Steward, the Financial Conduct Authority’s executive director of enforcement and market oversight, told Financial News in April that the regulator was bracing for an uptick in market abuse cases in the wake of the pandemic.
The FCA said in a 27 May note that it was aware of a “surge in the number of surveillance alerts in a number of markets” in recent weeks.
The note warned financial services firms to ensure they were maintaining “robust market surveillance” to catch out would-be miscreants in light of “changes in market conditions and the current use of alternative working arrangements” during the Covid-19 lockdown.
Working under lockdown, SteelEye’s Smith said had increased “the ability for people to do nefarious things if they want to do nefarious things”.
He also warned that finance workers tracked by the firm’s systems have been frequently switching work communication to channels not tracked by their company surveillance systems. That’s “always a red flag” for compliance teams seeking out signs of wrongdoing, he said.
The Behavox system had flagged an attempted intellectual property theft at one of its investment firm clients in early May, Adylov said. “A person was trying to steal proprietary data relating to a deal that was going on live … The [Behavox] system found out and caught this person in the act of trying to take proprietary information away from the client. And it escalated this to the compliance team, which then decided to act on it.”
Adylov added: “Typically these types of events are very rare, but what we’re seeing is that these rare events are becoming more frequent in the work from home environment.”
“I think … they [finance workers] are probably assuming that compliance teams are just asleep at the wheel or are probably firefighting somewhere else.”
Financial services firms may decide moving their staff back into the office is the only way to stamp out misbehaviour, other experts have warned.
Paul Tombleson, a partner in KPMG’s forensics team and head of its trader surveillance practice, said most banks will want to move traders back to a “secure physical environment relatively quickly”.
“It’s very difficult to replicate the controlled environment you have in place on a trading floor from home,” he said. “When you take a trader out of the trading floor, and you put them in their home … there is nothing you can do to put a hard control in place.”
“You can’t have a supervisor sitting next to them.”
To contact the author of this story with feedback or news, email Lucy McNulty