Trader exodus from WhatsApp to Signal creates surveillance blind spot for City firms

Tracking WhatsApp chats of thousands of City workers during the pandemic has been a nightmare for compliance departments. Now, they have a new enemy to contend with: Signal.

In what is becoming a whack-a-mole game between City workers and their regulatory watchers, the recent surge in the use of the encrypted messaging app Signal and its rival Telegram among bankers, traders and portfolio managers has compliance workers worried.

Firms that provide surveillance services to the City, in one of the world’s most regulated industries, told Financial News they’re fielding calls from finance firms wondering how to address the new blind spot. 

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“No one is able to accurately surveil Signal yet,” said Oliver Blower, head of VoxSmart, which pulls texts and photos from WhatsApp for analysis by about 100 financial services clients. 

The head of European investment banking at a big Wall Street firm in London said privacy concerns have sparked a “resurgence” of Signal and Telegram as he saw more gravitate from WhatsApp.

The shift to Signal, and its rival Telegram, follows a new set of terms and conditions from WhatsApp, which alerts users that the app would share data with Facebook. Facebook’s new terms come into effect on 8 February.

And while the new terms only apply to users outside Europe and the UK, it hasn’t stopped people from leaving the platform in droves.

A spokesman for Signal told FN it saw “record growth” since the WhatsApp changes were announced, with a roughly 4,200% increase in downloads the week of 11 January as compared to the week before. Telegram said on 12 January it had surpassed 500 million users with over 25 million new accounts opened in the previous 72 hours. Billionaire Elon Musk joined the fray on 7 January when he tweeted: “Use Signal.”

It’s “far more complicated to monitor” Signal than WhatsApp, Gil Shapira, the vice president of business development at Telemessage, which captures communications data for hundreds of finance firms, told FN.

WhatsApp parent Facebook has been making efforts to stem the outflows from its app. The app said it is delaying the update to its privacy policy following backlash from users, the Wall Street Journal reported on 15 January

A spokesman for WhatsApp told FN that “[The update] does not change WhatsApp’s data-sharing practices with Facebook and does not impact how people communicate privately with friends or family, wherever they are in the world.

“WhatsApp remains deeply committed to protecting people’s privacy,” he added.

READWhat’s up with WhatsApp? Everything you need to know about the shift to Signal

London’s finance workers have begun making the jump from WhatsApp to Signal in the past few weeks. One City trader told FN that he joined Signal because he was concerned about Facebook’s dominance overall, not just in relation to WhatsApp. Another trader said he left WhatsApp after watching Netflix’s ‘The Social Dilemma’ – a documentary about the perils of social media firms including Facebook. 

And one London hedge fund manager said of his peers’ use of Signal: “I seem to know a lot of paranoid Libertarians.”

A London trader noted that WhatsApp’s terms and conditions agreement was simply pushed to May instead of February, not scrapped entirely. Signal said in a series of tweets on 15 January that it was experiencing technical difficulties as “millions upon millions” of users flooded its servers.

The damage to WhatsApp may have already been done.

“I’ll leave [Signal] installed and see what happens,” the trader said.

Encrypted apps like WhatsApp were always a headache for finance firms that have been forced to reprimand and even fire staff for using WhatsApp inappropriately and ban communication through the platform. However, the pandemic has forced banks to reconsider WhatsApp bans while a massive spike in the app’s use among home-working staff has triggered a spike in the use of surveillance software to track communications. 

On January 11, the Financial Conduct Authority warned that “risks from misconduct may be heightened or increased by homeworking”. 

“This includes increased use of unmonitored and/or encrypted communication applications (apps) such as WhatsApp for sharing potentially sensitive information connected with work. Use of such apps can present challenges and significant compliance risks,” the regulator said in its markets conduct newsletter. 

A significant portion of non-corporate communication in the City is seldom up to the traders or bankers themselves. The European investment banker told FN that workers typically take their cue from clients.

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“These are usually for personal use, for non-substantive exchange,” he said. “‘Are you around next week?’, or, ‘Sorry, running late, stuck in traffic.’ When everyone is mostly using WhatsApp, as has been the case, that’s how we communicate.” 

Blower said there had been no demand to develop software to track Signal chats, until now. He added that it would be a few months before his firm could bring software to the market that could track conversations on the app.

Telemessage’s Shapira, meanwhile, said his firm would need to see usage of Signal grow considerably before it began developing technology to track messages sent on the app.

There is hope for compliance workers if traders opt for Telegram. Shapira says Telegram is more easily trackable. Telegram has been contacted for comment.

Hong Kong-headquartered LeapXpert gives tens of thousands of workers at large global banks access to an app that enables compliance teams to track employees’ communications with clients on various messaging apps. Avi Pardo, the firm’s co-founder and chief operating officer, said LeapXpert updated its technology in late 2020 to enable it to track messages sent on Telegram to finance workers using its app.

Pardo said his firm was also trialling new technology to capture messages from Signal, driven by requests from “100% of our existing customers”. That should be ready for launch by March, he said.

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Singapore’s FinChat, meanwhile, helps six global finance firms, including trading firms and banks, to record messages sent by employees on Telegram, according to a spokesperson for the firm.  

WhatsApp is nowhere near obsolete among City workers. Some who started using Signal recently say they’re doing so out of a mixture of curiosity and perceived client demand. One senior banker and two London traders said they all downloaded Signal, but still use WhatsApp to contact clients. “WhatsApp is what I’m sticking with for now,” the banker said.

Additional reporting by Trista Kelley

To contact the authors of this story with feedback or news, email Lucy McNulty, William Canny and Paul Clarke

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