Compliance, Financial Services
- Key Objectives for the Financial Market
- Requirements for call recording in accordance with MiFID II
- Recording Solution for MiFID II – What It Takes to Work in Compliance with MIFID II
- Advantages of modern call recording solutions for compliance with MiFID II
- The AI revolution won't wait - and neither should your business!
Key Objectives for the Financial Market
Recent adjustments to the MiFID II Directive and the associated revision of the Financial Instruments Directive require financial actors – primarily investment banks, asset managers, and financial advisors – to record their consultation calls. Although call recording in accordance with MiFID II appears expensive and complex at first glance, it is worth considering the potential benefits of the directive. MiFID II might pose some challenges for financial service providers, but it nevertheless pursues important objectives. At its core, it is about strengthening market integrity. And that means: more transparency and more consumer protection.
It places strict regulatory requirements on the recording, documentation and storage of customer communication. Taping, or compliance recording, includes the recording of all communication channels such as telephone, chat, video telephony and more. The recordings must be stored in accordance with the required recording periods, be tamper-proof and be able to be made available quickly if required.
Requirements for call recording in accordance with MiFID II
The MifID II Directive represents the regulatory framework for investment services in Europe and influences the way European financial markets work. It sets out the rules that banks and asset managers must follow when conducting investment transactions with private clients.
The MiFID II Directive tightens the regulations of the MiFID I Directive and adds new rules that were not previously defined. Compliance with these requirements is monitored in Germany by the Federal Financial Supervisory Authority (BaFin). Violations are punished with high fines - up to five million euros - or even trading bans.
MiFID II comprises a good 7,000 pages - the regulations even run to 20,000 pages. On these pages, there is one regulation that is very small at just three quarters of a page, but has an even greater impact on day-to-day banking business: taping. The exact requirements for this are as follows:
MIFID II Telephone Recording:
Banks, financial services and asset managers with a BaFin license according to § 32 of the German Banking Act (KWG) are required according to MiFID II art. 16 para. 7 (Taping) to keep records of phone or video consultations as well as of any related electronic communications in an in a tamper-proof manner:
- All consultation calls made by means of phone, chat, video telephony, co-browsing, etc.
- Calls which lead to a transaction or to a customer order
- Changing and cancelling orders
- Consultation calls where a transaction is intended to take place
- Calls within the investment firm if they are connected to consultation
Documentation and Retention Obligation:
The recordings must be kept for five years. The period begins with the creation of the recording. Upon request of the supervisory authority, this period can be extended to seven years. During this time, it must be possible to find the recording quickly if requested by BaFin. It must be ensured that the archived calls cannot be manipulated or deleted. Furthermore, any manipulation must be traceable.
- Recordings in a format that makes changes impossible
- Storage on permanent media
- Export upon customer request e. g. as WAV or text
Notification Obligation:
Customers must be informed that their communication is recorded. Furthermore, it must be pointed out to customers that they can request a copy of their recorded call within the retention period. If customers object to being recorded, no advice may be provided when relating to the acceptance, transmission and execution of customer orders.
- §201 para.1 StGB: Unauthorized recording of private conversations of other persons will be prosecuted.
- §4 para.1 BDSG: Permission by other legislation
- Permission according to § 28 BDSG by consent according to §4a BDSG in written form or under special circumstances by verbal/implicit consent e. g. keystroke/phone announcement
Recording Solution for MiFID II – What It Takes to Work in Compliance with MIFID II
A recording solution that meets the standards of MiFID II should fulfill various criteria, including
- Recording in accordance with compliance requirements
- Recording across multiple channels, including voice, screen, video and chat
- Ability to record "on demand" or "automatically"
- Audit-proof and tamper-proof storage of data
- Unalterable storage of recordings for a period of five to seven years in accordance with MiFID II
- The option to quickly provide the recordings in the event of customer or authority enquiries
- Efficient search functions and clear allocation of records to the broker's business premises
- Traceability of changes, also considering security measures
- Notification of the recording, either manually or automatically
- GDPR compliance, including functions such as multi-client capability, user management, logical separation of data in cloud solutions and encryption techniques
Advantages of modern call recording solutions for compliance with MiFID II
Innovative call recording solutions offer more than just the ability to meet these requirements. By using intelligent software to analyze customer communications, firms can also gain valuable data from their customer interactions. This data can be used to optimize operational processes, modernize structures and make them more efficient. In addition, the increased transparency fosters customer trust and loyalty, and protects the financial services provider from potential allegations."ASC's native application for Microsoft Teams promises a seamless user experience and high availability. We rely on Compliance Recording to meet the requirements of MiFID II in our offices around the world.” - Alfred Alcon Beltran, CTO, Crèdit Andorrà Financial Group
With Recording Insights, ASC offers a solution that enables compliance with MiFID II requirements while providing deep insights into customer interaction data. Using advanced analytics and AI capabilities, the system automatically creates transcripts and logs that clients can sign directly, enabling predictive analytics and trend detection. This not only improves compliance and customer interaction, but also reduces the effort required for manual documentation. In addition, automated recording opens up new possibilities in data analysis and compliance management.
The AI revolution won't wait - and neither should your business!
Advancing digitalization is changing the way we communicate and opening up new horizons for customer experiences. Expanding regulatory requirements signal the growing importance and need for secure and effective digital communication channels. However, this is not a burden, but a clear invitation to innovate. AI-driven technologies offer immense opportunities: Not only can they ensure compliance, but they can also strengthen customer loyalty through customized and engaging communication channels. Be proactive and take the initiative to use these technologies to your advantage. Imagine how AI can help your company not only survive, but thrive as a leader in digital customer interaction.
The question is not whether you can afford to invest in these technologies, but whether you can afford not to. Seize the opportunity now, expand your market presence, and build a relationship of trust that is unparalleled in the digital world.
Michael Krause
Vice President Sales Central & Eastern Europe
Vice President Sales Central & Eastern Europe
Michael Krause is Vice President Sales Central & Eastern Europe at ASC Technologies AG. He has been active in the financial environment for many years and renowned institutions among them banks, insurance companies, stock exchanges and other financial service providers in central Europe. His expertise in sales and service management, business development as well as in sales and distribution of IT solutions proves advantageous in his reach of responsibility: operative and strategic sales activities of ASC Technologies AG with partners and final customers in Europe.
