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We are just two months away from the start of the Financial Services Authority regulation that requires all those in the UK trading on capital markets to record every mobile communication, from voice to SMS and instant messaging. Heather McLean speaks to those on the cutting edge of this new market.
UK regulator, the Financial Services Authority (FSA), has mandated that participants in the country’s capital markets must record all mobile communications including voice, SMS, and instant messages of all employees involved in trading by 14 November this year.
While regulators require strict compliance with the rules they have set in place, the companies deploying mobile recording solutions have additional concerns, says research firm, Ovum. They need to keep their traders, a demanding user base, happy, which means installing a system that is as unobtrusive as possible. And, of course, they need keep their costs down without compromising their ability to comply with the regulation.
This last point leads Ovum to believe that companies will seek to utilise the investments they have already made in recording fixed line communications, such as routing mobile voice calls to be stored on the same recording server they use for wireline calls.
Choose your weapon
Rik Turner, senior analyst for financial services technology at research firm, Ovum, and author of new report, ‘Mobile Communications Recording in the Financial Markets’, comments that there are several key points to consider when helping a customer choose a mobile call recording system. Firstly the size of their organisation and, more particularly, of the mobile estate that will need to be recorded. “A hedge fund with ten people represents a different challenge from an investment back with 300 traders,” he explains.
Secondly, Turner points to the organisation’s appetite for ‘DIY’ solutions vis-à-vis a managed service. “Some tier one investment banks are total DIY snobs who want to implement stuff on premise and run it themselves, while a small fund in Mayfair may be quite happy for someone to deliver the whole thing to them as a service,” he contends.
Thirdly, Turner says the question of how important is it for the client to use their existing investment in fixed line calling should be asked. He says: “They will probably have a NICE or Verint call recording server (or even one from a smaller provider like Red Box,) in their network for this purpose, and may want to use it for holding their mobile call recording too. This is a logical position, though they should bear in mind that it will mean buying new channels on their recording server and adding considerably more storage behind it.
“In addition, if they are going down the route of holding all their mobile comms recording on-premise, you should check where the recording server vendors are in terms of their ability to hold non-voice recordings, such as SMS, IM, webmail and the rest. They were still working on that when I spoke to them earlier this year.”
Adam Smith, head of product management at Red Box Recorders, comments on how Red Box deals with customers looking into this area: “Firstly we advise customers on what system they need to comply with the FSA regulations. This might sound obvious but the FSA has a principles-based approach to regulation, which is designed to get companies to decide more often for themselves what business processes and controls they should operate. In reality this means there are some grey areas, as is often the case when new regulations are brought in.
“For example companies need to decide if they are going to record all mobile conversations, including private calls, and whether to include calls to and from voice mail. Other issues such as the number of mobile users, the type of handset used, the number of calls expected and whether the users are often abroad, all have huge implications for the choice of system, the functionality required and the cost,” he notes.
“Once we have defined what the client really needs and wants, the next stage is to discuss whether they want a hosted or on-site solution. There are pros and cons for both, but we are finding that some customers are going down the hosted path and leasing equipment while they wait to see how the market and the regulations develop,” says Smith.
Technical minefield
Steve Donovan, managing director at Xarios, states: “Mobile recording potentially creates a technical minefield for any organisation that needs to work out how to achieve this in the face of a range of mobile networks and smartphone devices, some of which are capable of the task and some of which are not.
“The majority of companies affected by the new legislation to record mobile will already have call recording equipment within their organisation, but our objective is to provide a single user interface for our clients to search and playback both fixed line and mobile calls from the same place, while maintaining the existing FSA requirements to encrypt and store the call data,” Donovan explains.
Philip Hill, CEO at Intelligent Recording, notes: “The key point that determines the type of solution required, is whether all calls need to be recorded without the user having a choice about it. Clearly there are network-based solutions and individual end user solutions. Once this decision is made, companies can then select the solution based on additional features and cost.”
While Sarah-Jane Heber-Hall, head of operations at ComputerTel, adds: “The equipment will need to match a budget set aside by the firm for these requirements. Hosted and stand alone mobile recording equipment should be available, to help meet the need for current and long-term plans.
“Reliability issues will need to be addressed, based on a lack of current market confidence relating to this new technology, along with compatibility issues,” continues Heber-Hall. “The equipment must work with existing kit and service providers currently in place, as well as cover the same worldwide network and roaming functions that are currently experienced, to the same standard as the user’s experienced before. It also has to fulfil industry regulations with no compromise to the user’s experience.”
She adds: “Sourcing a solution that involves minimum disruption and minimum administration requirements will be a key point to consider. A remote set up and maintenance application would therefore offer best results.”
Lesley Hansen, group marketing director at TeleWare, says that any mobile recording system should be mandatory on the monitored number, without any bypass option. “The ability for the user to selectively bypass recording is effectively a non-compliant solution.”
Hansen continues: “The FSA regulations and clarifications suggest that any technical method to achieve recording is acceptable provisioning that the system is reliable, enforceable, secure and with a full audit trail.”
Step up protection
The primary objective behind the regulations for recording mobile calls is for the protection of the consumer rather than the banks, contends Donovan. However, he adds: “The banks and traders themselves are currently exposed if staff transact business on their behalf outside the controls and visibility of the IT network. The mobile phone is one of the last areas not measured or controlled, and this new regulation will force them to address this issue.”
On how this regulation is going to be a positive move for banks and traders, Andrew Jones, sales director at Magnetic North, comments: “From a day-to-day perspective on the shop floor, I’m not sure anyone sees further regulation as a positive thing. However, at 30,000 feet, the organisation can prevent trading abuse and close a potential loophole that could otherwise land it in hot water.”
Hill adds: “Having an audit trail is both a positive and negative move for banks and traders, in the same way as recording on fixed line phones is at present. The clear advantage is that traders can continue business as normal, on mobile phones, while knowing they are covered with regard to the regs.”
Pick your trade-off
Turner notes that all mobile call recording systems have a down side. Commenting on SIM and app-based methods, he says: “If you are an organisation with employees that need recording and who often work abroad, you need to check which countries they will be in, as that will need to determine your selection; a SIM-based solution is far less intrusive for the end user and less a headache for them to manage, but it relies on the CAMEL protocol to work when abroad and, for instance, there are currently no mobile operators in China supporting CAMEL.
“All the offerings that use a software client on the handset introduce some degree of delay, which may be irksome to the end user and their interlocutors. However, they do not rely on CAMEL to work abroad and so should be able to guarantee recording wherever the employee happens to be on the planet at a given moment.
“You cannot, as things stand today, develop a software client (an app) for the iPhone to perform mobile comms recording, so the SIM-based route is the only way to do it on that platform,” he notes.
The wrong sort of system is quite simply one that either will not work or does not meet the organisation’s needs, states Smith. He argues: “As often happens when new regulations are introduced, we are seeing a number of players enter this sector that have no experience of the voice recording market, and yet they are offering the ‘utopia’ of solutions. Clients need to be very thorough in their analysis of both the companies and their product capabilities to ensure that any investment they make is fully future-proof.”
While Jones adds: “Anything that impacts the user or the callers’ experience is a bad thing in my book. Our approach lets organisations outsource this problem without having to upgrade existing equipment, install new phone lines, change GSM call routing or in any way increase the IT support load. As far as we’re concerned, solutions that do these irritating things are from the dark ages and are best consigned to the history books.”
Not all call recording systems are equal and some have traits that make them less suited to a busy and FSA-compliant financial services organisation, says Hansen. She explains: “Any system that requires additional steps, such as dialling a prefix or clicking on an icon to stop and start call recording, causes delays and potentially allows covert calling in breach of the regulations. Other systems that use applications on the handset are particularly troublesome to support, manage, upgrade and can potentially open security vulnerabilities.”
The wrong sort of system, says Heber-Hall, would be one that doesn’t meet the new FSA regulations fully, is not reliable and does not offer the same functionality or level of network coverage and roaming options that is currently offered. “The wrong system would also be one that is not secure or allows users to decide when to keep, delete or drop a call, or one that does not offer watermarked recordings, and disrupts the user of the mobile phone, whilst it is being implemented,” she notes.
Take your bets
Hansen comments: “Organisations looking at mobile call recording are effectively faced with either an on-premises or a hosted solution. Hosted solutions require no integration and are quick and easy to get in place by the 14th November deadline. Premises-based solutions deliver the call over a private trunk (SIP, DPNSS, ISDN etc) and then rely on the on premises PBX to onwards integrate to the customers recording platform, so deployment and set up is more complex and time-consuming, but the native device functionality can be maintained and existing PBX and call recording equipment investment be utilised.”
Call recording in the network is likely to emerge as the winning technology because it has least impact on the organisation and provides both the lowest cost and levels of risk, bets Hansen. She says that because the call recording is already managed at the core by a dedicated team in a scalable and resilient network, it is easy to calculate a per minute call recording cost. “Network recording removes the need to employ and retain specialist people to manage expensive local equipment. The analogy would be akin to buying and running your own electric generator compared to just getting electricity from the national grid.
“The concept of running services from the core network has been used for many years for fixed line services, and being utilised now with mobile networks on these call recordings solutions,” continues Hansen. “Once call recording is established, additional applications are also possible. For example, language translation services, text transcription and agent training to name but a few.”
On how can we expect to see these technologies evolve, Donovan reckons that the mobile phone’s evolution will be the answer: “The smartphone will continue to become more powerful, with additional storage and processing power. In addition, ubiquitous access to Wi- Fi networks and the continuation of mobile convergence will permit the idea of the smartphone device itself recording the call to be a real option, and either streaming the call to a collector server at the headquarters, or sending the whole file immediately the call is finished.”
Smith states: “There is no doubt that these technologies will evolve and I think the biggest change will come from the handset providers, who are likely to recognise the opportunity to include more functionality. The network providers might also see the opportunity to provide additional services in this manner, only time will tell. In the future, voice recorders may be developed to capture everything on the phone including all of the multimedia and video. This is already achievable today but at present the demand is not there from the market.”
Turner comments on how he feels the current technologies will evolve: “I see all the software-based vendors developing SIM-based offerings. I would also expect at some point that an MNO will launch a SIM-based service, which might preclude the need to change all the SIM cards for the employees who are going to be recorded, as is currently the requirement. It could then become a box to tick on the basic contract the bank or brokerage signs with a mobile operator, enabling them to specify up front which individuals will need to be recorded and let the MNO get on with doing it.
“I also expect to see the call recording server vendors integrate the capability for recording non-voice comms into their boxes, possibly through partnerships with companies such as Actiance,” he continues.
“As for other technologies, there is a call recording technology in the market that cannot currently be used to comply with the FSA requirement. This uses a software client and actually holds the recording on the handset, then streams it across to a recording server once the call has finished. Clearly there is room for abuse of this system in its current stage of development, but there is talk of introducing massive compression of the recorded data, such that it could be streamed across while the recorded call is still underway,” remarks Turner.
Yet Jones says right now there is a land grab going on in the mobile call recording market. He believes there is a lot of hype being spread about the industry as companies vie for customer attention. “And lots of tall stories are being told to customers by people who we think are long enough in the tooth to know better,” argues Jones. “We think there will be a lot of churn when customers realise the real cost of ownership of some of these premises-based and complex call routing architecture solutions. This market is nascent and there will be casualties, but we think that the long-term winners will be the network operators themselves.”
Install the angry guard dog
On whether the regulation will actually work, Hill states: “Of course nothing can stop a trader using a non-recorded phone (not just a mobile), and the regulation really only affects those that tend to do trades out of the office or out of hours. I imagine some organisations will adopt mobile recording as a ‘belt and braces’ approach just to be covered. Others will specify that trades are not performed on mobiles to avoid implementing recording.”
While Hansen comments: “It would be naive to suggest that a dedicated criminal could not circumvent the FSA regulations. However, using a private phone to carry out a trade would be illegal and therefore carries a penalty to the user and potentially the organisation if they were deemed as lax in enforcing the regulations.”
Heber-Hall says the FSA has attempted to cover this point by introducing a new rule requiring firms to take ‘reasonable steps’ to ensure that such communications do not take place on private communication equipment that firms cannot record. This includes private mobiles, private handheld mobile electronic communication devices, and private non-mobile electronic communication devices.
“Firms will need to ensure that disciplinary procedures to cover the use of private mobiles and handheld electronic devices are in place before the 14 November deadline,” warns Heber-Hall. “While the industry recognises that there is no current failsafe method that can legally be used to capture every person’s communication activities 24/7, technology can be used to capture and record more communication traffic than ever before. The financial industry will also need to implement new methods of measuring and managing personnel compliance to the new technology, and set up revised disciplinary procedures to deal with any breaches or matters of misconduct.”
Jones adds: “They say where there’s a will there’s a way; of course people who set out to commit a crime are still going to do this. All the regulation is doing is making it harder though, and hopefully cutting out a tier of market abuse, or at the very least making people think twice.”
Ovum’s Turner remarks: “Of course it can’t be foolproof against human ingenuity. I expect the companies that have to implement it for their employees to write something into their traders’ contracts, whereby they agree not to use personal phones and, if they are found to be doing so, dismiss them and sue them. That, in addition to the deployment of the necessary recording infrastructure, is what the FSA will consider best efforts, I would imagine.
“It’s a bit like protecting your house from burglary,” continues Turner. “After installing alarms and barbed wire and a big angry guard dog, you can place a notice outside to say that anyone who makes it over the wall will be shot on sight, but they may still try their luck.”
A journey of a thousand miles…
This is the first step in mobile call recording, some industry pundits believe; while a regulation has been the first step in this area, more will see the benefits of mobile call recording and will take up the technology without being forced to, says Magnetic North’s Jones, who sees the expansion of mobile call recording going beyond the regulated market.
He explains: “We see SMEs, pro-sumers and carriers adopting this technology to make the most of the market opportunity and their existing investment, and we see consolidation coming down the pipe, both of vendors and of solutions bought by customers, as people realise that some things really are just ‘vapourware’ or too clunky to operate in the real world.”
Smith concludes: “I think we will see this expanding into other markets such as emergency services, security and transport, which will mean that solutions will become more cost-effective. As a result I would expect to see consolidation of single technology organisations being absorbed into larger multi-technology organisations, as well as the inevitable few who exit the market.
“As a result of the market becoming more mature, in the long term there are also likely to be more new players entering the mobile voice recording market with specific technologies or propositions,” he predicts.