Last week’s Anglo tape revelations shone a spotlight on the existence of internal recordings of private telephone conversations in the finance sector – even if that wasn’t exactly the point of the exercise.
The likelihood is that the tapes were created as part of oversight rules on monitoring the conduct of financiers dealing in treasury, although Ireland does not actually have any such binding requirement.
The reason why John Bowe and Peter Fitzgerald's revealing exchange on their dealings with the Central Bank was ever captured in the first place has probably got more to do with internal policy at the former Anglo Irish Bank than in Ireland Inc .
Six years ago, the Irish Stock Exchange was tasked with regulating the area of corporate conduct and insisted on recordings of phone calls being kept for a period of three months, primarily for use in case of complaints.
However, and somewhat surprisingly, when the mandate was superseded by a European directive in 2007 handing over enforcement to the Central Bank this ceased to be the case and the notion of recorded calls in the financial sector moved from the compulsory to the voluntary.
In the case of Anglo, it is believed the calls were taped because Bowe was acting director of treasury at the time.
As a banking source explained: “Where there is the potential for large transactions, that [the recording of conversations] would be the norm.”
Currently, a new round of EU negotiations on the rules governing the sector – the Markets in Financial Instruments Directive, or soon the “MIFID 2” – is underway and should set such measures in legal stone.
Strict policy of this nature is already adopted by the UK's watchdog, the Financial Conduct Authority (FCA), formerly the Financial Services Authority (FSA).
That is perhaps explained by the fact that the London stock market is the biggest in Europe and traders, potentially open to accusations of professional abuse, must be seen to be regulated.
Recording conversations, and certainly sharing the content, delves deep into legal complexity, with much of the focus laid on consumers and individuals, and with a view to striking a balance between the sensitivities of personal data and corporate responsibility to maintain information.
We have all heard the “training or verification purposes” mantra of call centres and customer support lines, but the legality behind how we deal with the need, requirement or even temptation to record private conversations can be complicated.
Personal information
The Office of the Data Protection Commissioner has clear rules when it comes to this – those involved must be made aware they are being recorded.
However, these rules deal specifically with the safeguarding of personal information, generally of customers, and do not cover areas in which conversations are recorded for business purposes.
A spokeswoman explained that cases reported to the office involving recorded inter-business conversations are “marginal at best”.
“Anybody can be seen to make a complaint to us to outline why in those specific circumstances it would apply to data protection and we would look at that,” she said, but added that such cases are rare.
The Postal and Telecommunications Services Act 1983 says that anybody “intercepting” [recording] or assisting in intercepting information is committing a criminal offence.
However, that is tempered by legislation under the Interception of Postal Packets and Telecommunications Messages Act 1993 which allows for such activity where there is consent on the part of those being recorded. That would apply to the likes of the financial sector.
This is not an automatic entitlement to have private conversations published, however, explains Declan Doyle, a senior counsel working extensively in the area of privacy and defamation law.
“Let’s say there is a recording that is not in breach of this Act and it is legally recorded and published; there is clearly no criminal offence,” he says.
“But it doesn’t necessarily preclude a civil action for breach of privacy. The recording could be legal but the publication of it could amount to a breach of the citizen’s constitutional right to privacy.
“Even if there is a public interest, ultimately the test is whether a citizen’s right to privacy outweighs the right to free speech.”
While individual cases are subject to individual hearings, it is safe to assume that little legal recourse in this regard is open in the case of the Anglo tapes, which are clearly in the public interest.
It would appear those recordings were made on an internal policy basis, as is the case with many institutions delving into the area of financial markets.
AIB said: "As per standard banking practice AIB records certain calls, typically those in a customer-facing capacity such as call centre and treasury dealing. It is not and has not been AIB's policy to record all calls."
Bank of Ireland said it does not comment on its internal operations.
Taping generally applies to specific departments and the amount of time the recordings are retained would be a matter for the individual institution. Again, a forthcoming revision of rules monitoring European finance houses may change that.
In the case of Anglo, is not clear exactly how the tapes came to light. Material was seized from the bank by gardaí and the Director of Corporate Enforcement in 2009 as part of their investigation. Anglo itself, later the Irish Bank Resolution Corporation, would also have had the material.
In the UK, the FCA has been monitoring fixed-line calls since 2008 involving those dealing with stock investments and, when the technology became available, company mobile phones since the end of 2011.
A spokesman explained that while standards on recordings were included in the original MIFID agreement they were not compulsory and the UK was, in effect, ahead of most of its European regulatory counterparts in enforcing them.
'Enhance transparency'
The measures, he said, are applicable "only to certain firms and certain functions within firms".
“The reason we have introduced it is primarily for market abuse and the reason we would listen into it is if we were carrying out an abuse investigation.”
The rules are clearly set out and apply to firms whose products are included in the “market abuse regime”.
“These products are qualifying investments (include shares, bonds, options and futures) that are traded on a prescribed market, or other types of investments that are related to these,” the FCA says.
Only those calls involving clients are recorded; people in “back-office functions” are not affected.
Last month, the Department of Finance announced that EU partners had broadly agreed the terms to the new MIFID 2 deal, which will become law in due course.
These proposals are part of the G20 commitments to "enhance transparency, mitigate systemic risk and protect against market abuse".
While the inclusion of mandatory telephone recording, and its extent, has yet to be confirmed, last week can leave little doubt as to the value such systems offer when it comes to safeguarding the activity of the financial sector, even if not always in the intended sense.
