Security & Fraud

Are Encrypted Apps Boosting Insider Trading?

According to reports emerging in the Financial Times, the FBI is becoming increasingly concerned that Wall Street traders have found a way to turn encryption to their advantage when it comes to illegally exchanging insider information.

Encryption, according to John Casale, an assistant special agent in charge of complex financial crimes in the FBI’s Manhattan field office, is “a growing problem overall.” In his remarks to the Financial Times he noted:

“New technology comes out, and you know it’s going to be applied — and it could be applied in a way to engage in fraud, money laundering, and insider trading.”

WhatsApp, Signal and Telegram are a few of the encrypted chat apps that allow financial professionals access to totally secure end-to-end communications.

Law enforcement stumbled upon this rather anti-social use of social media when a former IT worker from Bank of America pleaded guilty to a $5m insider trading scheme.

According to civil and criminal charges brought by the Securities and Exchange Commission and US attorney’s office in Manhattan, Daniel Rivas used a phone messaging app to pass encrypted, self-destructing messages to three friends about confidential corporate information.

Encryption, according to reports, represents a massive hurdle for law enforcement, whose agents see that encrypted “public” services make it easy for criminals to suddenly go dark from a surveillance point of view.

However, it should be noted that those who want to break insider trading laws find ways to do so — Facebook chats, Instagram posts, burner cell phones — and what is happening now is something like the latest tech upgrade for the forward-thinking white collar criminal.

“People are starting to get creative and using some of those communication channels that are harder for law enforcement and internal teams to lay their hands on,” noted Marten den Haring, chief product officer of Digital Reasoning, an artificial intelligence-based computing platform that some financial institutions are using for surveillance.

“My only worry is: can the government adapt fast enough?”

——————————–

Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The July 2019 Pay Advances: The Gig Economy’s New Normal, a PYMNTS and Mastercard collaboration, examines pay advances – full or partial payments received before an ad hoc job is completed – including how gig workers currently use them and their potential for future adoption.

Click to comment

TRENDING RIGHT NOW

To Top