Taped phone calls could cut bank fraud

5 March 2008

After taped phone conversations helped to convict top executives at General Reinsurance and AIG of fraud, UK regulators are set to make financial traders legally obliged to keep records of phone calls.

The Financial Services Authority (FSA) has ordered that brokers who trade in stocks, shares, equity, bonds and derivatives will have to record any transactions made by phone and keep the tapes for six months.

In addition, the FSA says that under the new rules, which will come into effect next March, all email transactions will also have to be kept on record.

The policy statement from the FSA said: "Preventing, detecting and deterring market abuse is one of our key priorities. However, market abuse is one of the most difficult offences to investigate and prosecute."

It added: "Introducing a taping requirement may raise the standard of behaviour by those using telephone lines and means of electronic communication which will be taped for the first time. It may also increase the quality and volume of information available in pursuing market abuse cases."

"Crucially, the evidence that might be obtained from tape recordings may not be available by other means," it continued. "The advantage of telephone evidence over documentary evidence [or] oral testimony is that telephone evidence more often helps to show 'knowledge' and 'intent' - matters that are critical in terms of enforcement action but which are not always easily established."

The FSA had intended to be even stricter, requiring record to be kept for three years, but changed its mind after negative feedback.

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