Confidence in misconduct detection falls despite greater focus on culture

Confidence in financial services firms’ ability to detect non-financial misconduct (NFM) has declined despite organisations placing greater emphasis on tackling inappropriate workplace behaviour, according to new research from communications technology provider Smarsh.

The survey found that 63% of employees believe NFM has been taken more seriously by their organisation over the past two years, suggesting firms have strengthened their approach to workplace culture.

However, confidence in communications monitoring systems has fallen, with 77% of respondents saying they believe their organisation can effectively detect instances of NFM, down from 81% in 2024.

Meanwhile, the proportion of employees unaware of any communications monitoring systems increased from 5% to 8% over the same period.

The findings come as the FCA continues to prioritise NFM, requiring firms to demonstrate they have effective systems in place to detect and respond to inappropriate behaviour.

Shaun Hurst, principal regulatory adviser at Smarsh, said the research pointed to a disconnect between firms’ cultural commitments and their operational capabilities.

“There is a clear gap between firms’ commitments and their ability to detect and address NFM in communications,” he said.

Monitoring communication 

Hurst added that increasing regulatory scrutiny, alongside the growing volume of AI-generated communications, would place further pressure on firms’ monitoring capabilities.

He said organisations should ensure they capture and retain communications across relevant channels before applying monitoring tools to identify conduct risks.

“The FCA expects firms to evidence detection capability, not just policy intent,” Hurst said. “That evidence starts with the communications data firms already hold.”

Smarsh said firms could reduce regulatory risk by combining robust communications monitoring with greater employee awareness of the systems used to identify and investigate NFM.