How Software Can Help Banks Meet Social Media Rules

The recent, and some say extremely onerous, social media compliance rules proposed by the Federal Financial Institutions Examination Council join a bevy of existing rules from regulators such as FINRA and the SEC. Unless a bank has a large pool of employees who can monitor social media activity, it will need to use some kind of social media compliance software to monitor not only what its employees are saying on social media, but what the public is saying about the bank - even if it's made a conscious decision not to engage on Twitter, Facebook and the like. The FFIEC calls for a thorough social media risk management program anyway.

The FFIEC's description of social media includes interactive online communication on Facebook, Google Plus, MySpace and, Twitter, forums, blogs, customer review web sites and bulletin boards (such as Yelp); photo and video sites (such as Flicker and YouTube); professional networking sites (LinkedIn); virtual worlds (Second Life); and social games (FarmVille and CityVille).

The proposed rules require seven main things:

1. Senior executives and/or the bank's board must direct the use of social media to contribute to the bank's strategic goals (such as brand awareness or product sales). Software can't make a CEO take an interest in social media. But by monitoring and tracking social media activity, software can help provide examples that illustrate for senior executives how social media can help the business.

Joanna Belbey, social media and compliance specialist with social media compliance software company Actiance, has seen banks' financial advisors sell products through social media conversations. "People are beginning to think of social media as a way to prospect and gain loyalty from clients," she says. One large wirehouse in New Jersey asked its senior advisors to use social media. An advisor noticed on LinkedIn that one of his clients had retired and wasn't working with a financial advisor. "They had a number of conversations and he won a $3 million piece of business," Belbey says. "If you can share those types of stories with management they're going to be really interested in social media."

On Facebook, financial institutions can find out a lot about customers' life events, such as getting engaged, having children, buying a car, retiring and hospitalization. "All those major life events are opportunities to sell financial products," Belbey points out.

It's hard to imagine customers wanting to link to their financial advisor or mortgage officer on one's Facebook or even LinkedIn page. But "the world is changing, and some people really like to be in touch with business context," Belbey comments.

2. Banks need to create a policy around use and monitoring of social media throughout the organization. This is an exercise in evaluating what employees are currently doing in social media and analyzing all relevant rules. It should probably be done by lawyers, rather than software.

3. Banks should have a due diligence process for managing third party vendor relationships related to social media, such as software contracts and marketing services. Most banks vet providers thoroughly already; they may need to document their efforts in this area.

4. Employees should be trained on the right and wrong use and monitoring of social media. "A lot of organizations just try to block access to social media as a way to manage risk, but we're getting to the point where the market is so saturated that your employees are going to be on LinkedIn and Facebook," says Megan Herfkins, product marketing manager at social media compliance software provider Hearsay Social. "Organizations that are ignoring that are putting themselves at risk." Software may not be used in such training per se, but it can be used to warn or guide employees as they use social media, and reinforce the training.