Drinking on the job. Disrespectful and angry communication. Retaliating against a coworker. These examples of “non-financial misconduct” are a growing liability for financial institutions, requiring surveillance and HR teams to better track, investigate, and remediate, according to a major British regulatory body.
A recent poll of 984 financial firms conducted by the U.K.’s Financial Conduct Authority (FCA) — the equivalent of the U.S. Securities and Exchange Commission — revealed an unexpected trend. Reported incidents of non-financial misconduct surged from 1,363 in 2021 to 2,347 in 2023 — a staggering 72% increase in just two years.
Among the non-financial misconduct incidents reported in 2023, some 40% fell under “other” behaviors, a catch-all for actions like intoxication at work or work-related environments; offensive communication with colleagues or clients; data security breaches; retaliation by employees against colleagues who made allegations about them; and misuse of expenses, among other things. Bullying and harassment (25%), discrimination (20%), and sexual harassment (12%) were also prevalent, followed by violence and intimidation (4%), and possession of or use of illegal drugs (2%).
Many industries are increasingly recognizing that this fast-rising threat to banks can lead to financial risks, such as:
Reputational harm impacting investor or client trust.
Legal and regulatory penalties.
Increased litigation costs.
For example, a workplace harassment case (non-financial misconduct) can result in significant financial settlements or fines. Similarly, lax oversight of non-financial misconduct can indicate broader governance failures, raising red flags for regulators and stakeholders. (“Financial misconduct,” by comparison, is associated with activities including fraud, embezzlement, insider trading, and money laundering.)
Firms that address non-financial misconduct head-on stand to gain more than just compliance and risk-mitigation. They nurture trust among employees, making the workplace more attractive to top talent, and gain a competitive edge through a healthier, safer culture. In the words of the FCA, these measures "safeguard their culture with effective and fair governance," ensuring a strategic market advantage.
Across the board — among the wholesale banks, wholesale brokers, market insurers and market intermediaries surveyed — 43% of reported cases led to disciplinary actions. But that left a substantial 57% of the complaints unresolved, ongoing, or deemed inconclusive. Some, like cases of violence and intimidation, were more likely to result in action. Others, like discrimination, were more likely to end with settlement or confidentiality agreements. All call for better detection technology to capture the so-called “bad actors” within a firm, but also stop unintended harm and disputes before they escalate.
Investigations into cases after the fact drain valuable resources that might otherwise go to serving clients and growing business. There are better ways — and new technologies — to help companies detect and stop damaging communication.
Breaking the Cycle of Misconduct
Addressing non-financial misconduct is critical to preserving workplace culture and resource efficiency. Here are actionable strategies to help companies take the lead:
Spot Issues Early with Technology: Tools like Reflect AI are revolutionizing workplace monitoring by flagging harmful, unlawful, and unethical language in real time. These offer pinpoint details and insights for companies to address concerns early, preventing them from becoming major incidents.
Be Consistent in Investigations: Employees notice when standards are applied unevenly. A transparent and structured process for addressing misconduct — from whistleblower reports to informal complaints — ensures fairness while streamlining resolution.
Invest in Meaningful Training: Training is often dismissed as a checkbox exercise. Tailored, scenario-based training can change that, equipping employees with the tools they need to foster a respectful, compliant workplace.
Why This Matters Now
The FCA’s findings underline that addressing non-financial misconduct is a rising compliance and HR risk that is integral to building a resilient, high-performing organization. By adopting smarter tools and proactive strategies, firms can minimize disruptions and refocus on priorities such as serving clients, driving innovation, and fueling growth.
Amanda Nurse is the editorial and operations coordinator at Alphy.
Reflect AI by Alphy is an AI communication compliance solution that detects and flags language that is harmful, unlawful, and unethical in digital communication. Alphy was founded to reduce the risk of litigation from harmful and discriminatory communication while helping employees communicate more effectively. For more information: see www.alphyco.com