Dive Brief:
- Ireland’s central bank said Thursday it fined a unit of BNY Mellon nearly €10.8 million ($11.9 million) over 16 regulatory breaches connected to the outsourcing of fund administrative activities between 2013 and 2019.
- Among other failures, BNY Mellon did not obtain central bank approval before starting new outsourcing arrangements, failed to monitor and assess service providers’ financial performance, failed to notify clients before beginning an outsourcing arrangement and repeatedly failed to make sure a senior bank official completed, signed and dated a review of the final net asset value, a key metric in investment decision-making, according to the Irish regulator.
- BNY Mellon admitted its shortcomings, saying it “sincerely regrets” failing to meet the central bank’s expectations, according to an emailed statement seen by Bloomberg. “The firm has taken the necessary steps to rectify the deficiencies that gave rise to the breaches,” the bank said. “We remain steadfastly focused on demonstrating fulfillment of our regulatory obligations and being a strong and trusted partner.”
Dive Insight:
BNY Mellon’s penalty — which Ireland’s central bank cites as the largest it has imposed on a fund service provider in the country — saw a 30% reduction from €15.4 million.
The central bank penalized BNY Mellon for having an inadequate outsourcing governance framework, failing to comply with regulatory obligations related to that activity and for its lack of transparency once breaches were identified, it said.
“Despite protracted intrusive supervisory engagement, BNY DAC failed to fully remediate all of the issues to the Central Bank’s satisfaction,” the regulator said Thursday in a release. “This led to further breaches and extended the duration of the breaches.”
After the regulator began an investigation, BNY Mellon “committed additional breaches by providing inaccurate and misleading information to the Central Bank,” meant to “minimize their “seriousness and extent,” the central bank said, adding that BNY Mellon failed to report breaches as soon as it became aware of them.
The shortcomings “undermined BNY Mellon’s ability to effectively identify and manage the risks associated with its outsourcing arrangements,” making it difficult for the central bank to “properly assess, monitor and supervise” BNY Mellon’s outsourcing and creating “unnecessary potential risks to [the bank’s] clients, investors and the financial markets,” the regulator said.
“Regulated firms must have a culture, driven by their boards, which supports transparency with the regulator,” Seana Cunningham, the Irish central bank’s director of enforcement and anti-money laundering, said in the release.
