The Bank of New York Mellon today agreed to pay $14.8 million to the Securities and Exchange Commission to settle charges that it violated the Foreign Corrupt Practices Act.
The violations took place during 2010 and 2011, when employees of BNY Mellon sought to corruptly influence foreign officials to retain and win business managing and servicing the assets of a Middle Eastern sovereign wealth fund, according to the SEC. “These officials sought, and BNY Mellon agreed to provide, valuable internships for their family members,” the SEC said.
“BNY Mellon provided the internships without following its standard hiring procedures for interns, and the interns were not qualified for BNY Mellon’s existing internship programs,” the SEC added.
Furthermore, the SEC said, BNY Mellon failed to devise and maintain a system of internal accounting controls around its hiring practices sufficient to provide reasonable assurances that its employees were not bribing foreign officials in contravention of company policy.
The SEC’s administrative order, issued Aug. 18, describes the following compliance failures by BNY Mellon:
BNY Mellon had a Code of Conduct and a specific FCPA policy, which prohibited BNY Mellon employees from violating the statute. Although BNY Mellon’s policies stated that “any money . . . gift . . . or anything of value” provided to a foreign official might constitute a bribe, employees were provided with little additional guidance that was tailored to the types of risks related to hiring faced by BNY Mellon’s international asset servicing unit and asset management business division.
BNY Mellon provided employee training obligations under the FCPA and the bank’s policies, but did not ensure that all employees took the training or understood BNY Mellon’s policies.
BNY Mellon had few specific controls relating to the hiring of customers and relatives of customers, including foreign government officials. Sales staff and client relationship managers were permitted wide discretion in making initial hiring decisions, and human resources was not trained to flag hires that were potentially problematic.
Senior managers were able to approve hires requested by foreign officials with no mechanism to ensure that potential hiring violations were reviewed by anyone with a legal or compliance background.
BNY Mellon’s system of internal accounting controls was insufficiently tailored to the corruption risks inherent in the hiring of client referrals, and therefore inadequate to fully effectuate BNY Mellon’s policy against bribery of foreign officials.
In determining to accept the settlement offer, the SEC said it took into consideration BNY Mellon’s cooperation and remedial actions. Prior to the SEC’s investigation of the interns, BNY Mellon had begun a process of enhancing its anti-corruption compliance program, including:
Making changes to the Anti-Corruption Policy to explicitly address the hiring of government officials’ relatives;
Requiring that every application for a full-time hire or an internship be routed through a centralized HR application process;
Enhancing its Code of Conduct to require that every year each employee certifies that he or she is not responsible for hiring through a non-centralized channel; and
Requiring as part of a centralized application process that each applicant indicate whether she or a close personal associate is or has recently been a government official, and, if so, additional review by BNY Mellon’s anti-corruption office is mandated.
Without admitting or denying the findings, BNY Mellon agreed to pay $8.3 million in disgorgement, $1.5 million in prejudgment interest, and a $5 million civil penalty.