Press Release: SEC Charges BNY Mellon With FCPA Violations
August 18 2015 - 12:34PM
Dow Jones News
FOR IMMEDIATE RELEASE 2015-170
SEC CHARGES BNY MELLON WITH FCPA VIOLATIONS
Washington D.C., Aug. 18, 2015 - The Securities and Exchange
Commission today announced that BNY Mellon has agreed to pay $14.8
million to settle charges that it violated the Foreign Corrupt
Practices Act (FCPA) by providing valuable student internships to
family members of foreign government officials affiliated with a
Middle Eastern sovereign wealth fund.
An SEC investigation found that BNY Mellon did not evaluate or
hire the family members through its existing, highly competitive
internship programs that have stringent hiring standards and
require a minimum grade point average and multiple interviews. The
family members did not meet the rigorous criteria yet were hired
with the knowledge and approval of senior BNY Mellon employees in
order to corruptly influence foreign officials and win or retain
contracts to manage and service the assets of the sovereign wealth
fund.
According to the SEC's order instituting a settled
administrative proceeding, the sovereign wealth fund officials
requested that BNY Mellon provide their family members with
internships, and they made numerous follow-up requests about the
status, timing, and other details of the internships for their
relatives. BNY Mellon employees viewed the internships as important
to keep the sovereign wealth fund's business.
"The FCPA prohibits companies from improperly influencing
foreign officials with 'anything of value,' and therefore cash
payments, gifts, internships, or anything else used in corrupt
attempts to win business can expose companies to an SEC enforcement
action," said Andrew J. Ceresney, Director of the SEC Enforcement
Division. "BNY Mellon deserved significant sanction for providing
valuable student internships to family members of foreign officials
to influence their actions."
The SEC's order finds that BNY Mellon lacked sufficient internal
controls to prevent and detect the improper hiring practices. The
company did have an FCPA compliance policy, but maintained few
specific controls around the hiring of customers and relatives of
customers, including foreign government officials. Sales staff and
client relationship managers were permitted wide discretion in
their initial hiring decisions, and human resources personnel were
not trained to flag potentially problematic hires. Senior managers
were able to approve hires requested by foreign officials with no
mechanism for review by legal or compliance staff. BNY Mellon's
system of internal accounting controls was insufficiently tailored
to the corruption risks inherent in the hiring of client referrals,
and therefore was inadequate to fully effectuate BNY Mellon's
stated policy against bribery of foreign officials.
"Financial services providers face unique corruption risks when
seeking to win business in international markets, and we will
continue to scrutinize industries that have not been vigilant about
complying with the FCPA," said Kara Brockmeyer, Chief of the SEC
Enforcement Division's FCPA Unit.
The SEC's order finds that in 2010 and 2011, BNY Mellon violated
the anti-bribery and internal controls provisions of the Securities
Exchange Act of 1934. Without admitting or denying the findings,
the company agreed to pay $8.3 million in disgorgement, $1.5
million in prejudgment interest, and a $5 million penalty. The SEC
considered the company's remedial acts and its cooperation with the
investigation when determining a settlement.
The SEC's investigation was conducted by Eric Heining, Rory
Alex, Richard Harper, and Rachel Hershfang of the Boston Regional
Office. The case was supervised by Paul G. Block of the FCPA
Unit.
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(END) Dow Jones Newswires
August 18, 2015 12:19 ET (16:19 GMT)
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