The Central Bank has announced what it says is the largest penalty so far imposed on a provider of fund services in Ireland.
The regulator has reprimanded BNY Mellon Fund Services (Ireland) DAC (BNY DAC), and fined it almost €10.8 million, for 16 breaches of regulatory rules linked to the outsourcing of fund administration.
In a statement, the regulator said that an investigation had identified “serious systemic breaches” across BNY DAC’s outsourcing framework. BNY DAC's ultimate parent company is the US bank Bank of New York Mellon Corporation.
The breaches ranged from 26 days to six years, and spanned a period from July 2013 to December 2019.
The Central Bank said that the issues included:
- Failure to have in place an adequate outsourcing-governance framework,
- Failure to comply with its regulatory obligations on outsourcing, and
- Failure to engage openly and transparently with the Central Bank once breaches of its regulatory obligations were identified.
The regulator added that the bank had failed to fully address all issues after the problems had been identified, despite “protracted” engagement.
"Following the commencement of the investigation into BNY DAC’s outsourcing failings, it committed additional breaches by providing inaccurate and misleading information to the Central Bank, and by failing to report breaches as soon as it became aware of them,” the Central Bank stated.
It added that the failings undermined BNY DAC’s ability to effectively identify and manage the risks associated with its outsourcing arrangements, and undermined the Central Bank’s ability to properly assess, monitor and supervise the outsourcing.
Call for transparency
The regulator’s fine of €15.4 million was reduced by 30%, in accordance with the settlement-discount scheme provided for in the Central Bank’s Administrative Sanctions Procedure 2018 (ASP).
“While outsourcing can be beneficial, that is only the case where firms manage their outsourcing arrangements and associated risks correctly,” said Seana Cunningham (the Central Bank’s director of enforcement and anti-money-laundering).
Pointing to BNY DAC’s lack of transparency and openness on the issues identified, she warned that the Central Bank expected firms to be “candid” in all of their dealings with it.
“Regulated firms must have a culture, driven by their boards, which supports transparency with the regulator,” she added.
'Necessary steps' taken
Responding to the Central Bank decision, BNY Mellon Fund Services (Ireland) DAC issued the following statement:
“BNY Mellon Fund Services (Ireland) DAC sincerely regrets failing to meet its regulatory requirements, and the expectations of the Central Bank of Ireland, in relation to the oversight of outsourced fund-administration activities and related regulatory engagement.
"The firm has taken the necessary steps to rectify the deficiencies that gave rise to the breaches.
"We remain steadfastly focused on demonstrating fulfilment of our regulatory obligations, and being a strong and trusted partner," the fund-services provider concluded.