BNY Mellon has agreed to pay $14.8 million to settle corruption charges for giving internships to family members of a Middle Eastern sovereign wealth fund’s officials.
The US Securities and Exchange Commission (SEC) found that the custodian bank and asset manager employed three of these family members in 2010 despite them not meeting “stringent hiring standards” of a minimum grade point average and multiple interviews.
“BNY Mellon viewed the internships as important to keep the sovereign wealth fund’s business,” the SEC said.
The unnamed sovereign fund had been BNY Mellon’s customer since 2000 and held about $55 billion with the bank.
“BNY Mellon viewed the internships as important to keep the sovereign wealth fund’s business.”Senior BNY Mellon employees approved the internships, the regulator said, “to corruptly influence foreign officials and win or retain contracts to manage and service the assets of the sovereign wealth fund,” including a $711 million mandate.
This is in direct violations of the Foreign Corrupt Practices Act (FCPA), which prohibits companies from bribing foreign officials with “anything of value” including cash payments, gifts, and internships, the SEC said.
The SEC added BNY Mellon lacked “sufficient internal controls” to prevent improper hiring practices.
“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 bank neither admitted nor denied the allegations.
“We cooperated with the SEC throughout this process, and had already taken steps to enhance our existing internal controls and procedures with respect to our internship and hiring practices,” a BNY Mellon spokesperson told CIO.
BNY Mellon was first alerted to the SEC’s inquiry in January 2011 and received Wells notices in the third and fourth quarter of 2014.
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