Central Bank of Ireland Fines BNY DAC €10,780,000 for Regulatory Breaches

The Central Bank of Ireland reprimanded and fined BNY Mellon Fund Services (Ireland) DAC (BNY DAC) €10,780,000 pursuant to its Administrative Sanctions Procedure (the ASP) for 16 regulatory breaches relating to the outsourcing of fund administration activities.

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The 16 breaches arose because of BNY DAC's failure: to have in place an adequate outsourcing governance framework; to comply with its regulatory obligations in respect of outsourcing; and to engage openly and transparently with the Central Bank once breaches of its regulatory obligations were identified. The duration of the breaches ranged from 26 days to 6 years, spanning the period from July 2013 to December 2019.

Weaknesses within BNY DAC's outsourcing framework were first identified by the Central Bank, and despite protracted intrusive supervisory engagement, BNY DAC failed to fully remediate all of the issues to the Central Bank's satisfaction. This led to further breaches and extended the duration of the breaches. 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's investigation identified serious systemic breaches across BNY DAC's outsourcing framework. These failings undermined BNY DAC's ability to effectively identify and manage the risks associated with its outsourcing arrangements; undermined the Central Bank's ability to properly assess, monitor and supervise BNY DAC's outsourcing of regulated activities; and created unnecessary potential risks to its clients, investors and the financial markets.

The Central Bank has determined the appropriate fine to be €15,400,000, which has been reduced by 30% to €10,780,000 in accordance with the settlement discount scheme provided for in the Central Bank's ASP. This is the largest monetary penalty imposed on a Fund Service Provider in Ireland to date.

The Central Bank's Director of Enforcement and Anti-Money Laundering, Seana Cunningham, said:"The investigation into BNY DAC found systemic weakness across its entire outsourcing framework. Despite intervention by the Central Bank over a number of years, BNY DAC repeatedly failed to address these deficiencies. The Central Bank expects firms to take the necessary actions to remediate weaknesses communicated to them and will hold firms fully accountable where they fail to do so."