1. Bank of New York Mellon Pays $14.8 Million for the U.S. Foreign Corrupt Practices Act Alleged Violations
Recently, the Bank of New York Mellon Corporation (BNY) agreed to pay $14.8 million to settle Foreign Corrupt
Practices Act (FCPA) charges. The U.S. Securities and Exchange Commission (SEC) alleged that BNY violated the
FCPA anti-bribery and internal controls provision by providing valuable student internships to family members of
foreign government officials affiliated with a Middle Eastern sovereign wealth fund (Fund). It remains to be seen
what additional actions the U.S. Department of Justice will take against BNY given the SEC’s findings.
While the $14.8 million fine is not crippling to a financial institution like BNY, this settlement is a reminder to
multinational businesses that even relatively innocent favors in exchange for a business advantage can lead to
expensive fines and the regulators take these matters seriously. Because the FCPA has no materiality standard,
any corrupt exchange with a foreign official in exchange for a business advantage can lead to liability.
BNY provides global banking, financial and wealth management services. From 2010-2011, BNY managed
approximately a $55 billion portfolio of the Fund. The Fund is a government body responsible for management
and administration of assets of a Middle Eastern country. Fund officials requested, and BNY agreed to provide
valuable internships for the Fund officials’ family members – in exchange for continued business, according to the
SEC.
BNY had a code of conduct and a specific FCPA policy yet BNY’s employees had little guidance on risks related to
international hiring. Sales staff and client relationship managers enjoyed wide discretion in hiring decisions, and
Human Resources staff were not trained to recognize potentially problematic hires. There was no legal or
compliance review in the hiring process.
As a result, the SEC concluded that BNY failed to devise and maintain a system of internal accounting controls
sufficient to provide reasonable assurances that its employees were not bribing foreign officials.
Because the FCPA does not have any minimum payment exceptions, and because bribery can take many forms
besides money transfers (for example, internships, lavish gifts and entertainment, valuable favors, etc., when
done in exchange for a business advantage) it is important to continue legal and compliance reviews of
transactions with foreign officials and intermediaries. Confer with your respective country’s legal or compliance
personnel for guidance.