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SEC: BNY Mellon Bribed Officials With Internships for Family Members

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The Securities and Exchange Commission announced that BNY Mellon has agreed to pay $14.8 million to settle charges in connection with three valuable student internships it provided to the family members of foreign government officials affiliated with a Middle Eastern sovereign wealth fund.

The internships were in violation of the Foreign Corrupt Practices Act (FCPA), according to the SEC.

“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, in a statement released Tuesday.

This is the first FCPA action the SEC has filed against a financial institution. And, this is the SEC’s first FCPA case involving internships.

The SEC investigation found that BNY Mellon provided the internships to influence government officials in order to win and retain business from a sovereign wealth fund in the Middle East.

“The internships were highly valuable to the foreign officials who specifically requested them and in one instance asked that the request be kept confidential from his employer,” Ceresney said during a conference call with media on Tuesday afternoon.

Some of the emails between BNY Mellon employees – cited in the SEC’s order instituting a settled administrative proceeding – demonstrate that the internships were designed to influence the foreign officials, Ceresney said.

“For example, one account manager wrote to another employee that BNY Mellon was ‘not in a position to reject the request from a commercial point of view,’ Ceresney said. “And, ‘by not allowing the internship to take place we potentially jeopardize our mandate with the Middle Eastern sovereign wealth fund.’ In another email, a relationship manager wrote that an official’s request for an internship was likely to ‘influence any future decisions taken within the Middle Eastern sovereign wealth fund.’”

The SEC did not name the Middle Eastern sovereign wealth fund involved in this case.

According to Ceresney, “Our general practice is not to name entities or individuals that we do not charge. Therefore, in this case, we determined that it was not appropriate to make public the individuals or entities that may have been involved in the internships.”

According to the SEC, BNY Mellon custom designed the internships for the foreign officials’ relatives.

An SEC investigation found that BNY Mellon did not evaluate or hire the foreign officials’ family members through its existing and highly competitive internship programs that have strict 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,” the SEC states.  The SEC’s order finds that BNY Mellon lacked sufficient internal controls to prevent and detect the improper hiring practices. 

While the company did have an FCPA compliance policy, the SEC finds they maintained few specific controls around the hiring of customers and relatives of customers, including foreign government officials. 

According to the SEC, BNY Mellon’s 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,” the SEC states.

The SEC did not charge any employees in this case, Ceresney confirmed.

“In every case we consider carefully whether to charge any individuals and here we determined that it wasn’t appropriate to charge individuals,” he said.