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Anti-Corruption Compliance Considerations after SEC’s BNY Mellon Order

By GAN Integrity (Updated )

In an 18 August 2015 cease and desist order involving Bank of New York Mellon Corporation (BNY Mellon), the SEC effectively brought hiring within the scope of the Foreign Corrupt Practices Act (FCPA) definition of “anything of value.”

The order’s alleged facts (and BNY Mellon agreed to entry of the order without admitting or denying the facts):

  • During 2010 and 2011, certain senior BNY Mellon employees knowingly went outside normal competitive procedures to hire relatives of several foreign governmental officials affiliated with a Middle Eastern sovereign wealth fund for specially created internships
  • In providing the internships, BNY Mellon’s sought to corruptly influence the foreign governmental officials in order for the bank to keep and increase the business of managing and servicing an account valued at approximately $55 billion
  • BNY Mellon’s internal controls were not sufficient to prevent and detect the improper hiring
  • The foreign governmental official(s):
    • repeatedly requested BNY Mellon officials to provide the internships to relatives;
    • stated that the internships were an “opportunity” for BNY Mellon;
    • suggested that the positions could be obtained from a BNY Mellon competitor; and
    • openly questioned one BNY Mellon employee’s “job performance and professionalism” because of delays in securing the positions

The order provides for a BNY Mellon payment of $14.8 million (a reduced amount, reflecting the bank’s cooperation and remedial efforts) to settle charges, and extensive changes (actually conducted before the SEC’s investigation) to its anti-corruption policy, employee code of conduct and internal controls.

Financial services firms are particularly at risk

Financial services firms are particularly at risk of potentially becoming involved in problematic hiring situations because of the immense sums they handle (other global banks are reportedly under investigation for their past hiring practices), and the BNY Mellon facts strongly support the SEC’s determination. But this case should cause compliance officers at global companies of all types (subject to the FCPA) to consider:

  • Is my company at risk of hiring foreign governmental officials and/or their family members? If so, are hiring practices sufficiently covered within our existing anti-corruption program – specifically within our risk assessments, policies, practices (to include internal controls), communications and training? Should changes be made?
  • Do my company officers (including Board members) occasionally do favors for their present and past business associates (that may include governmental officials), as is common in virtually all cultures? If so, how best to do inform them of this case and its implications?
  • Since the BNY Mellon case is the first FCPA determination to specifically cover hiring as an item of value, and effectively represents an expansion of the law’s scope, what other employee behavior (perhaps unique to my industry or business sector) should be more closely scrutinized? What else might be in the grey areas of “anything of value”?

It is time for compliance officers to think holistically and “outside the box” after this case.

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