AN IRISH SUBSIDIARY of US investment bank JP Morgan has been fined €1.6 million by the Central Bank after it was found to have breached Irish financial services regulations.
The Central Bank found that the firm’s Irish subsidiary JP Morgan Administration Services had breached rules governing the outsourcing of fund administration activities.
Four distinct regulatory breaches were identified by the Central Bank, which all relate to the outsourcing of fund administration.
Outsourcing allows banks to use a third-party organisation to administer funds. For financial institutions, the benefits are twofold – firms can reduce costs while also ensuring that clients are able to access more regular and efficient support.
All outsourcing must be approved by the Central Bank.
JP Morgan persistently failed to address the breaches despite being notified by the Central Bank. In two instances, these failures lasted for nearly three years.
A settlement agreement between the Central Bank and JP Morgan reduced the fine from €2.3 million to €1.6 million. The maximum fine the Central Bank could have imposed was €10 million or an amount equal to 10% of the company’s annual turnover.
This is the first time Ireland has taken an enforcement action against a financial institution in this type of case.
In a statement, Director of Enforcement and Anti-Money Laundering at the Central Bank, Seána Cunningham, was critical of the “unacceptable weakness” at the Irish subsidiary in relation to the outsourcing of fund administration.
“These weaknesses were further evidenced by the firm’s repeated failures to satisfactorily remediate the issues identified by the Central Bank,” Cunningham said.
She said that the fine reflects “the failure to address the root causes of these weaknesses over several years”.
According to the Central Bank, JP Morgan has now remedied all the breaches.
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