28 Jun 2019
An Irish subsidiary of JPMorgan will pay €1.6 million for failing to keep proper records and obtain approval of its outsourcing of fund administration activities, the country’s central bank said Wednesday.
The penalty by the Central Bank of Ireland is the first-ever to cite outsourcing-related violations, which are an area of “particular focus” for the regulator, according to the enforcement action. Under the nation’s financial rules, banks must seek approval to farm out regulatory and administrative duties to third-party companies in other jurisdictions.
J.P. Morgan Administrative Services Ltd. (JPMAS) “persistently failed” over a number of years to obtain such approvals and did not implement adequate controls to ensure that the third-party relationships were in compliance with regulatory requirements, according to the central bank.
“As a result of these failings, JPMAS did not always have a clear understanding of, and controls around, its outsourcing arrangements,” the regulator said. “This undermined the ability of the firm to effectively identify and manage the risks associated with its outsourcing arrangements.”
The violations, which were first identified in March 2014 and continued through 2016, involved JPMorgan’s recordkeeping of OTC derivatives activity and its release of net asset value information, among other activity.
“Outsourcing plays a key role in the provision of regulated financial services and it is vital that regulated firms can demonstrate a clear understanding of their outsourcing arrangements,” said Seána Cunningham, director of enforcement and anti-money laundering for the central bank.
“JPMAS’s failures in this case demonstrated unacceptable weaknesses in its outsourcing framework. These weaknesses were further evidenced by the firm’s repeated failures to satisfactorily remediate the issues identified by the Central Bank as part of its supervisory engagement with the firm,” Cunningham said.
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