The Central Bank has fined JP Morgan Administration Services €1.6m for regulatory breaches relating to the outsourcing of fund administration activities.
This is the first enforcement action taken by the Central Bank against a fund administration firm in relation to outsourcing failures.
The company, an Irish subsidiary of the US banking giant, admitted to three breaches of the Outsourcing Requirements and one breach of the Prudential Handbook for Investment Firms 2008.
The duration of the breaches varied between seven months and two years and 11 months spanning the period from July 2013 to June 2016.
The Central Bank determined that the appropriate fine was €2.3m, which was reduced by 30pc in accordance with the settlement discount scheme provided for in the Central Bank’s Administrative Sanctions Procedure.
An investigation by the Central Bank identified “serious failings” in JP Morgan Administration Services outsourcing framework including, a failure to obtain the prior approval of the Central Bank to outsource fund administration activities, and a failure to have adequate control systems to ensure that the company satisfied the Central Bank’s outsourcing requirements for fund administrators.
As a result of these failings the company did not always have a clear understanding of, and controls around, its outsourcing arrangements, a statement from the Central Bank said. This in turn undermined the ability of the company to effectively identify and manage the risks associated with its outsourcing arrangements.
In addition, the it’s failings undermined the Central Bank’s ability to properly assess, monitor and supervise the company’s outsourcing of regulated activities, the Central Bank added.
JP Morgan Administration Services “persistently” failed to remediate the root causes of these failings despite repeated supervisory intervention by the Central Bank over a number of years. “This is an aggravating factor in this case,” the regulator added.
The Central Bank’s director of enforcement and anti-money laundering, Seána Cunningham, said: “When firms outsource activities, they do not outsource their responsibilities.”
“It is important for firms to have strong controls in place around the governance and oversight of all outsourcing arrangements to ensure that they comply with all legal and regulatory requirements,” Ms Cunningham added.
A spokesperson for JP Morgan said: "J.P. Morgan has cooperated fully with the CBI and has already made remedial adjustments to controls procedures in the associated legal entity in Ireland."
“At no point were our clients or the quality of the service we provide to them affected, and we continue to operate our fund administration business normally.”