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Central Bank hits JP Morgan Administration Services with €1.6m fine over rule breaches


Oversight: CBI’s Director of Enforcement, Seána Cunningham. Photo: Jason Clarke Photography

Oversight: CBI’s Director of Enforcement, Seána Cunningham. Photo: Jason Clarke Photography

Oversight: CBI’s Director of Enforcement, Seána Cunningham. Photo: Jason Clarke Photography

The Central Bank of Ireland (CBI) 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 regulator 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 CBI 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 regulator identified "serious failings" in JP Morgan Administration Services' outsourcing framework. These included a failure to obtain the prior approval of the CBI to outsource fund administration activities, and a failure to have adequate control systems to ensure that the company satisfied the CBI's outsourcing requirements for fund administrators.

As a result of the failings the company did not always have a clear understanding of, and controls around, its outsourcing arrangements, a statement from the CBI said. This in turn undermined the ability of the company to effectively identify and manage the risks associated with its outsourcing arrangements.

In addition, its failings weakened the CBI's ability to properly assess, monitor and supervise the company's outsourcing of regulated activities, the CBI added.

JP Morgan Administration Services "persistently" failed to remediate the root causes of these failings despite repeated supervisory intervention by the CBI over a number of years. "This is an aggravating factor in this case," the regulator added.

The CBI'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: "JP 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."

This is the Central Bank's 130th settlement under its Administrative Sanctions Procedure since 2006, bringing the total fines imposed by the Central Bank to over €91m.

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