On Aug. 18, BNY Mellon settled with the SEC allegations that it had violated the FCPA by hiring three interns. In re The Bank of New York Mellon Corporation, SEC Release No. 75720 (Aug. 18, 2015). The allegations stated that the three interns were not hired because of their individual qualifications or through the rigorous internship qualification process; instead, the three individuals were relatives of high ranking officials of a Middle Eastern Sovereign Wealth Fund that was an existing client of BNY Mellon’s asset management group. BNY Mellon admitted to violating Section 30A of the FCPA by "providing valuable internships to relatives of foreign officials from the Middle East Sovereign Wealth Funds" in order to obtain and retain business and violating the internal controls requirements by not prohibiting the hiring.
This case highlights the importance of rigorous due diligence and internal controls when dealing with government officials and their families. According to an internal email that was obtained during the investigation, this was “a personal favor,” not a request of the Sovereign Wealth Funds. Id. ¶ 16. The internships were only six months in duration, and one of them was even unpaid. While these types of requests for personal favors in helping customers or their families may be routine and commonplace when dealing with private individuals, they can be violations of the FCPA and other anti-corruption laws when they involve government or quasi-government officials. Under the UK Bribery Act, even between private entities, these types of “favors” may be violations if they are sought in connection with obtaining or retaining business.
At the end of the day, the internships constituted an “expensive favor,” as one of the internal emails put it. Id. ¶ 22. BNY Mellon agreed to pay a total of $14.8 million dollars, including a $5 million fine to settle the charges.