J.P. Morgan Administration Services fined €1.6m by CBI
27 June 2019 Dublin
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J.P. Morgan Administration Services (Ireland) has been formally reprimanded and fined €1.6 million by the Central Bank of Ireland (CBI) for “regulatory breaches” in relation to the outsourcing of fund administration services.
J.P. Morgan Administration Services admitted to three breaches of the outsourcing requirements as according to CBI’s AIF Rulebook, and one breach of its Prudential Handbook for Investment Firms, between July 2013 and July 2016.
In its investigation, the CBI found that J.P. Morgan Administration Services’ outsourcing structure lacked official CBI approval, and lacked “adequate control systems” to ensure the framework complied with outsourcing requirements, despite having already had CBI intervention on the matter.
A comment from a J.P. Morgan spokesperson 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.”
Seána Cunningham, director of enforcement and anti-money laundering at the CBI, said: “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, the associated risks and the effectiveness of the governance and risk management measures in place in respect of those arrangements. This is the first enforcement action taken by CBI against a fund administration firm in relation to outsourcing failures.”
She continued: “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.”
Cunningham added: “J.P. Morgan Administration Services’ failures, in this case, demonstrated unacceptable weaknesses in its outsourcing framework. These weaknesses were further evidenced by its repeated failures to satisfactorily remediate the issues identified by the CBI as part of its supervisory engagement with the Firm. The fine imposed reflects JPMAS’s failure to address the root causes of these weaknesses over several years.”
J.P. Morgan Administration Services admitted to three breaches of the outsourcing requirements as according to CBI’s AIF Rulebook, and one breach of its Prudential Handbook for Investment Firms, between July 2013 and July 2016.
In its investigation, the CBI found that J.P. Morgan Administration Services’ outsourcing structure lacked official CBI approval, and lacked “adequate control systems” to ensure the framework complied with outsourcing requirements, despite having already had CBI intervention on the matter.
A comment from a J.P. Morgan spokesperson 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.”
Seána Cunningham, director of enforcement and anti-money laundering at the CBI, said: “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, the associated risks and the effectiveness of the governance and risk management measures in place in respect of those arrangements. This is the first enforcement action taken by CBI against a fund administration firm in relation to outsourcing failures.”
She continued: “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.”
Cunningham added: “J.P. Morgan Administration Services’ failures, in this case, demonstrated unacceptable weaknesses in its outsourcing framework. These weaknesses were further evidenced by its repeated failures to satisfactorily remediate the issues identified by the CBI as part of its supervisory engagement with the Firm. The fine imposed reflects JPMAS’s failure to address the root causes of these weaknesses over several years.”
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