Bank of New York Mellon (BNY Mellon) recently agreed to pay a fine of US$14.8-million to the U.S. Securities and Exchange Commission (SEC). The fine comes after the SEC found that BNY Mellon bribed foreign public officials of a Middle Eastern country's sovereign wealth fund (SWF) and failed to maintain adequate internal control systems. This is a significant case for a number of reasons.

First, this is the first case flowing from the SEC's industry-wide investigations sweep of SWFs and financial institutions. The SEC has sent a clear message that it will continue to scrutinize financial institutions and SWFs. Canadian financial institutions, many of whom are subject to the jurisdiction of the SEC and Canadian enforcement authorities, should be aware of this scrutiny being imposed by the U.S. anti-corruption enforcement authorities and in particular in connection with their activities of seeking and retaining business from SWFs.

Second, this case is an example of the wide scope of conduct or activities that may constitute a bribe under both U.S. and Canadian anti-corruption legislation. According to the SEC, BNY Mellon bribed the SWF's officials by extending valuable student internships to their family members in order to retain and win business. Under the U.S. Foreign Corrupt Practices Act, as well as under the Canadian Corruption of Foreign Public Officials Act and Criminal Code, bribery is not limited to the exchange of money.

Finally, this case confirms that effective internal control systems are critical. Despite having a written anti-corruption compliance program, the SEC found that BNY Mellon did not have adequate internal control systems to effectively implement the program. Companies should consider implementing rigorous procedures, including in the hiring process, to avoid corruption related risks.

More details on this case please see our recent Osler Update (Link to https://www.osler.com/en/resources/critical-situations/2015/bny-mellon-fined-$15-million-by-sec-in-financial-i).

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