BNY Mellon fined $5 million for swap reporting lapses

The Bank of New York Mellon (BNYM) has been fined $5 million after a US regulator stated it failed to properly report millions of swap transactions and supervise a unit that deals with derivatives.

The US Commodity Futures Trading Commission (CFTC) on Monday said BNY repeatedly failed to “correctly report millions of swap transactions to a registered swap data repository.” The CFTC also noted that BNY Mellon violated a prior order the regulator had against the firm.

This enforcement action underscores the critical importance of regulatory compliance in the financial industry, particularly concerning derivatives and swaps.

In a statement, BNY Mellon said it “takes its regulatory responsibilities seriously and is pleased to have resolved this matter.”

The reduced penalty reflects BNY’s self-reporting, the CFTC said. Last year, Goldman Sachs Group Inc., JPMorgan Chase & Co., and Bank of America Corp. also settled cases with the CFTC over swap reporting.

“Accurate reporting is a core pillar of the regulatory regime for swaps, and every individual data field matters,” Ian McGinley, the Director of the CFTC’s Division of Enforcement, said in a statement. “It is essential that swap dealers get this right.”

Case background

From 2018 to 2023, BNY repeatedly failed to accurately report at least five million swap transactions to a registered swap data repository. These failures violated both CFTC regulations and a prior order issued against the bank in 2019.

In addition to reporting failures, BNY Mellon also failed to properly supervise its swap dealer business. The bank lacked written policies or procedures to monitor the voice communications of its associated persons (APs) and e-communications in languages other than English.

These deficiencies hindered the bank’s ability to ensure compliance with the Commodity Exchange Act (CEA) and CFTC regulations.

The CFTC’s order not only imposes a $5 million civil monetary penalty but also incorporates BNYM’s decision to retain an independent compliance consultant. This consultant will review and provide advice on the bank’s compliance programme, aiming to prevent future misconduct. McGinley commended BNYM for its extensive cooperation, remediation efforts, and decision to engage an outside compliance consultant.

The reduced penalty reflects BNYM’s self-reporting and substantial cooperation with the Division of Enforcement’s investigation. The Division of Enforcement staff responsible for this matter includes Daniel Jordan, Rick Glaser, Amanda Burks, and Phillip Tumminio.

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