Irish Central Bank fines JPMorgan €1.6m for 'serious failings'

Ireland’s central bank on Wednesday said that it had reprimanded and fined an Irish subsidiary of US banking giant JPMorgan Chase (JPM) for “serious failings” relating to the firm’s fund administration activities.

Though the €1.6m (£1.4m) penalty is small, it will be noted by the increasing number of financial services firms that have chosen Dublin as a post-Brexit location.

The fine comes after the bank admitted to four breaches of regulations between July 2013 and June 2016, including failure to obtain prior approval from the central bank to outsource these activities.

Irish-based fund administrators are entitled to use third parties to perform fund administration activities on their behalf, but only if they obtain permission from the bank.

The subsidiary, JP Morgan Administration Services, also failed to introduce adequate control systems to ensure that it met the bank’s requirements for fund administrators.

READ MORE: UK financial services firms have spent £4bn on Brexit preparations

The appropriate fine, the central bank said, should have been €2.3m, but JPMorgan received a 30% reduction as part of one of its settlement discount schemes.

Seána Cunningham, director of enforcement at the central bank, said that it was the first action taken against a fund administration firm in relation to outsourcing failures.

“When firms outsource activities, they do not outsource their responsibilities,” Cunningham said.

“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.”

In a statement, a spokesperson for JPMorgan said that it had “cooperated fully” with the Irish central bank, and that it had already made adjustments to its controls procedures 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,” they said.

JP Morgan Administration Services, which has been operating in Ireland since 1996, is a wholly owned subsidiary of JP Morgan’s Irish bank, which is itself an ultimate subsidiary of the US-based JP Morgan Chase.