Accounting giant KPMG should be fined 12.5 million pounds ($15.9 million) or more for misconduct over reports on Bank of New York Mellon Corp., a U.K. regulator said Tuesday. KPMG said the fine should be just a fraction of that size, at 1.4 million pounds.
The Financial Reporting Council’s request — and KPMG’s response — were outlined Tuesday at a hearing in London, where a tribunal will decide what’s an appropriate sanction for the case. KPMG, which has admitted misconduct, would get a 30 percent discount on the fine for cooperation with the regulator.
The FRC’s proposed fine is an “extravagant” and “gargantuan” penalty, and the misconduct involved in the BNY Mellon case was unintentional and didn’t involve any criminality, KPMG lawyer Bankim Thanki said at the hearing. FRC attorney Raymond Cox said the proposed fine was justified because KPMG’s conduct was “truly exceptional.”
The accounting firm last year admitted misconduct in relation to reports it filed to U.K. regulators on the bank’s compliance with rules on client assets in 2011.
“We accept and regret that some of our work did not fully reflect all aspects of the new guidance applicable,” and have since changed procedures, a KPMG spokesman said by email. “We are committed to cooperating with our regulator to bring these historic cases to conclusion as swiftly as possible.”
An FRC spokesman said he couldn’t comment during the hearing.
The case adds to KPMG’s woes after the FRC fined the firm 5 million pounds this month. It was fined 6 million pounds in April following an investigation by the regulator into the preparation of the books of a U.K. insurance company that is part of the Lloyd’s of London syndicate.
The U.K. accounting industry has been under fire for the quality of its work in recent years. In 2018, the regulator issued a stark warning that KPMG’s audit work in the U.K. was of an unacceptable standard.
Richard Hinton, a KPMG partner, has also admitted misconduct in relation to the BNY Mellon case. KPMG failed to come to an agreement with the FRC over appropriate sanctions, so the issue will be determined by an independent tribunal.
