Bank of New York Mellon will pay $714 million to settle charges it cheated customers of its custodial services in foreign exchange deals, US justice authorities announced Thursday.
The bank was accused in civil fraud lawsuits by the Department of Justice, New York state and private clients of systematically overcharging clients by giving them the worst rates possible in foreign exchange transactions.
“Contrary to representations to clients that it provided ‘best rates’ and ‘best execution’, the bank actually gave clients the worst reported interbank rates of the trading day,” the Justice Department said in the announcement.
BNY Mellon will pay $335 million to the US and New York state governments. Another $335 million will settle private class action lawsuits from customers.
Another $30 million will go to the Securities and Exchange Commission, and $14 million to the Department of Labor.
The bank, which admits the conduct, also agreed to dismiss several executives involved in the fraud, the Justice Department said.
“The Bank of New York Mellon’s custody clients, many of whom are public pension funds and non-profit organizations, trusted the bank to be honest about the financial services it was providing and to deal with them fairly. BNYM and its executives, motivated by outsized profits and bonuses, breached this trust and repeatedly misled clients,” said Preet Bharara, US Attorney in New York.
In a statement, the bank made no reference to the nature of the charges. But it said the penalties were fully covered by existing reserves.
“We are pleased to put these legacy FX matters behind us, which is in the best interest of our company and our constituents. We continue to improve our product offerings to ensure they are meeting client demand and positioning clients to succeed in an increasingly complex financial environment,” the company said.