BNY Mellon office.
A former trader at Bank of New York Mellon was awarded a $50m whistleblower payment last week after alerting authorities to methods used by the bank to overcharge large clients on currency trades.
It is the largest award of its type made by the US Securities and Exchange Commission, coming five years after the bank paid $714m in fines to resolve allegations it defrauded pension funds in relation to currency transactions. According to the Wall Street Journal, the trader who blew the whistle, Grant Wilson, began assisting authorities with the currency trading investigations more than 10 years ago and left the bank in 2011.
BNY Mellon, Wilson found, was giving large pension funds that invested in global assets the less favourable exchange prices of daily exchange rates then profiting from the difference.
Wilson is said to have assisted the government for two years while working as a currency trader at BNY Mellon, and provided extensive documentation about how the bank processed trades that resulted in client overcharges.
When it settled the investigations in 2015 the bank said it was “pleased to put these legacy FX matters behind us, which is in the best interest of our company and our constituents”. The settlement with the SEC required the bank to report on compliance improvements that it planned to implement over a period of three years. It also had made changes to its pricing disclosures in 2012.
Wilson helped US investigators gain “firsthand observations of misconduct” and details that “provided a road map for the investigation”, the SEC said when announcing the $50m award.
“Whistleblowers have proven to be a critical tool in the enforcement arsenal to combat fraud and protect investors,” Jane Norberg, the chief of the SEC’s whistleblower office, stated.
The award has been noted in the UK with Mark Turner, managing director in Duff & Phelps’ Compliance and Regulatory Consulting practice, highlighting the contrast between the handling of such cases in the US and their equivalents in the UK.
Turner said: “It is interesting to see yet another case in the US where the whistleblower has been awarded a large sum of money – in this case a record-breaking $50m. The UK has, to date, avoided going down the route of rewarding whistleblowers partly through fear of encouraging spurious claims – something the US has seen little evidence of. It remains to be seen whether the UK reconsiders its position on awarding payments to those that risk it all to do the right thing.”
He added: “Regardless of the debate around payments to individuals, It has never been more important for firms to ensure they have a comprehensive whistleblowing programme in place. Whistleblowers play an important role in exposing poor practice and misconduct in the financial services sector.”
Turner said with the right resources, structure, and training, whistleblowing programmes could become valuable tools for strengthening a firm’s controls, culture, and reputation.
He said the City needed to ensure their systems were up to scratch: “In financial services, the potential risks posed by ineffective controls or misaligned incentives are high, and a comprehensive whistleblowing programme can be an effective early warning system that allows management to get out in front of these or other problems before they become true crises.”
A spokesperson for whistleblowing charity Protect said it was important that whistleblowers were adequately compensated as “too many struggle to find work after whistleblowing”. She added that past research had indicated that money was not a great motivator for whistleblowing in the UK.