KPMG admits falling ‘significantly short’ of standards when monitoring bank

Accounting firm KPMG was back on the naughty step with the industry watchdog on Wednesday as it admitted to falling “significantly short” of standards in its monitoring of custodian bank BNY Mellon.

The Financial Reporting Council has been investigating the firm’s work with BNY Mellon — which looks after trillions in assets for companies — since June 2015.

on Wednesday KPMG, which is also being investigated for its auditing of firms including Carillion and Conviviality, admitted misconduct over its handling of BNY under so-called Client Asset Sourcebook (Cass) regulations.

It is understood the firm failed to flag up with the Financial Conduct Authority that the bank had not kept separate asset records for its group and its London branch as required under the rules, which changed in 2011.

Partner Richard Hinton also admitted misconduct. KPMG’s fine will be set by tribunal, but PwC were fined £1.4 million in a similar case relating to JP Morgan in January 2012.

KPMG said no clients lost money and added: “We accept and regret that our work did not fully reflect all aspects of this new guidance.”